Business

Fuel costs drive up prices of small cars

The beige 2003 Honda Civic sat on Mike Haile's used-car lot near Atlanta for only three days before he sold it for $8,200. And that was $300 more than the asking price.

The car, with 62,000 miles on it and equipped with an automatic transmission, sunroof, air conditioning, side airbags and a compact disc player, is a perfect example of what Haile and other auto industry experts say is a consequence of nearly $4 per gallon gas: A run-up in the price of used small cars.

“These little cars are very hot, like hotcakes, they sell fast,” said Haile, who has filled his 15-car lot with smaller vehicles he bought at regional auto auctions in Atlanta and Orlando, Fla.

In the past month, Haile says, the price of used small cars has risen dramatically as gasoline steadily escalated to a record nationwide average of $3.80 per gallon.

At the auto auctions where dealers get many of their used vehicles, bidding wars are erupting over compacts, he says.

“It's extremely high right now,” Haile said. “The small cars are very hard to get right now. The cars that were $5,000 are now $7,000.”

In the past year, the average used small-car price has gone up 2 percent, from $9,278 to $9,470, according to wholesale auto auction data collected by the National Automobile Dealers Association. There's evidence that the prices are accelerating, according to recent data from J.D. Power and Associates.

The increases are in contrast to used full-size sport utility vehicles, whose prices have dropped $1,600 to $2,000 in the past year, said Paul Taylor, the NADA's chief economist. The average sale price of all used vehicles in the U.S. dropped 2.5 percent in the past year, the NADA reported.

Tom Libby, senior director of industry analysis for the Power Information Network, a division of J.D. Power, said gas prices could drop and demand could once again shift back toward larger vehicles.

Libby says his company's data shows the biggest used-car price increases in the super-small category, cars such as the Toyota Yaris and Chevrolet Aveo. J.D. Power's data shows the small-car price trend may have accelerated in the past two months. The average used Civic, for example, rose in value by 2.7 percent from April 1 through May 11, according to data that J.D. Power collects from new car dealers that also sell used cars. The price of used Ford Focuses rose 1.3 percent during the same time, from $9,838 to $9,963.

After Haile sold his Civic, he kept getting calls responding to his advertising. “I've been getting a million calls for the car,” he said. “I felt sorry that I sold it for that price. I should have sold it for a little higher.”

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