Small car equals small profits

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One obvious effect of an economic downturn is that it nearly always leads to people looking harder to find bargains. Whether in their food shopping, household goods or indeed the cars they buy. Buyers trying to save money will look at lower costs in retail price, insurance, fuel and running costs, so it is hardly surprising that a greater percentage of cars sold during this recession have been in this economical category. Cars like the Citroën C1, VW Fox or Peugeot 107 are not only inexpensive new, they also represent great value as a 2-3 yr old used example, which in turn means they become very sought after.

If the trend and clamour (helped in large part by the scrappage incentive) for these types of cars continues car makers will be forced into designing and producing more cars like this far into the future. This will be good for drivers looking to drive fresh looking, nicely specified and, most importantly inexpensive smaller cars which are far cheaper to own. It could very well be the case that these type of small, economical cars increase even further in popularity as more and more people buy into environmental issues. But for every ying there must be a yang and from the car manufacturers and dealers point of view these cars could be far less profitable to sell putting far more stress on margins.

One other point to mention is that it stands to reason that buyers will increasingly look to ensure that the cars they buy have better residuals and finance providers being far more cautions in the RV’s they set on PCP packages. In the next 3 years cars like the Mini, Polo and the funky Fiat 500 will probably top the buyer’s lists with the likes of Kia and Hyundai continuing to barge into the market and the more obscure makes, which miss the boat in terms of image style or aspiration, will continue to struggle and ultimately fade to black.