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As gas prices drop, buyers still lean to sippers

September 30, 2011
Though gasoline prices are projected to fall through the remainder of 2011, consumers still are more likely to purchase smaller gas sippers than take on an SUV or truck, new data show.
Lingering doubt about economic recovery and higher than average gas prices, as well as disappointing employment statistics, has led to the shift toward compact or subcompact cars, reported Sept. 13. And it comes just in time for the launch of a stable of tech- and content-rich new small-car models.
The bad news: as demand goes up, inventory and incentives tend to fall.
According to Edmunds data on incentives, the national average incentive for the compact car in August was $864, down 63 percent from $2,318 a year earlier. Subcompact car incentives averaged $520 per vehicle sold in August, down 57 percent from $1,211 in August 2010.
Better savings packages await consumers who are willing to delve into less popular segments. For mid-range luxury cars, incentives averaged $4,228 in August 2011.
Compact cars more profitable
Also of note, as the compact and subcompact segments continue to gain popularity, they also are becoming more profitable for dealers and OEMs, reported.
For example, Hyundai Motor America’s chief executive officer John Krafcik recently noted that the new Elantra is selling for an average of $4,000 more than the previous-generation model.
Moreover, Don Johnson, General Motors vice president of U.S. sales, pegged the rise in the new Chevrolet Cruze’s average transaction price at $4,000 more than the Cobalt that preceded it.
“Auto-company executives wishing for increased small-car supply in the U.S. happens about as frequently as an appearance by Halley’s Comet,” said Bill Visnic, senior editor of Edmunds’
“But with prices reaching new highs and almost no incentives required, compact cars are the auto companies’ new BFFs.”