SUV for Sale: Cheap!

Some of the consequences of very high oil prices are pretty predictable. Homes way out in the suburbs are likely to lose value. Prices will rise across the board for goods and services. Airlines will struggle. And gas guzzlers will be much less attractive:

Gas costs deflate prices on used SUVs

High fuel prices are causing the value of used SUVs to plummet, often below what’s listed in the buying guides many shoppers use to negotiate with dealers. “The dealer is going to offer a price, and the customer is going to be ticked off,” says Tom Webb, chief economist for Manheim, operators of auctions where car dealers buy their used-vehicle inventories. “The guidebooks have not caught up to the market,” he says.

Webb’s figures show wholesale 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%, Webb says.

Even though plunging values should make used SUVs bargains for buyers less concerned about fuel prices, that doesn’t seem to be happening. Used SUVs languished unsold an average 66.4 days last month, up from 48.6 days the year before, says CNW Marketing Research. “There are far more truck-based SUVs being traded in than customers to buy them,” says Mike Jackson, CEO of AutoNation, the largest new-car dealer chain.

Your Prius or Jetta TDI on the other hand? I may start buying up some of those as speculative investments. If people are trading in their SUVs, there is going to be a run on more fuel efficient cars – and they should hold their value, if not trade at a premium.

People have asked me for several years what I thought was going to happen with gas prices. I always tell them that the long-term trend is much higher, and you should plan accordingly. I have warned friends and family to embrace fuel efficiency, and I have tried to preach that message here. Now that gas prices are really hitting people in the pocketbook, looks like they are finally getting the message. But like many caught in the housing bubble, they waited a little too long and lost a lot of money. The lesson here? Pay attention to what I am telling you. Do you hear that, Mom? 🙂

14 thoughts on “SUV for Sale: Cheap!”

  1. This post highlights a vexing reality about the US car fleet. It make may economic sense to go out an buy a gas guzzler for cheap. The money you save will pay for the gas it slurps. It will take years for fleet averages to start really moving up. Cars are very well built today, and can last 300k miles with good maintenance.
    Obviously, we should have been taxing gasoline all along, and heavily, like Europe.
    A government program that might make sense would be to buy low mpg cars and scrap them.
    We can hope that people who live close to work will buy cheap used SUVs, while long-range commuters buy high mpg cars. The market will help this happen.
    Of course, the real solution is to move the US fleet average above 50 mpg, and seek annual improvements thereafter, by taxing gasoline, and giving rebates on cars that exceed certain targets.
    The good news is that gasoline demand is falling in the US, we have plenty of refinery capacity and gasoline, and demand will contonue to fall for decades.

  2. This post highlights a vexing reality about the US car fleet. It make may economic sense to go out an buy a gas guzzler for cheap.

    That’s essentially what I did with the house I just bought. It is way out in the suburbs of Dallas (23 miles), but I am only averaging 2 days a month in the office. So I got a really super deal, albeit on a house bigger than I wanted. But I weighed the utility bills against the price I had to pay, and it made sense to get that house.


  3. RR:
    Yes, I am wondering if in the Los Angeles market, we will start to see retirees and consultants and other move outward, while daily commuters move inward…of course, this has already been happening for other reasons (commute times).
    I am looking to find a p/u truck with a diesel cummins engine, and do the veggie conversion…you might consider it….there seems to be an ample supply of free restaurant waste oil, as diesels never caught on in America….though now there are nagging questions about gas and road taxes etc….

  4. Your Prius or Jetta TDI on the other hand? I may start buying up some of those as speculative investments.
    Oddly, diesels seem to be depreciating along with the SUVs.

    Perhaps that’s your opportunity, RR. Trust VW’s quality? Perhaps a diesel SUV? Just kidding!

  5. Oddly enough I spent the day selling our old SUV and buying my “KingofKaty hybrid”. From my adventures I would say that new SUVs and large trucks aren’t selling well. Used SUVs seem to be holding up OK at least here in Houston.

    My new ride is listed at 26 MPG but my ScanGaugeII was getting 31 MPG.

  6. Forget MPG. Miles driven is most important. We have a 98 Jeep Wrangler and a 07 Highlander Hybrid. Our gasoline bill last month? $80.

    We both moved very close to where we work. My wife works two days a week and I have to drive to work, maybe, two days a month.

    If we lived in a city that had a more robust public transportation system, I suspect we would drive even less.

  7. Forget MPG. Miles driven is most important.

    I think that’s more or less what Benny was alluding to in his first post, and reflects my comments on the house I bought. If you can pick up an SUV for a fire sale price, but don’t drive all that much, it may make perfect sense.

    Cheers, RR

  8. My new ride is listed at 26 MPG but my ScanGaugeII was getting 31 MPG.

    What are the details on it? 4-cylinder? Manual transmission?

    I got a Ranger when I came back to the U.S. from Germany. Drove it in Houston. Drove in Ponca City. Drove it to Montana, but the neighbors all let me know that it wouldn’t be wise to try to drive it there in the winter. That’s when I got rid of it.

    Cheers, Robert

  9. Off topic, but a funny spoof on carbon offsets:


    What is Cheat Offsetting?

    When you cheat on your partner you add to the heartbreak, pain and jealousy in the atmosphere.

    Cheatneutral offsets your cheating by funding someone else to be faithful and NOT cheat. This neutralises the pain and unhappy emotion and leaves you with a clear conscience.

    Can I offset all my cheating?

    First you should look at ways of reducing your cheating. Once you’ve done this you can use Cheatneutral to offset the remaining, unavoidable cheating.

  10. This is also off-topic, but I was looking at real estate prices this morning. In Regina, SK (due to potash, oil & gas, uranium, etc.) we have seen a 50+% jump in housing prices over the last year, and that is on top of a 30% jump last year. My home (1950 sq. ft,built in 1978, bought 6 years ago, completely updated) is worth at least 3x what I paid for it.

    I was poking around in Prosper, TX listings and it’s really surprising. this 10 year old 4200 sq. ft McMansion in Prosper is listing at $375k.

    A partially-updated 1900 sq. ft late ’70’s home in my area is listing for $389k and if it wasn’t on a busy street, it would sell for $450k in a day.

    The city and builders we so caught off-guard that there is over a 2 year waiting list on new housing and that has pushed the price up of any existing housing that is habitable.

  11. According to Google Maps, that house you listed in Prosper is 1.7 miles from my house.

    Housing in Texas is cheap relative to most places. But in places like Prosper – on the northern edge of the Dallas expansion, you can really find some deals as a result of the mortgage crisis.

    Cheers, RR

  12. What are the details on it? 4-cylinder? Manual transmission?

    I’ve never owned a truck. Would agree it wouldn’t be a good vehicle for Montana. But for a commuter car, it will work great.

    It has the 2.3 L I4 Duratec engine and a 5-speed manual. I got the basic XL version. The only options are A/C, tilt steering/cruise, cloth seats and a radio.

    My plan is to modify it to increase the gas mileage. I’ll switch to 5w-20 full synthetic oil, run the tire pressures up to 45 psi, install hotter ignition, K&N intake, dual low pressure exhaust and some other tricks.

    I’m even thinking about a “mild hybrid”. Would install deep cycle batteries to run the electrical and then fool the system into not running the alternator. At night I would recharge the batteries. That should increase the MPG by around 10%.

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