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Small Cars Losing Value While Gas Stays Cheap

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Sep 20th, 2009 by Ross Edwards

The U.S. government has decided that the country needs to move toward smaller, more fuel efficient cars. The government has upped the mileage requirements for future cars and gave fuel efficient car sales a bump with the Cash for Clunkers plan. Even with legislative support, public demand for fuel efficient cars is going down.

“It’s part of a larger trend that’s been happening all year,” Alec Gutierrez, a senior market analyst for KBB, told USA Today. “Some of the weakest segments are subcompact, compact and hybrids.”

It seems that despite what the government wants, Americans still want bigger cars and trucks. According to wholesale auction house Adesa, pickup prices have risen 23% since August 2008, while compact car prices have dropped by 15%.

Smart Car picture

The Smart Fortwo and other small, fuel efficient cars have lost value on the used car market while gas prices have stayed low.

Those numbers don’t tell the whole story though. Adesa saw pickup prices drop dramatically and compact car prices soar last August when gas was close to $4 a gallon. What we’re seeing now is not Americans shunning small cars, just a return to normal.

What this means for new car buyers is that high gas mileage cars won’t have as high resale values as they have in the last year. Since car companies and dealerships are in the business of selling cars, it’s obviously not in their best interest to point this out. So when they tell you their small car has been proven to retain 80% of its value after two years, they might not be lying, but they might not be telling you the whole truth.


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