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Small car deals abound as U.S. buyers go crazy for SUVs

May 20, 2016
In the 12 months that ended April 30, truck and SUV sales grew more than 10 percent, according to Ward’s Automotive. At the same time, small-car sales fell more than 6 percent, leading to small-car inventories on dealer lots reaching their highest level in seven years. 
Automakers are resorting to discounts and sweetened lease deals to move the metal—especially for models that haven’t been updated in a few years.
There are a number of reasons for the shift. Gas prices are low. SUVs generally are smaller, lighter and more efficient than in the past. Older people like the higher seating position an SUV offers because it’s easier to get in and out, and people of all ages use the hatchback and ample storage space.
Consumers also are more confident in the economy, and willing to spend on pricier SUVs, said Eric Lyman, vice president of industry insights for the auto pricing site.
Louis Cervi was looking to buy a small car for basic transportation with a monthly payment in the mid-$200 range. After six months of looking, Cervi, 41, drove off a dealer lot north of Pittsburgh in a Ford Focus for $192 a month. The dealership even accepted his 2001 Chevrolet Monte Carlo with a failed transmission as a down payment on his lease.
"I thought I’d probably get something in the $240 (per month) range," Cervi said. "It was the end of the month, so I think I got kind of lucky there. They were trying to meet a quota."
Cervi wouldn’t have been as fortunate if he was after a hot-selling SUV. A Toyota RAV4, for instance, can be leased for three years at $199 per month, but a buyer has to put down $1,999. That translates to another $56 a month. RAV4 sales rose 32 percent last month.
Falling car sales, along with faster updates of compact cars, will put pressure on companies with older vehicles to offer discounts, said Lyman.
Some automakers have updated small cars after a year to include new features or overcome shortcomings pointed out by customers, he said. "It’s going to become more cutthroat," Lyman said. "It means if you’re not keeping your vehicle up, you’re at a competitive disadvantage."