Hammer Time: Why Cheap Cars Don't Sell

Consumer Reports recently came out with a study that featured the seven least satisfying new cars in today’s market. The worst? By a margin worthy of “Independence Day” going up against “Pluto Nash,” it was the current generation Kia Rio. Only 40 percent of current owners would recommend buying a new one.

The usual demerits for a compact such as the Kia Rio would be that it is tinny, cheap, loud and had interior accompaniments that would be worthy of a Little Tikes Cozy Coupe. In other words, it’s a Korean version of the Mitsubishi Mirage with substantially more power in exchange for far less usable interior space and an ugly beak. That may just be my personal opinion.

But there’s a far guiltier crime of irrefutable measure that the Kia Rio is known for at the auto auctions, and Consumer Reports managed to hit the exact bullseye of that bullseye.

Kia decontents the hell out of the Rio (note the roll down windows) and then shucks far too many of these base model cars to dealers who end up catering to what we kindly call in the business the “pulse and a paycheck” clientele. The folks you would never willingly finance yourself, but are more than happy and able to buy any new car in today’s market thanks to cheap credit.

So long as the payment is low enough that it can be stretched out for at least seven years, these math-challenged souls will sign a stack of papers that will yield more short-term profit than any check cashing errand boy could ever dream of earning as a “Checks For Cash!” franchisee.

Automakers makes an absolute killing out of inking these deals and selling them in bunches as asset-backed securities to whatever bank is willing to remarket these soon-to-be-heavily-depreciated assets. But there are a few catches that come along the way as these cars age. Many of which end up nailing the automaker right in the proverbial groin of their bottom line.

Too Many Base Cars Drag Down Used Car Values

That 2013 Kia Rio that sold for $15,000 back when it was new is now worth less than $6,000 at the auctions according to the Manheim Market Report. We’re not talking about 60 percent off what is usually an inflated MSRP. We’re looking square into a bottomless pit of real-world depreciation that ends up destroying any opportunity for profit on the long-term leasing side of the car business. Whenever automakers decide to build a large horde of base model cars and decontent them to the extreme, it has a lasting negative effect on the value of those vehicles.

You Can’t Ignore Local Needs And Wants

Nissan learned this lesson about 10 years ago, Kia is still learning it.

When the Versa was first released you could find a surprising number of them all over the country. Their unconventional wisdom could be summarized by the following: “No A/C in Georgia? Why the hell not?!” Nissan pretty much ignored the actual needs of their local customers and simply rubber stamped a small army of base Versas to dealers who simply couldn’t sell them.

Back in the Farago days of TTAC, it was surprisingly easy to find a small base car to review that was worthy of an endless onslaught of pejoratives and color metaphors that described the driving experience. Franchise dealers back then would sometimes hock these sorry cars as a “Buy One, Get One Free,” deal that would pair an extortion-priced loaded model with one of these base models. Kia was a leading force in this not too bright marketing scheme that used deceptive ads to try to get the clueless into their doors. Many of them came, but few left with a couple of $2 keys to a cheaped-out base car.

You Can’t Offer Fewer Key Features Than The Competition

In the end, what would happen is that most of these bare-bones vehicles would just sit for month. Eventually they would get wholesaled out at the auctions. In Kia’s case, they still sell the Rio, and to the lesser extent the Forte, with deleted features that heavily detract from the long-term ownership experience.

You can’t sell a car that has roll-down windows, no cruise and wheel covers if your competition is offering power windows, cruise and alloy wheels at the same price point. It doesn’t matter if your MSRP is $1,500 less. People only look at what’s out their window once the shine of the great deal wears out. Not what you offered them as a great deal on paper a year ago.

Owner’s Remorse Is A Base-car Bitch

Case in point: Imagine going to a stop light with your brand new base-to-the-extreme refrigerator white Kia Rio and seeing a Chevy Sonic with a nice set of alloy wheels, a rear spoiler that works well with the design, and enough presence to make it stand out for all the right reasons. That exterior dynamic has a huge impact on long-term customer satisfaction because there is still an element of upscale features to the car. Even if it’s a base model.

That’s one of the reasons why the Sonic was able to win a Yahoo comparo pitting it against two other cars known for their parsimonious nature: the Versa and the Mirage. In real-world dollars, it was only a few hundred dollars more. When it comes to new or used cars, cheap only sells if there’s enduring value to it.

NOTE: This Is The Loaded ‘No Legs!’ Version

Roominess + Features > Performance

American consumers almost always value room and features over performance when it comes to affordable compact cars. That’s why a Nissan Versa can sell like hotcakes while the pocket rocket Mazda 2 has become a historical footnote.

In the used car world, a 2010 Dodge Caliber SXT equipped with the Jatco CVT may offer virtually no performance virtue compared with the lowly Chevy Cobalt LS and the based out Ford Focus S of the same year. But with standard alloy wheels, a ton more room and an arguably sportier design profile than the other dowdy Detroit offerings, the Caliber often sells for a higher price.

Nobody Wants A Cheap Car. Not Even Cheapskates.

You want a cheap Rio? Go to the website of your local Kia dealership and you will see a surprisingly large army of base LX models with no cruise, no alloy wheels and no power windows. That wouldn’t be that big of a deal 10 years ago, but today these options cost a grand total of maybe $50 to add onto a vehicle? The features that made a car loaded 10 years ago such as alloy wheels, cruise, ABS and traction control are now standard for everything save the cheapest of the cheap, and with many automakers equipping their cheapest cars with these features standard, you have to use these ingredients in the modern recipe that is a base car.

Still want cheap? Just buy a near-base car and upgrade it to your liking as time goes on. If Kia were capable of doing this I’m willing to bet that even the lowly Rio would have a far higher customer satisfaction rating. What do you think?