SUV Rollover

Posted by Clark Williams-Derry

05/09/2008 12:15 PM

Gas guzzlers are losing their resale value--fast.

SUV - Bitter - Flickr user joguldi Via Calculated Risk, USAToday is reporting that SUV resale value is plummeting.

[W]holesale prices on big SUVs such as Chevrolet Tahoes, Ford Expeditions and Toyota Sequoias are down 17% from a year ago. Full-size pickups have fallen as much as 15%...

The reason, obviously, is that soaring gas prices are souring car buyers on the big guzzlers. When a gallon of gas was cheaper than a cuppa joe, size and power seemed like nifty luxuries. But with gas nudging $4, the luxuries have become albatrosses.

There's absolutely no reason for "I-told-you-so's" here. Cars are the second largest purchase most people ever make, next to their homes, so rapid depreciation will be a serious hit to a lot of families. Still, there's not all that much to be done: SUV owners, whether they knew it or not, were making a bet that oil would stay cheap for a good, long while. It didn't, and they're paying the price for a bet gone bad.

The only thing that we can do, collectively, is to stop assuming that oil will be cheaper in the future than it is today. Maybe it will be; but the experience of the last 8 years suggests otherwise. Still, despite price hikes that outstripped most predictions, there are all sorts of decisions -- from what kind of cars to buy, to what kinds of neighborhoods to build, to what kind of transportation investments we should pay for -- that are being made under the tacit assumption that gas prices will come back to earth.

That's a risky bet. Just ask someone who's trying to trade in a Toyota Sequoia.

[Picture courtesy of Flickr user joguldi, distributed under a Creative Commons license.]

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Comments

Posted by chris jones 05/09/2008 07:49 PM

The flip side of this equation appears to be true as well, at least in one case. I bought a new Volkswagen Golf TDI (diesel) in 2005. kbb.com says it's worth MORE now, with three years and 25,000 miles on it, than I paid for it. I got a good deal, but not that good.

This is despite VW's atrocious repair record compared to Honda and Toyota.

I credit the high resale value to the fact that my car gets 45+ MPG on the highway, 39 MPG overall. (I have records to prove it.)

Posted by Clark Williams-Derry 05/09/2008 09:16 PM

Holy cow, Chris. That's cool. I'd heard the same about the Prius a while back -- that new supplies were limited, so people who *really* wanted one were paying a premium for a year-old Prius. But that's the first I've heard of this for a VW.

Posted by Jeff Douthwaite 05/09/2008 10:27 PM

Yes, the horrible price of gas will do some good re Global Warming...
I note more attention is now being given to my "ZAP Xebra" all-electric car. From Green Car Co in Kirkland, ph 425 820 4549
Its 20 mile range is ok for retired geezers like me who drive less than that per day... Electric power @ 9 cents / kw hr is much cheaper...
Longevity of its batteries is still a Q. Call me for info, 206 240 5576

Posted by Barry 05/10/2008 01:19 PM

It would be nice if the people who made the bad decisions to buy these gas hogs in the first place were the people hurt most by their own decisions. But they won't be.

It is the less wealthy strata of society that can only afford used cars who will feel most of the economic and mobility pain.

Gas guzzlers are the most expensive tier of new vehicles. People who can buy these new are in the upper tiers of wealth. These folks are much less price sensitive to rising gas costs compared to folks in the lower economic strata.

These gas hogs will represent the majority of the used car market for a decade or more. As one of the commentators above notes, used cars that are cheap to fuel are quickly becoming very expensive to buy.

So the people with the least ability to buy gas will be forced into the vehicles that go the least distance per dollar of gas.

The people who made the terrible infrastructure decisions in the first place (buying gas hogs) are not the ones who will suffer the most from these decisions. Lots of them can afford to either buy the gas or dump the beast and buy a Prius.

This is just another example of how unsupportable our approach to limiting fossil fuels solely by price is. The least price sensitive are allowed to make the majority of consumption and new infrastructure decisions...while the most price sensitive are going to feel the pain from these decisions.

Until we put into place a system that impacts the fossil fuel decisions of everyone somewhat equally, we will continue to dig ourselves into deeper and deeper misery.

Posted by Jon Morgan 05/11/2008 12:13 AM

How long until we start seeing the same trends in real estate--homes close to jobs and/or good transit service being most desirable, and those far from either being unwanted and hard to sell? Housing near good transit can save people the $7000 average annual cost of owning a car. It seems like it's been clear for up to 3 years now that Americans are starting to get it on more efficient cars, but we're still playing the futile game of buying more efficient ones instead of redesigning our communities and making cars unneeded and unwanted altogether. The head of OPEC just acknowledged that $200 oil is possible in the near future. CIBC, one of Canada's major banks, just predicted oil at $225 a barrel by 2012. Regardless what their fuel and emissions are, the environmental costs in land consumption and human costs in accidents (42,000 a year in the US right now) leave any cars harmful to the environment. Moreover, even in the current slump real estate remains a better investment than cars.