Small Cars Looking at Bigger Stickers

Car dealership
Car dealership

You knew it was only a matter of time until we saw the rotation into small cars putting the squeeze on buyers.

In fact, we are now seeing it with both new and used small cars.

Across the board, prices for these cars are moving up along with gas prices.

This is clear when you look at the latest data from Kelly Blue Book.

KBB tracks used car prices week to week. For the week ending March 2nd, it found used car prices jumped 1.3% to $12,286. That should not come as a surprise given the way auction prices have shot up. Used car auction house Adesa says the average compact car sold for $6,942 (up 4.4%) on the wholesale market in February.

While automakers are moving as quickly as possible to ramp-up production of small cars or at least the small fuel-efficient engines to put in those cars, it won’t happen overnight. So expect the tight inventories for many small cars to continue for some time. Eventually, that could play out with small cars selling with a minimal discount to the sticker price. Perhaps even at a premium to the MSRP (though automakers hate when that happens).

One thing is certain, we won’t see increased incentives or rebates for new cars anytime soon. Automakers don’t need to grease a market where buyers are coming into the showroom. They finally have pricing power and they’re not gonna blow it.

The question is how long this tight supply/higher price cycle lasts. Almost everyone in the industry expects it to continue through the rest of this year. After all, it will take time to boost production rates. All of this means that if you see a deal that works for you at a dealership, take it.


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