Small Cars, Big Profits: Setting The Trend For Leasing

DETROIT (WWJ) - If there's one thing automakers can count on, it's that a subcompact car built on U.S. soil is a surefire money pit. Until now.

General Motors is setting the industry on its ear with its soon-to-debut Chevrolet Sonic, which is being built in Orion Township. On track to compete with the Mexican-built Ford Fiesta and other extra-small vehicles, the Sonic just might revolutionize the American car manufacturing industry.

What led to this seismic shift in focus? Primarily, increased public demand for smaller, more fuel-efficient cars and a renewed spirit of cooperation with the United Auto Workers union. The smallest, most gas-efficient conventionally powered car in the GM fleet – earning more than 40 highway miles to the gallon – the Sonic's pricing will start at about $14,000, helping consumers save money at the pump and the bank.

And how is GM doing this? By making a wide range of changes in its traditional thinking, from revamping the plant to about half its original space and bringing outside vendors onto the manufacturing property, to employing cost-cutting, energy-efficient processes and paying union workers about half the UAW's typical wage. Through these and other efforts the Sonic may be the first American-built subcompact to turn a healthy profit.

For comparison's sake, the Fiesta's base MSRP is $13,320; the Hyundai Accent GL, the most inexpensive new car on the market, starts at $9,985; and the highest-priced subcompact, the all-wheel drive Nissan Juke SL, goes for $24,550.

Most of all, what does this mean for leasing? Put simply, more affordable contracts. Historically, manufacturers have pushed larger, more profitable vehicles by subsidizing their leases while de-emphasizing the smaller, less expensive models.

But as gas prices and ecological awareness continue to rise, so does the public's demand for smaller, more fuel-efficient, "greener" cars; that means small cars will increase in value and leasing terms will become more attractive.

"A renewed focus on small vehicles is great news for leasing customers," Swapalease.com's EVP of Operations, Scot Hall, said in a release. "High MPG vehicles coupled with low lease payments add up to significant consumer savings, and at the same time, those leases are a great way to lure new car shoppers back to the showroom more quickly than standard long-term financing."