Following on yesterday's discussion of the cost disadvantages involved in trading in a SUV for a fuel efficient car, here is an interesting article from the WSJ discussing how the prices of small cars has increased over the past year, whilst the prices of SUVs are dropping.
(From the WSJ): "The appeal of fuel efficiency is moving beyond the new-car market and creating a run on small used cars.
Used economy cars that once could be difficult for dealers to move -- the Ford Focus and Chevrolet Aveo, for instance -- are now flying off the lots, and prices are rising. In May and June, the 10 used cars with the fastest-rising prices, according to J.D. Power & Associates, included the Hyundai Elantra, up almost 9% from the year-earlier period, and the Kia Spectra, up nearly 8%. A few years ago, the list was dominated by larger, more luxurious cars like the Lexus LS Series
Some used cars' prices are even approaching the levels of new models. The average 2006 Honda Civic costs $16,118, or 86% of what a new 2008 model costs. The average price of a used 2006 BMW Mini Cooper is about 81% of what a new model costs. And the long-sought-after Toyota Prius costs 87% of the new-model price. Typically, three-year-old used cars cost between 50% and 60% of their new equivalents' prices...
...Brian Benstock, a Honda dealer in the Queens borough of New York City, says that dealers have to pay more than they used to at used-car auctions for certain models, like the compact Civic. Civics are selling at auction for more than $3,000 over the "book price" dealers are more accustomed to paying. SUVs are selling at prices "substantially under book price," he adds. Even large dealers are having a hard time finding enough used Civics and other models to satisfy demand."
This supports what I said yesterday about it not making sense to trade in a SUV for a compact car, because the acquisition costs will be greater than the money you'd save on fuel. However the fact that people are trading in their SUVs for compact cars anyway indicates that fuel prices trump vehicle costs in most people's minds. Let's not forget that people are paying over $30k for Priuses instead of spending a little more than 1/2 of that on Civic or Corolla, despite the fact that the fuel savings from owning a Prius
won't make up for the additional cost.
This also creates some opportunities for automakers to put more premium content into compact cars and/or start creating premium (if not luxury) compact cars, as an alternative to larger less gas efficient luxury vehicles.
The BMW 3-Series, Lexus IS and Audi A4 are all compact luxury cars so it's not like its a new precedent or product type.
You can read the entire article in full
here .
Sources:
The WSJ: "Want a Used 'Econobox'? Better Get in Line
" -- Jonathan Welsh, July 16, 2008.