Edmunds.com: Car Buyers Lean Towards Gas Sippers, Compact Demand Way Up, Incentives Way Down

Though gas prices continue to fall and are estimated to drop even more in the next few months through year-end, Edmunds.com data released Tuesday reflects that consumers are still more likely to purchase smaller gas sippers than take on an SUV or truck.

According to the company’s analysis, shoppers are still leaning towards compact or subcompact cars as a result of higher than average gas prices. High gasoline prices have caused a realignment of buyer priorities and almost unprecedented demand for small cars, just in time for the launch of a stable of tech- and content-rich new models,” explained Edmunds’ AutoObserver.com senior editor Bill Visnic.

Besides economic factors, Edmunds.com reports that increasing options in the small car segment are also driving consumer interest.

“More options in the small car segment are drawing in more consumers,” stated Edmunds.com analyst Jeremy Acevedo.

“The Chevy Cruze, Fiat 500, Ford Focus and Hyundai Elantra are among the small cars that are stimulating interest,” he added.

Though more options and new 2012 small-car models are becomings increasingly attractive to consumers, the bad news is “as demand goes up, inventory and incentives fall,” company officials noted.

According to Edmunds.com’s True Cost of Incentives data, the national average incentive for the compact car in August was $864, down 63 percent from $2,318 in August 2010.

Moreover, subcompact car incentives in August averaged $520 per vehicle sold, down 57 percent from $1,211 in August 2010.

However, if consumers are willing to delve into less popular segments, such as mid-range luxury cars, they may find better savings packages. Edmunds.com data reports that the national average True Cost of Incentives for this segment came in at $4,228 in August 2011.

Breaking the trend seen throughout August down further, for cities, Atlanta saw the highest rate of increase in compact car shopping as it rose 41 percent from 2010.  Subcompact car shopping also increased by 35 percent year-over-year in Georgia’s capital city. 

Boston followed close behind, with August compact car shopping rising by 28 percent versus 2010, and the rate of subcompact car shopping in rose a significant 59 percent year-over-year.

Edmunds.com listed the rate of increase in compact and subcompact car shopping across the country’s metropolitan areas, as follows:

 

Market Increase in compact car shopping vs. 2010 Increase in subcompact car shopping vs. 2010
Atlanta 41% 35%
Boston 28% 59%
Chicago 43% 43%
Dallas-Fort Worth 44% 70%

Houston

48% 44%
Los Angeles 37% 58%
New York 38% 60%
Philadelphia 34% 53%
San Francisco 25% 44%
Washington, DC 41% 47%

Compact Cars Become more Profitable

Also of note, as the compact and subcompact segments continue to gain popularity, they are also becoming more profitable for dealers and OEMs, AutoObserver.com’s Visnic reported.

For example, Hyundai Motor America’s  chief executive officer John Krafcik recently noted at a media event the new Elantra is selling for an average of $4,000 more than the previous-generation model.

Moreover, AutoObserver.com reported that 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 of Hailey’s comet, but with prices reaching new highs and almost no incentives required, compact cars are the auto companies’ new BFFs,” Visnic explained. 

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