Video: Big business for tiny cars

By Phil LeBeau
CNBC
updated 6/1/2006 10:49:52 AM ET 2006-06-01T14:49:52

They're small cars with big buzz: the Toyota Yaris, Honda Fit, and Dodge Caliber -- three of the fastest selling cars in showrooms. These cars stick around for just two or three weeks; the industry average is almost two months.

"We have seen the highest interest in compact cars that we ever seen since surveying new car shoppers,” said Jack Nerad, who tracks car sales at Kelley Blue Book. “So it's an incredibly hot market right now."

What's driving demand for these cars priced between $9,000 and $13,000? Most buyers are people trading in bigger cars and SUV's because of high gas prices.

"There's certainly a lot of hysteria in the United States about gas prices,” said Angus MacKenzie, editor-in-chief of Motor Trend magazine. “So people are looking for options and alternatives when it comes to trading up their cars."

Going further on a gallon is one advantage to buying a small car. But there's something else making these rides more appealing. It's their look and functionality. For example, the Caliber comes with flip down speakers for tailgating.

"You definitely get the feeling, ‘This is more car than I expected for the money,’” said cars.com senior editor Joe Wiesenfelder. “That never used to be the case."

Car makers have come a long way since the 1970's. When small cars like the Pacer and Gremlin first came out, they were tin cans with four wheels -- and not terribly attractive. Now, even subcompacts have more style and better performance. The Fit and Yaris get at least 33 miles to the gallon in the city.

But how long can this Renaissance last? That depends on the cost of gasoline.

"It's kind of a spurt with small cars,” said Nerad. “And it might change, given lower fuel prices."

As long gas prices are high, so will interest be in these pint size rides.

© 2012 CNBC, Inc. All Rights Reserved

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