The State of the High-Mileage Compact Car
The past two years have signaled an aggressive, and arguably historic, ramp up in fuel efficiency for many cars, but notably for compact cars. Combine that development with larger cabins and better safety and convenience features and today's commuter sedan isn't just more refined. In many cases, it's a flat-out better deal.
The last time gas reached $4 a gallon in 2008, shoppers rushed headlong to buy anything more fuel efficient than what they had. If you didn't have the cash to buy a hybrid, there were good but not great efficiency choices; many of them carried obvious limitations. Under $20,000, just four cars got better than 36 mpg highway. Three needed manual transmissions to do that. The other was the Smart ForTwo, whose calamitous automatic transmission appealed to few.
Today's shoppers have six non-hybrid choices under $20,000 whose EPA highway mileage is 40 mpg or above, and five of them can seat five. By year's end, the group is expected to hit 10.
"Everybody is specifically comparing the fuel-economy numbers," said Aaron Bragman, an IHS Automotive analyst. "If you're not hitting 40, you're not competitive."
It's no wonder that commuter and entry-level cars — a group that includes a lot of models that were around during the 2008 gas spike — have seen their sales increase more than 26 percent from January to April of this year. One in five cars and trucks sold today belongs to the group, making them more popular than mainstream family cars like the Toyota Camry and Honda Accord. Cars that hit 40 mpg in at least one version, like the 2011 Chevrolet Cruze and Hyundai Elantra, are leading the charge. Cruze sales are up 48 percent versus its Cobalt predecessor; the Elantra is up 89 percent versus the prior generation.
"The vehicle portfolio looks a lot more different than it did in 2008," said IHS analyst Rebecca Lindland. "In 2008, the last time there was a gas crisis was 30 years ago. We have a bit more 'Been there, done that' attitude, where we aren't necessarily going to see a panic ensue."
Some carmakers (notably Hyundai and Kia) say their 40-mpg cars will hit the mark across all trims. Others require a certain engine configuration to make 40 mpg. In a sign of the times, some carmakers wager that buyers will pony up extra cash not for beefier engines or sport-tuned suspensions but for low-rolling-resistance tires and aerodynamic enhancements that deliver better gas mileage. Examples include the Cruze, the 2012 Honda Civic and the 2012 Ford Focus; all are equipped with automatics and eke out an extra 1 to 2 mpg overall versus equivalent trims without the high-mileage packages.
Some of the packages make more financial sense than others. At 15,000 annual miles and with gas at $4 a gallon, it would take just 4.2 to years to recoup the $495 spent on the Focus' Super Fuel Economy Package versus an equivalently optioned automatic Focus SE. It would take 6.5 years to recoup the additional $925 for an automatic Cruze Eco versus an equivalent Cruze 1LT. But it would take more than 14 years to recoup the extra $800 spent on a Civic HF ("High Fuel Efficient") versus an equivalent, automatic-equipped Civic LX.
The larger unknown is how much a high-efficiency package might pad resale values. Projected residual values on the fuel-efficiency packages aren't readily available, and the advent of high-efficiency trims is a relatively new phenomenon.
Even without specialized packages, gas mileage is on the rise. Consider the five recently redesigned sedans in Cars.com's Under 20/Over 35 Shootout: the 2011 Cruze, Elantra and Kia Forte and the 2012 Focus and Civic. Compared with their predecessors in 2007 (with automatics and base engines for both groups) all five cars have improved by 10 to 19 percent in combined EPA ratings. Go back to the group's 2003 predecessors and today's gas mileage is up by 8 to 32 percent.
Pricier, Safer & Roomier
The improvements don't come for free. All five contenders boast starting prices from $15,000 to $16,500 and can be nicely equipped for less than $20,000. That's well under the auto industry's $34,160 average MSRP in May, according to CNW Marketing Research, but it typifies the segment's price creep. In 2007, the five cars' predecessors averaged a lower base price by about $2,000. In 2003, the average starting price was $2,700 lower than today's prices.
If cheap wheels are all you want, the upward price creep can prove frustrating. Take heart: Fuel savings should make up for some of the pricing uptick, particularly if gas prices stay high. Safety features shouldn't be discounted, either; commuter cars have more standard safety features, and all five Shootout sedans include an electronic stability system and six or more airbags standard. Four years ago, none of their predecessors offered both safety features standard together.
Safety and efficiency aren't the only improvements. By and large, interior room has increased, too, so much that many compacts aren't so compact anymore. Three of the five Shootout sedans — the Cruze, Elantra and Forte — are technically midsize, according to EPA designations. If the Shootout took place with the predecessors, only one would have been ranked midsize. Go back a generation before that and all five would have been compact. (It's worth noting that the Focus sedan has bucked the trend, seeing a steady decrease in interior volume over the years. It used to be one of the largest cars in the segment; that's no longer the case.)
Sky's the Limit
As buyers move toward small cars, many are gaining lavish options. It's "another way for the manufacturers to make money on smaller vehicles, which has been a problem in the past," said Jeff Schuster, J.D. Power and Associates vehicle forecasting director.
A decade ago, a commuter sedan might have topped out with a moonroof and a CD player. With a couple of notable exceptions — like the repositioned base-model Volkswagen Jetta — many of today's small sedans boast luxury-car options. The Elantra offers heated front and rear seats; the Focus and Mazda3 have dual-zone automatic climate control, and most cars in the segment offer Bluetooth connectivity and iPod-compatible stereos. The Focus, Mazda3 and Cruze offer extra-cost premium paint, which is usually seen in luxury cars.
You may pay handsomely for it. Most commuter sedans don't top out beyond the low-$20,000s, but some do and by quite a bit. A fully loaded Mazda3 breaks $25,000, and the Cruze can run north of $27,000. The Focus' upper-crust Titanium edition can come close to $30,000.
"What you're seeing is a wider price band and content feature band," Schuster said. "You still have the draw, or potential draw, for that young buyer who just wants to get into a basic transportation vehicle.
"Then you have the other side of it, which is people who have the disposable income who are more open to downsizing and don't need the larger vehicle," he adds. "The question will be, will buyers move into smaller vehicles that have a higher price tag? Will someone want a $25,000 to $30,000 [small] vehicle?"
A few years from now, we'll know the answer.