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Published: Tuesday, 7/15/2008

Demand growing bigger for smaller used cars

BY LARRY P. VELLEQUETTE
BLADE BUSINESS WRITER
Salesman Zack Clark prepares a sign in a car for sale at Grogan
Towne Chrysler-Dodge in Toledo. Salesman Zack Clark prepares a sign in a car for sale at Grogan Towne Chrysler-Dodge in Toledo.
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Over the two dozen years that Michael Okulski has sold used automobiles at one of Toledo's busiest intersections, he's rarely seen a topsy-turvy market like the one he's dealing with today.

"The big stuff, you can get cheap, but there aren't very many little cars out there," said Mr. Okulski, a veteran salesman at Tom Cater Auto Sales at Wernert's Corners in west Toledo.

As gas has rocketed from less than $3 a gallon in January to more than $4 now, demand for fuel-efficient small cars has climbed as dramatically as the value of high-priced trucks and SUVs have fallen.

"There's a shortage of [small] cars all across the spectrum," said Mark Scott, a spokesman for AutoTrader.com, a national online automotive marketplace which has about 4 million vehicles listed on its site at any given time.

Mr. Scott said that listings for large vehicles like trucks and SUVs have grown by 20 percent in recent months on the company's Web site as more consumers try to get out of their large vehicles.

Similarly, listings for smaller cars have declined, and their average price has gone up.

But local dealers, purchasers, and salesmen like Mr. Okulski say that consumers seem to be paying more attention to the overall value rather than just chasing after the highest mile-per-gallon rating on the window.

According to used car data compiled by the industry publication Automotive News, wholesale prices for trucks and SUVs have dropped more than 25 percent from a year ago, while prices for subcompact cars have climbed a total of 13 percent during the same period.

But the jump in wholesale prices for small, fuel-efficient vehicles has led to what would seem to be some illogical situations at the retail level.

For example, the Web site of a local dealer lists a used 2008 Ford Focus 2-door coupe with a 5-speed manual transmission and 6,000 miles on the odometer for $17,995.

Yet an identical vehicle - direct from the factory - sells new for $16,740.

"That's one of the hottest cars on the market right now, and the prices don't make any sense at all," said Todd Kauffman, inventory manager for GroganTowne Chrysler-Dodge and Charlie's Dodge.

Mr. Kauffman has been trav-eling the country attending automobile wholesale auctions for 22 years, the last seven of which were spent as the buyer for GroganTowne and Charlie's.

When gasoline hit $4 a gallon, it scared motorists as well as used car managers, who began driving up wholesale prices of fuel-efficient vehicles.

"Dealers were paying retail (prices) for small cars," Mr. Kauffman said. "They had to have them on their lots. That's panic. That's shooting from the hip."

Tim Robinson is the used vehicle manager at Ballas Buick GMC, where most of the vehicles on the lot are trucks and SUVs. He admitted that he tried to change his product mix to smaller vehicles, but is glad he wasn't able to do so.

"Two months ago when gas went sky high, I tried to buy all these fuel efficient cars, but they're really not selling any better than they have been," Mr. Robinson said. "We've had one month where we outsold trucks with cars. I know there's probably a panic out there [among consumers]; I just haven't seen it."

GroganTowne's Mr. Kauffman said he's a firm believer that while car buyers remain concerned about fuel economy, they're still measuring the real-world impact of $4-per-gallon gasoline on their daily lives.

"The consumer is very intelligent," said Mr. Kauffman. "They know what they want, they know what they need to buy, and they know what they should be paying."

Contact Larry P. Vellequette at:

lvellequette@theblade.com

or 419-724-6091.



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