Expensive gas means high prices for buyers, analyst says

(Honda)

Car buyers can expect fewer discounts on small cars as gas prices continue to bite, according to US auto publication Edmunds.com.

The online motoring magazine said in its monthly American incentives report that spending by automakers on incentives - effectively discounts for buyers - fell sharply last month as demand for small vehicles jumped.

Manufacturers spent 23 percent less on incentives for compact cars in May, Edmunds said May 31, and 14 percent less on subcompact cars.

Average incentives on US vehicles are now at their lowest levels since 2005, as automakers struggle with the effects of high oil prices, the Japanese earthquake, and an uncertain economic outlook.

Edmunds.com's Jessica Caldwell said that although deals on some vehicles are harder to find, it may still be possible to pick up a bargain.

"The continuing market shift toward small fuel-efficient vehicles is keeping overall automaker incentives at the lowest levels we’ve seen in years," she said

"These low incentives are making it increasingly difficult for consumers to find good deals on small cars. But on the other end of the spectrum, we’re seeing better offers on large vehicles that have taken a hit in demand."

The automaker with the sharpest drop in incentives is Honda, which cut spending by 46 percent in May, resulting in a price climb of over $1000 for the Civic and the Accord over the past two months as the manufacturer grapples with the effects of the Japanese earthquake on production.

General Motors, meanwhile, increased the amount it spent by 11.9 percent.

http://www.edmunds.com