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Consumer Addiction to Bigger Autos Resurfaces

Dip in gas prices boosts interest in big cars, SUVs

By Mark Huffman
ConsumerAffairs.com

November 10, 2008

• GMAC Becomes a Bank • White House to Loan Carmakers $17.4 Billion • Chrysler Closing Car Plants for 30 Days • What Would a Washington-Designed Car Industry Look Like? • States Want Stronger Used Car Rule • Industry Troubles Cloud LA Car Show • Carmakers Get Neither Love Nor Money From Congress • Taxpayers Headed For Automotive Bailout • Time May Be Running Short for U.S. Carmakers • Feds Move Closer to Carmaker Bailout • New-Vehicle Buyers Turn to the Web in Record Numbers --- • More about Auto Sales ...

When gas prices skyrocketed earlier this year, consumers abandoned SUVs in droves and turned to small, fuel efficient cars. But now gas prices are hovering near $2 a gallon. Does that mean consumers will forget all about fuel economy and return to big cars?

It just might.

As gas prices fall and dealers and manufactures offer special pricing on larger models, page views for several larger new models on AutoTrader.com are up, according to AutoTrader.com's monthly Trend Engine report, which tracks the rise and fall in page views of specific models on the site.

On the used car list, the top six models in October 2008 were exactly the same as the top six models in October 2007, but prices on the larger, lower-MPG models continue to fall, according to the report.

Larger new models making big jumps in page views on AutoTrader.com in October included

• the Honda Odyssey (from No. 35 in October '07 to No. 9 in October '08),

• the Honda Pilot (from No. 53 to No. 12 year over year),

• the Chrysler Town & Country (from No. 32 to No. 17 year over year) and

• the Toyota Highlander (from No. 51 to No. 20 year over year).

"In spite of the economy and gas prices, there will always be a market for larger vehicles," said AutoTrader.com President and CEO Chip Perry. "While many buyers can downsize to a smaller vehicle, many others can't because they have large families, need a larger vehicle for work or for other reasons. These people may be able to delay the purchase of a new vehicle, but they can't delay it forever.

The jumps in page views on our site for some of these larger new vehicles may represent some pent up demand that is about to be realized in sales in the coming weeks or months," he said.

Price changes seen

Two new models realized double-digit increases in their average list prices year over year, according to the AutoTrader.com Trend Engine.

The average price for a new Toyota Corolla jumped 10.35 percent from October '07 to October '08 and the average price for a new Chevrolet Malibu jumped 20 percent from October '07 to October '08. Demand for the Corolla remains high as many consumers continue to purchase more fuel-efficient cars and demand for the Malibu continues to be driven by strong marketing and good buzz about the car from automobile writers and the public.

But prices for larger used vehicles continue to drop.

The top six used vehicles on AutoTrader.com's Trend Engine list for October '08 held the exact same position in October '07. In order from No. 1 to No. 6 on the used vehicle list for this October and October '07 were the Ford F-150, the Ford Mustang, the Chevrolet Silverado, the Honda Accord, the Honda Civic and the Dodge Ram 1500.

Average prices for the larger vehicles in the top six on this list fell between 8.19 percent and 17.72 percent while average prices for the used Honda Accord and the used Honda Civic increased 1.17 percent and 6.97 percent respectively.

Almost across the board on the Trend Engine used vehicle top 20 list, average prices for larger vehicles fell by double digits year over year while average prices for smaller vehicles fell by single digits or rose slightly.

"Falling prices for these larger used vehicles mean we're continuing to see some excess inventory of these larger cars, SUVs and trucks," said Perry. "But as manufacturers continue to cut production of larger vehicles and demand for larger vehicles normalizes as gas prices go down we may in the coming months actually see a shortage of some historically popular new SUVs and trucks, which may make this used inventory more attractive to the buyers who need these vehicles to accommodate their families."

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