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Finance

2006: A look back - A look ahead  
  Winners and losers were prominent in 2006 but pricing and financing remains at the mercy of gas prices.
 Auto
 Personal finance calendar  Personal finance calendar 

Gas prices, interest rates spark big auto changes

In 2005, says Jack R. Nerad, executive editorial director and executive market analyst for Kelley, "All three American manufacturers participated in and heavily promoted their employee pricing programs. This year, General Motor's lack of participation in the employee pricing wars and the less prominent promotion of the programs by Ford and Chrysler did not spur car-buyers into the market or make them feel compelled to buy the way they did the previous summer.''

It's also likely that many consumers in 2006, with an eye on the upward spiral of interest rates, saw a zero-percent loan -- for as long as 72 months on some of the slowest-selling big SUVs -- as a bargain.

Late in 2006, General Motors added a tried and true sales incentive -- longer factory warranties.

The other thing that 2006 will be remembered for is that it was the first year since the 1970s that the subject of fuel economy of new vehicles really began to get traction, with both consumers and manufacturers. Ads for new vehicles stressed the uppermost federal highway fuel economy numbers -- even an ad for Chevrolet's Corvette stressed its EPA highway rating of 26 mpg.

And as 2007 models began to appear in dealer showrooms there were new small cars designed to appeal to fuel-conscious buyers. A handful of gas-electric hybrids remained the fuel-mileage champs, but these new small cars -- principally the Honda Fit, Toyota Yaris and Nissan Versa – promise fuel economy in the high 30 mpg range at prices at least $1,000 less than the cheapest hybrid.

Still, with gasoline prices falling well below $2.50 a gallon, there is some doubt whether these new fuel-sippers – which are significantly smaller sedans than U.S. buyers are accustomed to -- will create more than a blip.

''All of those (new vehicles) would make people sit up and take notice, but each one of those is a relatively niche vehicle,'' says George Peterson, president of California-based Auto Pacific, which does independent marketing and product consulting for the auto industry.

''The entire segment will account for only about 400,000 vehicles of the 17 million expected to be sold in 2007. It won't really swing the fuel efficiency of the U.S. fleet.''

-- Posted: Nov. 1, 2006
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