High gas prices fuel demand for smaller cars

U.S. buyers, even when they pick larger cars, are going for more fuel-efficient engines.

Six-cylinder engines used to command the lion’s share of the market, but 38 percent of buyers sought four-cylinder engines in the first quarter, the highest since Westlake Village, Calif.-based marketing and consulting firm J.D. Power and Associates began collecting such data in 2002.

That directly affects automakers’ bottom lines: A large vehicle with a V-8 engine can command $8,000 more than one with a 6-cylinder, in part because additional luxury features are often packaged with the larger engine, according to J.D. Power auto analyst Jason Rothkop. By comparison, there is a discount of $4,000 when a buyer moves down from a 6-cylinder to a 4-cylinder.

Demographics also play a role. Baby boomers are trading in larger vehicles as their nests empty, and their children are now of car-buying age. Half of the next generation will pick small cars for their first set of wheels, said George Pipas, Ford’s top sales analyst.

“Gas prices are important because they’ve accelerated these shifts, but the shifts were going to happen anyway,” Pipas said. “SUVs were not going to roam the Earth in this decade as they did in the 90s.”

Pickup sales also tumbled with the recent downturn in home construction, since they are often used as work vehicles. The weakened economy and falling home values have played a role in the decline of SUVs and pickups.

“We see our consumers coming into our dealerships and wanting to trade down into a lower monthly payment,” said Steven Landry, Chrysler’s vice president of sales.

A growing number of SUV owners, like Yumberto Menicocci, are leaving the segment altogether. According to J.D. Power, nearly a third of buyers who traded in a mid-sized SUV picked a small crossover or compact car in the first quarter of this year. Just 5 percent upgraded to a larger SUV.

Menicocci, a resident of the upscale Miami suburb of Palmetto Bay, recently placed his 2003 Chevrolet Tahoe with leather seats and 39,000 miles for sale on Craigslist for $16,000 — roughly $2,000 less than what his research determined was the Kelley Blue Book value.

He bought a 2003 Kia Spectra for $5,000 because he was tired of paying so much for gas with his heavy Tahoe. “I was wasting $30 a day compared to $10 a day,” he said.

“Everybody is like, ‘What is that? Is that the maid’s car?’ ” said Menicocci, who sells marble and granite for a living. “But I don’t care. At this point, I’m way past looks and appearances.”

Also in msnbc.com business Answer Desk: The risks of investing extensively in gold Your Career: The repercussions of expressing your faith Interactive: 10 cars we’re looking forward to in 2010 ‘Reaching out’ and the other worst buzzwords of the year   Video: Existing home sales make an unexpected jump

MORE FROM AUTOS

Autos Section Front

Ford offers retirement, buyouts to 41,000 Ten cars to look forward to in 2010 GM names Microsoft executive as new CFO Hyundai Motor announces China truck venture Spyker extends deadline on offer to buy Saab Hyundai unveils new Sonata GM names new head of Buick, GMC brands New small cars might struggle in market UAW leaders nominate Bob King to lead union CEO: GM to repay $6.7 billion in U.S. loans Autos Section Front   Add Autos headlines to your news reader: