(St. Louis Post-Dispatch (KRT) Via Acquire Media NewsEdge) Aug. 24--If gas were cheaper, Kelly Werner would have had more options when shopping for a used car.

After Werner learned last month that her first job out of college would be in Ballwin, 60 miles round trip from her Oakville home, she decided she needed a more fuel-efficient car than her midsize 2001 Pontiac Grand Am GT.

In her first car shopping trip this past week to Bommarito Chevrolet-Mazda in south St. Louis County, Werner, 22, found a compact car that would squeeze out a few extra miles per gallon -- a red 2007 Mazda3 with a four-cylinder engine.

RELATED LINKS

bullet Small car surge gets new life to discontinued car brands

bullet Trip Calculator

bullet TALK: What do you drive?

"I don't know if the car I chose would have been the one I chose" if gas had been cheaper, said Werner, who also considered a midsize Pontiac G6 but realized it would not give enough of a mileage boost. "It all came down to the gas."

This summer's rising gas prices have made consumers covet small cars like the Mazda3, thus turning the used vehicle market upside down. Sport utility vehicles and pickups, which sold faster than small cars just a year ago, now stay on lots longer. Dealers have had to slash prices to move these bigger vehicles, which traditionally have been the source of fat profits for used car lots.

On the flip side, higher gas prices have boosted consumer demand -- and prices -- for small cars, such as subcompacts and compacts.

In the last few months especially, "a lot of dealers said, 'I'm going to start stocking up on these (small cars),'" said Tom Kontos, chief economist for ADESA, an auto auction company in Carmel, Ind.

SHIFT TO SMALL

Take Jim Suntrup Jr., sales manager for Suntrup Select Pre-Owned in south St. Louis County. Earlier this year, he noticed the upswing in gas prices and stopped buying bigger vehicles for several months.

Instead, Suntrup said, he bought a more small cars like the Chevrolet Aveo and Cobalt and the Ford Focus.

Other dealers nationwide are following that shift, and the sudden demand means higher wholesale prices.

At auto auctions -- where dealers buy vehicles from other dealers, banks that have backed auto leases and rental car companies -- prices for used compact cars have skyrocketed.

Last month, dealers paid an average of $9,385 for these small cars, according to national data from ADESA Analytical Services. That's a 23 percent jump from July 2007.

In contrast, the average wholesale price of midsize cars rose only 5 percent, while the price of full-size cars dropped 25 percent.

"You just can't get enough of them," said Jim Mager, sales manager for Behlmann Buick Pontiac GMC in Hazelwood. "I'm trying to get my hands on (the smaller) cars, but I'm not going to pay an '07 price for an '05 car."

Some of the increased cost is passed along to car buyers, but it is not always enough. Forced to spend more money at auction on the smaller cars, dealers are seeing narrower profits, said Art Spinella, president of CNW Research, a consumer research firm in Bandon, Ore.

Still, dealers are buying the cars -- and consumers are, too.

Last month, in the St. Louis area and nationally, a small used car sat on the lot for an average 22 days, according to CNW Research data. That's about a third of the time it sat a year ago.

"A car will not last (on the lot)," said Austin Richards, sales manager for Lou Fusz Kia in St. Louis County.

That's been true for the Honda Civic.

Last year, about 30 used Civics would be on the lot of Dave Mungenast St. Louis Honda in south St. Louis County at any given time, said Tim Farace, who manages the preowned department. Now, because of higher demand, there are only four or five at a time.

And more people who lease Civics are opting to buy, instead of turn in, their cars at the end of the lease, Farace said.

For dealers and buyers, that means a smaller pool of cars.

THE BIGGER SELL

Meanwhile, rising gas prices have doused demand for used pickups and SUVs.

Richards, of Lou Fusz Kia, said that when gas hit about $3.70 a gallon in late spring, customers started turning in pickups and SUVs.

Car shoppers also pulled back on buying them.

Used pickups spent 56 days on average nationally on a lot, eight more days than data tracked in July 2007 by CNW Research. Pickups in the St. Louis area spent slightly fewer days than the national average but had a wider year-over-year difference-- 54 days compared to 45 days a year ago.

SUVs had an even steeper increase.

Last month, SUVs stayed on a lot about 66 days, compared to 44 days a year ago. Locally, that difference was larger -- 70 days on average this year, compared to 37 days in 2007.

As lots remained bloated with SUVs and pickups, auction prices have tumbled nationwide. Last month, dealers could buy a pickup like a Dodge Ram for an average of $8,829, or 23 percent less than a year ago, according to ADESA's data.

The price dealers pay for an SUV like a Ford Expedition dropped 24 percent to $9,783.

Prices that buyers pay also fell, according to national data compiled through Power Information Network, a division of J.D. Power and Associates.

"If someone is interested in a truck or SUV, now is the time to buy them," Richards said. "The prices are phenomenal."

With prices staying low and gas retreating in recent weeks to less than $3.50 a gallon locally, analysts and dealers say that pickup and SUV sales will rebound.

"We're still selling SUVs because of the aggressive pricing" on them, Behlmann's Mager said. He said his dealership sold a 2007 and a 2004 GMC Yukon on Monday.

"It isn't a completely dead business," Mager added.

Spinella of CNW Research pointed to the Chevy Tahoe as an example of a good SUV deal for consumers. A year ago, a 2004 Tahoe sold for $18,500, he said. A three-year-old Tahoe this year is about $11,000.

Despite higher gas prices this summer, "for $7,000, you can buy a lot of gas," he said.

atablac@post-dispatch.com -- 314-340-8140

To see more of the St. Louis Post-Dispatch, or to subscribe to the newspaper, go to http://www.stltoday.com.

Copyright (c) 2008, St. Louis Post-Dispatch
Distributed by McClatchy-Tribune Information Services.
For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

[ Back To TMCnet.com's Homepage ]

Discussions: