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Small cars, big mileage

SUVs fall out of favor as drivers purchase vehicles that are cheaper, more fuel efficient

POSTED: June 26, 2008 5:00 a.m.
SARA GUEVARA /The Times

Frank Backus, a salesperson at Moss Robertson Mazda dealership, points out different features of a 2008 Mazda 3 Friday. This particular model gets an estimated 31 mpg on the highway.

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Good things come in small packages.

That's what many drivers are finally discovering. After a decade-long love affair with SUVs, high gas prices have compelled Americans to reconsider the merits of small cars.

And some are discovering that today's compact cars are nothing like the poorly made "econo-boxes" they remember from the previous gas crisis in the 1970s.

In fact, small cars have suddenly become cool, according to Jessica Caldwell, manager of pricing and industry analysis for the car-buying Web site Edmunds.com.

"It wasn't that many years ago that if you bought a small car, you were considered cheap and thrifty and were kind of laughed at," she said. "Now, you're making a statement that you care about the environment."

Caldwell said compact cars now comprise 27 percent of the total vehicles sold, and that segment of the market continues to grow. "This trend is definitely here to stay," she said.

With gas now topping $4 a gallon and expectations that it could hit $5 before the end of the year, a small car increasingly looks like a good investment.

A.J. Hardy, general manager at Hardy Chevrolet in Gainesville, said the hottest selling vehicle is one nobody wanted a year or two ago.

"We have a small hatchback called the Aveo," he said. "The five-speed version with no air (conditioning) gets 40 miles per gallon and costs about $11,000. Those are sold out all over the Southeast."

Hardy said people are seeking the most fuel-efficient commute possible, but they don't want to settle for the Aveo as their only car. "They're looking for a less expensive vehicle, but they're keeping their SUVs," he said.

That's partly because they can't afford to trade them in. The market value of used SUVs has dropped so drastically that many people owe more on the vehicle than they can earn by selling it.

Caldwell said it's also hard to give up what's comfortable and familiar. SUVs were originally intended for off-road use, but in the 1990s they became the new version of the family station wagon.

"People liked the ride height, and they believed SUVs were safer," she said. "And then it became fashionable. People thought they looked good driving them."

With gas prices expected to remain high, will the SUV become a dinosaur? "Small SUVs, like the Ford Escape, and crossover SUVs, which are based on a car platform, are still selling," Caldwell said. "But SUVs based on trucks are kind of dying out."

And what about pickup trucks, which can be found in just about every driveway in rural Georgia? "The truck market has shrunk to its core customers: people who really need them for their work," Caldwell said. "Just like with SUVs, people are no longer buying a truck just because they like the way it looks."

But for over a decade, American automakers have concentrated on production of SUVs and trucks, because those vehicles are more profitable. Now that consumers are looking for smaller cars, will manufacturers be able to meet the demand?

Caldwell said as car companies have cut back on building SUVs, they can't necessarily take up the slack by selling more small cars.

"Unfortunately, most of the American companies have nothing in the pipeline," she said. "They weren't even designing any new small cars."

But the compact cars they have in stock are easy to sell. Hardy said he's had success with the Chevrolet Cobalt, which gets about 31 mpg, and the HHR, which can get about 27 mpg.

"I sold more HHRs last month than I did anything else," he said. "It's popular because it has more room and amenities than the Aveo."

Even the Asian car brands, which have always offered a variety of small vehicles, are having trouble keeping up with the demand.

"There's no extra four-cylinder cars anywhere," said Steve Lehrer, sales manager at Carriage Nissan in Gainesville. "There's no inventory at the ports, so you have to order from the factory."

Lehrer said his biggest-selling Nissans right now are all four-cylinder models: the Versa, Sentra, and Altima. "They all get upper 20s to about 30 mpg," he said.

The law of supply and demand implies that when a product is more desirable, people will pay more for it. But Lehrer said so far dealers don't seem to be taking advantage of that.

"If the supply goes down, prices might go up. But right now they're selling for the same price (as before)," he said. "And eventually rebates may go away, but we still have rebates on small cars now."
Lehrer said business is booming at the adjacent dealership, Carriage Kia. The Kia brand specializes in small cars.

"Some get almost 40 mpg. And you can get a new (Kia) Rio for about $12,000," he said.

"Pre-owned" compact cars, generally priced from $5,000 to $10,000, are also in high demand at area dealerships. "We're selling them as quick as we can get them," said Hardy. "We're not increasing the prices on them because the market is so competitive."

But while small cars are more desirable now, apparently people aren't so desperate to have one that they would steal it.

"We're not seeing an increase in thefts of small cars," said Capt. Jeff Strickland, spokesman for the Hall County Sheriff's Office. "The vehicles most commonly stolen are trucks."

Though most people recognize the necessity for more fuel-efficient vehicles, some are having difficulty cutting their emotional ties to their SUVs.

"People like bigger things. It's just the American nature," said Shane Peal, a salesman at Milton Martin Honda in Gainesville.

Like other Japanese automakers, Honda has benefited from the small car boom, because its product line has always concentrated on small- to midsize vehicles.

"Business has been insane," said Peal. "We beat our last year's numbers for the month."

In May, the Honda Civic become the top selling vehicle in the United States, for the first time surpassing the larger Honda Accord. America's perennial best-seller, the Ford F-150 pickup truck, dropped to fifth on the list, beaten by the two Honda models and Toyota's Camry and Corolla.

The redesigned Civic and Accord are both larger than previous versions, so for people who want a true subcompact, Honda has added a new hatchback, the Fit.

"We're seeing a lot more interest in the Fit, especially over the last two months," said Peal. "It gets slightly better mileage than the Civic. And it has a lot more cargo room than people think. It's almost like a very small utility vehicle."

Like most Hondas, the Fit costs a bit more than other manufacturers' cars in the same category, starting at about $15,000. But Peal said the Fit is a good option for people who are looking for better fuel economy but can't afford the Civic hybrid, which starts at about $23,000.

Peal said he often has to address the misgivings that many customers have about small cars, that compact vehicles are unsafe, for example, or that they're too puny to handle North Georgia's mountainous terrain.

"Four-cylinder (engines) have almost as much power now as the old V6s," he said.

Both American and foreign automakers say they plan to increase production of small cars and offer more choices for consumers, though it could be a couple of years before those vehicles become widely available.

In the meantime, Caldwell said, "the supply is definitely tight for small cars."

But Lehrer thinks the majority of Americans will probably downsize once it becomes economically feasible to get another car.

"Gas ain't going down," he said. "I think $4 (a gallon) will be the new norm. "It's never going back to where it was."



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