Car Buyers Think Hard and Long Distance About Mileage

Darci Bawdon was nearly sold on the powerful Dodge Durango SUV that she was renting as a tryout -- until she stopped at a gas station one day last month. As the fuel pump’s digits reached $70, the fitness trainer nearly choked on her vitamin water.

Sherman Oaks businessman Marc Kontoff was tired of watching his profit squeezed by $25 fill-ups every four days. Now, in his brand new Toyota Prius gas-electric hybrid, he can stretch the interval to eight days.

Then there’s Jason Holmes, an unrepentant lover of large rides.

The Lomita resident owns two hulking Ford Aerostar vans and a Volvo DL sedan with a combined 493,000 miles on the odometers. Even at today’s high pump prices, Holmes is in the market for a new Ford Expedition sport utility vehicle, although that could change if pump prices keep going up.

Down at the automobile showroom, red-hot gas prices are melting the rules -- altering what customers buy, how they negotiate and what they can get for their old cars. For many, costly fuel has brought a growing sense that big and inefficient vehicles are a luxury they can no longer afford.

“Put the letter V and the number eight together now, and it scares people,” said Santa Monica Nissan salesman Adam Escobar, who was taking a smoking break on a quiet weekday afternoon as he waited for the occasional customer. “The first question they ask now is, how much does it cost to fill the tank?”

Like a boxer changing his footwork, Escobar said he had shifted tactics because of fuel-price concerns. Now, Escobar said, he is more likely to emphasize gas mileage, touting the 2.5-liter Altima sedan over the 3.5-liter version or noting that the 2005 Pathfinder SUV is a good alternative to the larger Armada.

Some equity analysts also have noticed a shift.

“Until the end of last year, I didn’t see any correlation, but that situation has changed since the beginning of the year. The gas prices in the last few months have begun to put pressure on the big SUVs and the full-size pickup trucks,” said David B. Healy of Burnham Securities.

In the first quarter, sales of the Ford F-Series and Dodge Ram pickup trucks fell 9% and 13%, respectively, compared with a year earlier, according to Automotive News Data Center. The Ford Explorer and Chevy Trailblazer SUVs dropped by 25% and 23%. That stands in sharp contrast to 2004, when the trend toward big and powerful remained steady through the end of the year.

Meanwhile, sales of Toyota’s gas-sipping Prius more than doubled when compared with the first three months of 2004. Ford’s Escape SUV posted a 7% sales increase, based largely on its hybrid edition.

Overall U.S. hybrid sales hit 83,153 in 2004, up 81% from the previous year, according to R.L. Polk, an automotive industry research firm. Nearly one-third of those sales were in California, and the Los Angeles area accounted for more than one-third of the state’s hybrid purchases.

Expensive fuel also is affecting resale value, according to statistics kept by Edmunds.com, an automotive website. In March, the average trade-in value of a 3-year-old compact car was $6,638, up 22.6% from March 2004; the trade-in value for a 3-year-old large SUV was $18,180, down 3.9% from a year earlier, Edmunds said.

“In our surveys, 60% say that high prices are changing how they drive and what they buy,” said Brian Chee, the editor responsible for the Autobytel.com, Autoweb.com and CarSmart.com online sales websites. “Fuel economy is becoming an important criteria. Going to the gas station twice a week is becoming unacceptable.”

In an effort to boost sales, automakers have brought out incentives usually reserved for the end of the year, when dealers are anxious to move vehicles to make way for the new models. SUV incentives averaged $2,841 in cash back or rebates per vehicle in March, up from $2,475 in March 2004, Edmunds said. SUV incentives were nearly double those offered on compacts.

“Without incentives, we would be reporting a very different situation,” said Jane Liu, Edmunds vice president of data analysis.

Although the Explorer and the Expedition are fetching rebates up to $5,000 or interest-free financing for up to 60 months, sales are “dead flat,” said Billy Lourie, sales manager of Santa Monica Ford, where banners proclaim that “low 0.0% APR financing is back.”

The mid-size Escape, Ford’s entry into the hybrid wars, can coax 36 miles from a gallon of gas in city driving. The vehicle is drawing lots of buyer interest, but the company made only 25,000 for 2005. Lourie got six Escapes; 67 would-be buyers put in orders.

“Some won’t get them until 2006,” Lourie said.

Some observers doubt that the fate of large SUVS and pickup trucks is sealed.

Calling the first-quarter shift in sales numbers “much ado about not much,” UCLA Anderson Forecast Senior Economist Christopher Thornberg noted that Americans spend a smaller percentage of their income on petroleum products to fill their gas tanks and heat their homes than they did several years ago -- 3.5% now compared with almost 6% in the 1980s.

Still, high prices have begun to affect even people with relatively fuel-efficient vehicles. Kontoff of Sherman Oaks, who owns a cleaning service, was getting 25 miles to the gallon from his 1999 Toyota Corolla but was driving as many as 500 miles a week keeping tabs on cleaning crews from Pasadena to Santa Monica.

Once the 46-year-old entrepreneur drove the Prius, Kontoff said his mind was made up even though the highly sought-after hybrid carried a $5,000 markup over its $26,500 sticker price. Kontoff said he was able to bargain the extra cost away.

It’s not unusual for dealers to demand a premium over the list price for hot cars with a waiting list, like the Prius. But a sampling of Los Angeles-area dealers found that the Prius markup was becoming less common as supplies of the car have increased.

Kontoff’s “sea-tide”-blue car has been averaging 40 miles a gallon and has made “a huge, huge difference.”

Bawdon, 27, frequently trains clients in their homes and was lured by the Durango’s size, which could handle lots of exercise equipment. But the prospect of spending $70 on gas more than once a week quickly changed her mind.

“That’s just insane,” said Bawdon, of Venice, who gives clients an hourlong workout for not much more than $70.

In late March, she bought a new Ford Mustang with a six-cylinder engine. It was less expensive than the SUV, and “it only costs $40 to fill the tank.” She stashes exercise gear in the back.

But for Holmes, there’s nothing like a big vehicle. The 49-year-old belongs to the fraternity -- somewhat beleaguered lately -- that clings to very large vehicles in the belief that they are safer and more comfortable.

Twice a year, Holmes, his wife and three daughters make a 1,400-mile trek to visit relatives in Sturgis, S.D., sometimes in icy weather. A large SUV is more powerful and is steadier on slippery surfaces, Holmes said. With his old vehicles wearing out, Holmes is eyeing the Ford Expedition or the even larger Ford Excursion.

“What am I supposed to do, pile everyone into a Toyota Corolla? Well, then I have to rent a trailer to carry everything,” said Holmes, a benefits coordinator for the United Auto Workers.

Holmes might reconsider if gas reaches $3 a gallon by June, when he is planning to make his purchase, he said.

“Then again, I just might say the heck with it and buy it anyway.”