New Car Buyers Downsize, but Spend Big on Options

Small Not Cheap

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Washington DC July 17, 2008; The AIADA newsletter reported that the NYT said consumers used to buy small cars for a simple reason: they were cheap. Now people of all income levels are buying small cars to pinch pennies at the gas pump, but they are not scrimping on creature comforts.

Small-car buyers often pay $600 for a sunroof, $500 for satellite radio, or $400 for a hands-free phone system. In this new math for the auto industry, gas mileage often trumps sticker price for consumers.

Transaction prices for compact cars have increased an average of $2,370 over the same period and $3,055 for the segment's top seller, the Honda Civic.

Perhaps the biggest success in the small car segment, in terms of persuading buyers to upgrade, is BMW's Mini Cooper, which starts as low as $18,050 but typically sells for at least 40 percent more than that.

In response, many dealers are stocking their lots with more upgraded vehicles. "I've never seen anything like it," D. J. Smith, the sales manager at Panama City Toyota, told the New York Times. "You don't have too many people saying, 'It has to be white with a power package and it has to have Michelin tires.' Instead it's, 'What do you have and can I get it by the end of the month? Just get me out of my Tahoe.'"

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