Article

Gas Prices, Economy Driving Interest in Small Cars

August 2008, Auto Dealer Today - WebXclusive

by Rob Chesney - Also by this author

In recent years, industry attention has refocused on small cars. However, with gas prices recently topping $4 per gallon, the spotlight on fuel economy and the cost savings associated with small used cars is growing brighter.

The average price for a small used car has increased 2 percent in the past year, from $9,278 to $9,470, according to wholesale auto auction data from the National Automobile Dealers Association. Small used cars are increasing in popularity in searches and bidding on eBay Motors.

According to a report from Forrester Research, Inc., online retail sales in 2007 increased 21 percent over 2006.  E-commerce continues to grow in part because online shoppers are less sensitive to adverse economic conditions than the average U.S. consumer. As a result, dealers are wise to consider moving more of their marketing budget online to drive small used car sales. 

A sample search on eBay Motors in May shows 81 listings that advertise great or good gas mileage. Cars such as Ford Escorts and Geo Metros and Storms are being listed – and bid on – more frequently as consumers become increasingly concerned about how much it takes to fill a tank.

Near the end of May, 41 Geos and 43 Escorts were currently listed, with upwards of 40 bids on some cars. One Chevrolet Chevette and even a few Dodge Omnis were listed. The small cars have been popular, with multiple bids and growing prices on some of the vehicles, sometimes over the estimated value.

Consumer interest in small new cars is impacting overall sales for the OEMs, too. Sales of the Ford Focus increased 44 percent in April, Toyota Prius was up 54 percent, the Yaris up by 46 percent. and Nissan cars altogether increased 20 percent. In looking at long-term trends, Ford Focus sales have increased 24 percent in the last year on eBay Motors.  Although small car sales are somewhat positive, the majority of automakers are experiencing decreasing overall sales as consumers become more hesitant to buy new as the economy wavers.

With an expanding market, auto dealers are giving small cars a renewed look. Once unpopular after SUVs became the consumer darling, small cars of the 90s are now back in style, sometimes seen as a smart investment when it comes to gas mileage. And many consumers are finding these used vehicles online.

According to J.D. Power and Associates 2007 Used Autoshopper.com Study, Internet sites such as eBay Motors are increasingly leading consumers to the actual vehicle they buy. Last year, nearly one in four buyers of late-model used vehicles utilized an Internet vehicle locator or online classified ad service to find the vehicle they purchased.  That’s nearly a 44-percent increase from 2006.

A quick avenue to increase used vehicle sales is to market that inventory online. In fact, the J.D. Power study reports that last year was the first year that Internet use surpassed all other shopping methods in locating the used vehicle that a buyer ultimately purchases.

Dealers can invest staff, time and money to create expanded Web sites, purchase online advertising and engage in search engine optimization. Another option is to partner with third-party sites that already have these functions successfully in place.

Once a dealership is ready to sell small cars online or is looking for insight into pricing, research can offer hidden gems about knowing how to describe and price items that will sell more quickly.

Sellers can identify the most profitable small cars by learning about the demand and average sales prices for specific makes and models on eBay Motors. In addition, sellers can learn more about advanced information like the sell-through rate, which is the number of items sold versus the number available on the site.

Looking at the average selling price and sell-through rate of various listings of the same model year of a small car can often point to listing characteristics that yield more successful results. Listing characteristics include what listing features were used, the day and time the auction starts and ends, and the listing format, among others.

In addition, noting the titles and descriptions that have worked for the same or similar vehicles can help develop a competitive listing. The “top searches” module also lists the most common search terms based on keyword or category. Including these most common keywords within listing titles can increase the exposure of listings to more buyers. With this feature, sellers can determine if buyers are searching for “gas mileage” or “good MPG” instead of or in addition to a specific model.

Once the research has been completed, the golden rule of merchandising online is to always provide as much information as possible.  Research shows buyers are more likely to purchase online when they feel comfortable that they have been given all the information they need.  Providing detailed photos, disclosing even the tiniest defects and offering accurate mileage and current MPG information, if available, will create more confident buyers.

With gas prices reaching record highs every day, consumers are starting to change their habits. Small used cars are an appealing way for car shoppers to save money in an unstable economy and still enjoying summer travel.  This trend is an enticing opportunity for dealers to market their inventory of small used cars where consumers are shopping—online.

Vol 5, Issue 6

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