More than high gas prices fueling small car sales

Go figure. The price of gas at the pumps goes up, and people start buying smaller new cars. That’s the easy conclusion industry analysts like Dennis DesRosiers came to when looking at the detailed Canadian new car sales figures from this April.

Sure. Sales of wee subcompact cars were up 17.1 per cent, compact cars up 11.3 per cent, and compact sport utility vehicles up 16.6 per cent can all be related to per litre prices ranging anywhere between $125 and $1.50, depending where you live and what time of the day it is.

But I posit that it’s more than just the high price of gas that’s fueling small car sales (in fact, DesRosiers' figures show that year-to-date sales of the most fuel efficient vehicles—like hybrids—actually “underperformed the overall market”). Simply put, it's the product: small cars aren’t, well, so “small” anymore, which makes the decision to downsize a little bit easier.

Compare the barebones Fiesta Ford last sold here in the late-1970s to the new one launched last year. Not only is the new Fiesta larger, it’s safer, more comfortable, and has big car features like heated leather seats and navigation.

One size up, so-called all-new compacts like the Chevrolet Cruze, Hyundai Elantra (above) and Volkswagen Jetta are about the size of a midsize family sedan from a couple of generations ago. And these cars too can be outfitted like a luxury car to make the jump “down” a cushy landing.

Also helping is the old adage that “new product sells.” All-new subcompacts like the Fiat 500 are getting all kinds of attention from us media. And with impendingly higher fuel economy regulations to meet, automakers are ploughing more small cars into the market—and advertising them—like never before.

So, yeah. Some buyers will downsize to save some money at the pumps. But I think a bigger reason in the upsurge in small car sales is simply more choice and a better product.

[Sources: The Star, DesRosiers & Associates]

Comments

[Mark]

I'm definitely looking at buying small for all those reasons; the Hyundai Veloster looks like a vehicle I will want to test drive when available. You're right that the options and quality in small vehicles makes it an easy move to that segment, but to me the feeling does start with pump prices. If fuel were not an issue, I'd immediately widen my scope of purchase options. I'm restricting my view entirely to the compact/subcompact segment based on fuel economy (though I might still do the same if fuel was $0.90/L instead of $1.35), but again, I am doing that because the cars are so attractive that it barely feels like a sacrifice. So, I suppose, my thinking is that the other issues you mention are making small cars attractive to consumers, a large part of their relevance comes from fuel prices forcing consumers to look at these cars in the first place.

[RP]

I don't think people are buying compact cars only because they are better than they used to be. Consumers realize that the days of inexpensive fuel are over, so that is in the back of their minds when looking for a new car.

Since the compact cars aren't so compact anymore, and they have all the goodies their mid-size counterparts do, plus 90% of the time it only has one occupant, why buy the mid-size?

Compact is the new mid-size I think.

[CGS cat back exhaust]

I would still prefer to have a car that is fuel saving because it can help me maintain my car and enjoy its ride more often. I would love to hear from the manufacturer that they will consider these things. Luxury, comfort, design and fuel economy cars.

[Desking tool]

Brand new cars that are more fuel efficient and fuel saving sounds like a better idea. They're quite expensive though. But the price to pay is much better put up a car that isn't fuel economic.

[CGS intake]

Subcompact cars are also getting in the trend too nowadays. SOme of them, have improved versions, redesigning its engine and its likes; and also having a new facelift.

[DJL]

In the past, most young people's first car was something used (and it wasn't uncommon for the 2nd and even the 3rd cars they bought to be used as well). This had a lot to do with price, but it also had to do with the fact that the quality and especially the styling of the lower priced new cars wasn't all that attractive to a young driver looking for something cheap but fun.

As you've mentioned the quality (and styling) of new small cars has increased significantly over the last few years. At the same time, prices have remained reasonable; especially when you take into account the financing deals (no/low money down payments and zero percent financing).

So while I think there are a number of different factors contributing to the increased sales numbers, one of the big factors is that more young people are buying a new car as their first car instead of getting something used.

[Sports Administration Courses]

I think the shock isn’t there any more. It changed people’s behaviour two years ago, but we’re still noticing it now.