The Car and Truck Fleet and Leasing Management Magazine

Car Buyers Downsize, But Spend Big on Options

July 21, 2008

DETROIT – People of all income levels are buying small cars to pinch pennies at the gas pump, but they are not scrimping on creature comforts. Instead, they are spending hundreds or even thousands of dollars on options, like heated leather seats and high-end entertainment systems, usually found in luxury cars, according to

Small-car buyers often pay $600 for a sunroof, $500 for satellite radio, or $400 for a hands-free phone system. Some even spend $300 for colorful interior lights.

Among the growing ranks of small-car buyers are baby boomers who previously toted their families in well-equipped minivans and SUVs. Now, with gas above $4 a gallon and their children grown, they want nothing to do with such a large vehicle but have grown accustomed to its luxuries, the report said.

The price Americans are paying for a subcompact car has increased an average $2,532 since 2004, nearly double the $1,253 increase for all vehicles, according to the Power Information Network data. Transaction prices for compact cars have increased an average of $2,370 over the same period and $3,055 for the segment’s top seller, the Honda Civic.

Perhaps the biggest success in the small car segment, in terms of persuading buyers to upgrade, is BMW’s Mini Cooper, which starts as low as $18,050 but typically sells for at least 40 percent more than that. BMW offers myriad options on the Cooper that can take the price well above $40,000.

Many dealers, having realized that small-car shoppers are willing to buy higher trim levels and optional features, are stocking their lots with more upgraded vehicles. That is particularly true for hot sellers that have waiting lists, such as the Toyota Prius hybrid and the Honda Civic.

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