SUV owners see trade-in values drop

[gmsickofan]

SUV owners see trade-in values drop
Soaring fuel prices now overshadow the prestige of owning a big gas guzzler
BY SARA KEHAULANI GOO AND DAN MORSE
The Washington Post
09/18/2005

WASHINGTON -- Terry and Sherri Ward bought a new Chevrolet Tahoe for $32,000 last year. It is jet black, 6 feet tall and 16 feet long with leather seats and power everything. Great for hauling the kids. Great for Sherri Ward's job as a real estate agent.

"You can sum it up in a word," she says of pulling up in a Tahoe. "Image."

That image is starting to lose some of its sheen, thanks to rising gas prices. On a recent stop at the pump, Terry Ward got some sympathy. "I know it hurts," a fellow motorist told him. The Wards are trying to sell their Tahoe, hoping to buy something more fuel-efficient, perhaps a Chrysler Pacifica, a vehicle that's a cross between a sport utility vehicle and a station wagon.

With gas prices in the $3 range, many drivers of the least fuel-efficient cars are especially feeling the pain and are looking to downsize to a vehicle that gets more than 15 miles to the gallon.

But selling an SUV may also be a pain. Sales of the largest General Motors and Ford SUVs have plummeted in the past year. Car dealerships around the country are flooded with used SUVs they find difficult to unload. SUV owners are finding that their cars are depreciating quickly, mostly because manufacturers offered steep discounts on new models, causing the older ones to fall in price.

The resale values of the biggest and most expensive SUVs are dropping the fastest. A 2004 Ford Expedition, a monstrous vehicle with three rows of seats, has dropped nearly 10 percent in value, or $2,400, since the beginning of the year, to $22,200, according to Kelley Blue Book.

"Used SUVs are down more than normal" in value, said Kelley spokeswoman Robyn Eckard. "You can get a really good deal on a 2003 or 2004 SUV right now because prices have dropped so much."

Nearly 60 percent of shoppers said that gas prices either have changed their minds or strongly influenced their purchase decisions, according to Kelley Blue Book, which reports a 13 percentage-point increase from a month ago, the highest increase on record. Similarly, car shoppers now rank fuel efficiency as the 23rd most important factor in what kind of car they will buy, up from the traditional ranking of around 35th, said Art Spinella, who tracks car-buying trends at CNW Marketing Research.

The shift away from SUVs, which has been happening gradually over the past seven years, is now permanent for certain kinds of buyers, Spinella said. "This gas price run-up has effectively cooled any desire for buying an SUV for a fashion statement," he said. "A good two-thirds of people were buying them not to carry people or things around."

If a sampling of Washington-area SUV drivers is any example, people are showing an interest in getting rid of the bigger gas guzzlers for smaller gas guzzlers, but they are not ready to part with SUVs altogether.

"I'm torn; I love my truck," said Shilpa Johnson, who drives a Lexus SUV with a V-8 engine that requires premium gasoline. Her husband wants her to give up the truck for something more fuel-efficient. They've started to visit car dealers. He's pushing for a sedan. She wants a smaller SUV, such as the Toyota Highlander, a hybrid truck that is touted on a company Web site with the slogan "Now you can have your SUV and MPG too."

"I feel safe in my truck. I can put a lot of stuff in it," Johnson said. "I love to drive it, but it makes sense to get something more fuel-efficient."

Robin Rynn, a mother of two who lives in Columbia, Md., said she was dismayed that the dealer gave her so little for her Ford Expedition when she traded it in last week -- about a third less than she expected.

"They told us nobody's buying them. They said, 'We've never had this many,' " Rynn said.

http://www.delawareonline.com/apps/p...509180332/1003

[TorchRedCorvette]

Originally Posted by gmsickofan

SUV owners see trade-in values drop
Soaring fuel prices now overshadow the prestige of owning a big gas guzzler
BY SARA KEHAULANI GOO AND DAN MORSE
The Washington Post
09/18/2005

WASHINGTON -- Terry and Sherri Ward bought a new Chevrolet Tahoe for $32,000 last year. It is jet black, 6 feet tall and 16 feet long with leather seats and power everything. Great for hauling the kids. Great for Sherri Ward's job as a real estate agent.

"You can sum it up in a word," she says of pulling up in a Tahoe. "Image."

That image is starting to lose some of its sheen, thanks to rising gas prices. On a recent stop at the pump, Terry Ward got some sympathy. "I know it hurts," a fellow motorist told him. The Wards are trying to sell their Tahoe, hoping to buy something more fuel-efficient, perhaps a Chrysler Pacifica, a vehicle that's a cross between a sport utility vehicle and a station wagon.

With gas prices in the $3 range, many drivers of the least fuel-efficient cars are especially feeling the pain and are looking to downsize to a vehicle that gets more than 15 miles to the gallon.

But selling an SUV may also be a pain. Sales of the largest General Motors and Ford SUVs have plummeted in the past year. Car dealerships around the country are flooded with used SUVs they find difficult to unload. SUV owners are finding that their cars are depreciating quickly, mostly because manufacturers offered steep discounts on new models, causing the older ones to fall in price.

The resale values of the biggest and most expensive SUVs are dropping the fastest. A 2004 Ford Expedition, a monstrous vehicle with three rows of seats, has dropped nearly 10 percent in value, or $2,400, since the beginning of the year, to $22,200, according to Kelley Blue Book.

"Used SUVs are down more than normal" in value, said Kelley spokeswoman Robyn Eckard. "You can get a really good deal on a 2003 or 2004 SUV right now because prices have dropped so much."

Nearly 60 percent of shoppers said that gas prices either have changed their minds or strongly influenced their purchase decisions, according to Kelley Blue Book, which reports a 13 percentage-point increase from a month ago, the highest increase on record. Similarly, car shoppers now rank fuel efficiency as the 23rd most important factor in what kind of car they will buy, up from the traditional ranking of around 35th, said Art Spinella, who tracks car-buying trends at CNW Marketing Research.

The shift away from SUVs, which has been happening gradually over the past seven years, is now permanent for certain kinds of buyers, Spinella said. "This gas price run-up has effectively cooled any desire for buying an SUV for a fashion statement," he said. "A good two-thirds of people were buying them not to carry people or things around."

If a sampling of Washington-area SUV drivers is any example, people are showing an interest in getting rid of the bigger gas guzzlers for smaller gas guzzlers, but they are not ready to part with SUVs altogether.

"I'm torn; I love my truck," said Shilpa Johnson, who drives a Lexus SUV with a V-8 engine that requires premium gasoline. Her husband wants her to give up the truck for something more fuel-efficient. They've started to visit car dealers. He's pushing for a sedan. She wants a smaller SUV, such as the Toyota Highlander, a hybrid truck that is touted on a company Web site with the slogan "Now you can have your SUV and MPG too."

"I feel safe in my truck. I can put a lot of stuff in it," Johnson said. "I love to drive it, but it makes sense to get something more fuel-efficient."

Robin Rynn, a mother of two who lives in Columbia, Md., said she was dismayed that the dealer gave her so little for her Ford Expedition when she traded it in last week -- about a third less than she expected.

"They told us nobody's buying them. They said, 'We've never had this many,' " Rynn said.

http://www.delawareonline.com/apps/p...509180332/1003

It sounds to me that Sherri Ward cannot afford the Tahoe ITSELF.
With the hot real estate market expected to slow, maybe she is scared.
Buyers remorse?

The AWD Pacifica gets 17/22 mpg vs 15/20mpg for the Tahoe 4wd.

What is THAT difference in gasoline over a year?
Say 20,000 CITY miles a year for a busy agent,@ 2 mpg more with the UNDERPOWERED Pacifica.
So the Tahoe will use 1,333 gallons @3.00/gal =$4,000
Pacifica 1,176 gallons @ $3.00/gal=$3,539

That my friends is a NOMINAL DIFFERENCE.
The DESTINATION FEE on the NEW Pacifica is around that!
What about the sales tax?

I guess some people REALLY did not need an SUV!

[Ming]

The AWD Pacifica gets 17/22 mpg vs 15/20mpg for the Tahoe 4wd.

What is THAT difference in gasoline over a year?
Say 20,000 CITY miles a year for a busy agent,@ 2 mpg more with the UNDERPOWERED Pacifica.
So the Tahoe will use 1,333 gallons @3.00/gal =$4,000
Pacifica 1,176 gallons @ $3.00/gal=$3,539

That my friends is a NOMINAL DIFFERENCE.
The DESTINATION FEE on the NEW Pacifica is around that!
What about the sales tax?

Or an AWD Audi sedan for that matter. Compare the Ford Freestyle to the Ford Explorer. That's a better match up considering what most people use their Explorers for, I think.

I'd do it myself but I can't find the MPG numbers for the 2006 Explorer at the usual sites I check (Yahoo! Autos, etc).

[Cortazzo]

$500 a year is significant, that is a month+'s car payment, a substantial portion of an insurance bill, or a really few good nights out on the town. And over the life of the vehicle, that is a couple thousand dollars. If they downsized from a tahoe to an even smaller SUV/crossover than a pacifica they could save more, or if they went to a wagon they'll save even more. Saving gas is money in their pocket, and when you're talking thousands over the life of a vehicle that is serious money that most americans would like to see back in their pockets.

[TorchRedCorvette]

Originally Posted by Cortazzo

$500 a year is significant, that is a month+'s car payment, a substantial portion of an insurance bill, or a really few good nights out on the town. And over the life of the vehicle, that is a couple thousand dollars. If they downsized from a tahoe to an even smaller SUV/crossover than a pacifica they could save more, or if they went to a wagon they'll save even more. Saving gas is money in their pocket, and when you're talking thousands over the life of a vehicle that is serious money that most americans would like to see back in their pockets.

Maybe they should buy an 07!!!

Do not forget that RE Agents are independant contractors and the majority of vehicle expense is a WRITE-OFF.
It is the single parents with one child,or the young person without a family that may not REALLY need an SUV.

If you can drop $32,000 on an SUV, what is $500/yr?
Getting RID of it will cost them MUCH MORE THAN THAT...

[TorchRedCorvette]

Originally Posted by TorchRedCorvette

Maybe they should buy an 07!!!

Do not forget that RE Agents are independant contractors and the majority of vehicle expense is a WRITE-OFF.
It is the single parents with one child,or the young person without a family that may not REALLY need an SUV.

If you can drop $32,000 on an SUV, what is $500/yr?
Getting RID of it will cost them MUCH MORE THAN THAT...

Do NOT forget I am figuring 20,000 miles a year!

Imagine if she works close to home and plans her showings a bit better.

Let's her children ride the school bus more?

Puts coffee in a cup instead of hitting the drive-thru?

Maybe the gas price increase will have NO effect?

How much are the leather seats in the Tahoe?

Over 1000$ from what I recall. Try fabric next time!

[gmfan3]

Originally Posted by Cortazzo

$500 a year is significant, that is a month+'s car payment, a substantial portion of an insurance bill, or a really few good nights out on the town. And over the life of the vehicle, that is a couple thousand dollars. If they downsized from a tahoe to an even smaller SUV/crossover than a pacifica they could save more, or if they went to a wagon they'll save even more. Saving gas is money in their pocket, and when you're talking thousands over the life of a vehicle that is serious money that most americans would like to see back in their pockets.

Wow! very insightful. Tell u what. I'll trade in my suv for a little econowagon, and every time i need to pull a trailer, i'll just rent a truck...yeah...that really saves money.

Come on...you are assuming most people are so stupid to not know how to read mileage estimates and make a informed decision.

$500. that's Nominal. that's not even 100 bottles of froofy water or cups of coffee.

[Fesasp]

Hmm, I think one of those new Chevy HHR's may be one of her better choices. It is a bit like an SUV and should be able to haul around 5 people. It's mileage is 30 hwy / 22 city.

[gmfan3]

Originally Posted by TorchRedCorvette

Do NOT forget I am figuring 20,000 miles a year!

Imagine if she works close to home and plans her showings a bit better.

Let's her children ride the school bus more?

Puts coffee in a cup instead of hitting the drive-thru?

Maybe the gas price increase will have NO effect?

How much are the leather seats in the Tahoe?

Over 1000$ from what I recall. Try fabric next time!

lol...

she probably shouldn't have gotten the 20 inchers also.

[01cavalier]

I agree about the HHR, should work just fine, there is also the Malibu Maxx, another fuel-efficient choice, and with that sliding back seat, should be more than comfortable enough, the Freestyle, Equinox/Torrent are pretty efficient choices, heck, even the new Impala, could get the SS and have lots more power and fun, with being much more efficient.

[TorchRedCorvette]

ALSO notice how the article came out in the Washington Post 2 DAYS before the unveiling of one of the new GM full-size SUV's...

Search deeper and we will find the authors are from a PAC,Sierra Club, or "think-tank" on living,driving,loving, and being green...

[desmo9]

Originally Posted by gmsickofan

"You can sum it up in a word," she says of pulling up in a Tahoe. "Image."

Yeah, "image." .... gluttonous sense of entitlement, arrogance, and naievety. If you truly need such a vehicle, great. But to drive around in a monstrosity for "image" represents all that's bad about America. And the domestics, for capitalizing on it without preparing for leaner days ahead, are gonna be hurting real quick. As bad as things are without expensive oil, the loss of the corporate cash cow will truly test GM's ability to survive. There's simply not enough well-executed yet fuel-miserly stuff in GM's broad lineup. Inexcusable case of abysmal planning, and Wagoner's gonna eventually pay for it with his job, and the jobs of many others. Mark my words.

Round 1 was in 1973. The Japanese will again prevail in Round 2. Three- decades-and-change henceforth.

[TorchRedCorvette]

Originally Posted by desmo9

Yeah, "image." .... gluttonous sense of entitlement, arrogance, and naievety. If you truly need such a vehicle, great. But to drive around in a monstrosity for "image" represents all that's bad about America. And the domestics, for capitalizing on it without preparing for leaner days ahead, are gonna be hurting real quick. As bad as things are without expensive oil, the loss of the corporate cash cow will truly test GM's ability to survive. There's simply not enough well-executed yet fuel-miserly stuff in GM's broad lineup. Inexcusable case of abysmal planning, and Wagoner's gonna eventually pay for it with his job, and the jobs of many others. Mark my words.

Round 1 was in 1973. The Japanese will again prevail in Round 2. Three- decades-and-change henceforth.

Despite the doom and gloom you forecast,even @ 3.00 gallon the price of fuel is lower than it was 25 years ago,inflation adjusted. Interest rates were 20% then!

When hurricane season is over,and gas is below 2.00 gallon this will be forgotten.

The Japanese have NOT prevailed.
As a matter of fact, THEY are building full-size SUVs and Pickups themselves!

[VivienM]

Originally Posted by desmo9

Yeah, "image." .... gluttonous sense of entitlement, arrogance, and naievety. If you truly need such a vehicle, great. But to drive around in a monstrosity for "image" represents all that's bad about America. And the domestics, for capitalizing on it without preparing for leaner days ahead, are gonna be hurting real quick. As bad as things are without expensive oil, the loss of the corporate cash cow will truly test GM's ability to survive. There's simply not enough well-executed yet fuel-miserly stuff in GM's broad lineup. Inexcusable case of abysmal planning, and Wagoner's gonna eventually pay for it with his job, and the jobs of many others. Mark my words.

Round 1 was in 1973. The Japanese will again prevail in Round 2. Three- decades-and-change henceforth.

Wow, we actually agree on something for once

I'd love for Wagoner and co to explain the following.

The GMT-900s (and specifically, rushing the 900s) only make financial sense if they bring in more profit than the 800s. The 800s managed to keep selling well because they were discounting them by like... $12000. Assuming the unit cost of a 900 was equal to an 800 (which is an incorrect assumption), an incentive cut of $1 would be enough for the 900s to bring in more money than 800s.
BUT clearly the 900s represent a lot of R&D, tooling, and so on costs (fixed costs) that have long been paid for the 800s. Let's hypothetically say that's $6000/truck. That means that, in order to make more (or lose less) money, they have to cut incentives by $6001, at the very least. That implies the new SUV is $6001 (or more) more expensive than the old one was... which is a significant percentage increase. (Knowing GM, of course, they'll initially increase the transaction price by $12000 or more and then slap incentives like crazy after two months once people balk at paying $45000 for a redesigned version of what cost $33000 six months before)

Can they really match/exceed the sales volume of the 800s, especially given the gas price situation, when they are going to be selling the 900s for way higher prices? And if they can't... then what idiot concluded that the 900s would dig GM out of its financial mess? And when is that idiot going to get fired?

I have this scary feeling that someone high up at GM hasn't heard of the difference between fixed costs and variable/unit costs, because for a company with high fixed costs, both due to UAW obligations and due to the capital-intensive nature of the auto industry, it sure seems like fixed costs aren't taken into consideration when making key business decisions.

And I agree with you, the Japanese are going to slap GM/F*rd around again, for a simple reason: they've nurtured EVERY market they compete in. Civics may not bring in as many yen per car as Acura RLs, but that doesn't mean they're neglected. If one particular market (big SUVs, say) tanks, then sure, Toyota is hurt a bit (nobody is going to be buying Sequoias), but they have the rest of their lineup ready for business.
The domestics, for structural reasons as I've argued before, have been incapable of doing that. I don't think, for the record, that this is unique to the domestic auto industry - I think it extends to EVERY industry subject to Wall Street analysts' pens. Wall Street would have had a fit if GM, in the mid-late 90s, had spent money fixing the money-losing Cavalier when that same money could have been used on a new, highly-profitable SUV project. (I remember an article a few years ago in the heyday of the telecom boom when analysts wanted Sprint to dump a small, low-growth, steady-income local telephone business that was "dragging down" their growth numbers... only Wall Street is stupid enough to suggest that businesses sell off their steady activities to focus on riskier 'growth' markets, and the same principle applies to the auto industry).

Toyohondassan don't operate under that kind of self-destructive system.

That, for the record, is why I don't particularly think Wagoner should be fired. Wagoner is a symptom of a broken culture in American business, and if you replace him with Yet Another MBA, you won't get much of an improvement.

If people wanted to sue somebody for GM's troubles, they should sue every analyst who has encouraged GM to concentrate on SUVs, to rebadge, to neglect the unprofitable car side of the business, etc. Those people, though probably not liable in any legal sense, are the ones who are to blame for the downfall of an American business icon.

[VivienM]

Originally Posted by TorchRedCorvette

The Japanese have NOT prevailed.
As a matter of fact, THEY are building full-size SUVs and Pickups themselves!

Who cares?

If full-sized SUVs and pickups are hot... then they'll make money.

If they cool down, cut a shift at the SUV plant, add a shift at a car plant, and boom, Toyohondassan is ready for battle with a perfect competitive car design and enough inventory to satisfy demand two months later.

Toyohondassan are smart enough to get into full-sized SUVs/pickups, in case there's some money to be made there, but they are also smart enough NOT to bet the company on that segment, so if it blows up on them, I doubt any Toyota shareholder will be unable to sleep at night because Tundra sales dropped 70%.