Low Gas Prices Drive Consumers to Think Big…For Now

Sep 24, 2009

There has been a lot of talk lately about smaller, more efficient cars being the new face of America’s roads.  Yet despite the discussion, lower gas prices are causing used car buyers to revert to bigger vehicles.

Small used cars are taking a hit on value in the market, according to Kelley Blue Book.  Even the once hot-ticked Smart ForTwo is suffering, according to the auto pricing publication.

“Its part of a larger trend that’s been happening all year,” says Alec Gutierrez, a senior market analyst for KBB. “Some of the weakest segments are subcompact, compact and hybrids.”

This trend reflects a couple of important things to consider about the current market: first, it shows that gas prices have been remaining at what consumers view as a reasonable level for a prolonged period of time.  But more importantly, it shows that consumers are not thinking long-term when it comes to their vehicle purchases.  The federal government is mandating smaller, more efficient cars, but for now consumers are staying away from them due to higher costs.

Lower demand for SUVs during 2008’s price spike led to lower prices which are now very enticing to buyers. “We do see big stuff moving,” says Steve Bussjaeger, owner of the Star SuperCenter used car lot in Glendale, Calif. “They got cheap… People are more price conscious than gas (price) conscious.”

To those looking for a compact car, the near future will hold some deals, as demand for larger vehicles is having the inverse effect on small cars.  Value is down 15% since 2008 on small autos.

“The entire industry has suffered this year. … The small-car segment has been affected by this as well,” says Smart USA spokesman Ken Kettenbeil. “However, we know that in time both situations will change. For this, and many other reasons, the trend will transition toward smaller vehicles.”

Photo courtesy of wili hybrid under the Creative Commons License.