Used Car Markets Kinder to the SUV Lately
I get the data from the major vehicle wholesale auctions on a regular basis, look at the NADA and Black Book data on used vehicles as it comes out, and it’s become apparent that used full-size SUVs have gained a few points in residual value recently. This is a bit surprising, since it represents an inverse relationship to rising gasoline prices and the same inverse relationship to sales of new full-size SUVs, which have been declining for some time.
It appears that some consumers are making the decision that they need a full-size SUV around the homestead, and the rising price of gasoline will just have to be accepted as part of the deal.
Other people in the industry have noticed this as well, and acted accordingly. Dealerships are no longer running away from the full-size trade-in, but instead, putting a better ACV (Actual Cash Value, the real value of any trade – NOT the trade-in value) on the full-size SUVs that still show up on their lot every day.
And other automotive writers have noticed as well – David Welch of BusinessWeek, a auto writer who puts out some good work, had a piece in the magazine yesterday on the same subject.
One of the points made in Welch’s article was that some people have decided that they need an SUV and are buying used SUVs because a used SUV is much, much less expensive than a new SUV, and still fills whatever need they have.
This, by the way, if I could digress a little bit, syncs up with some strong anecdotal evidence I’ve run across in the past 12 months in consumer interviews that consumers who currently have an older SUV that was previously used as a primary vehicle are not trading those vehicles in when it comes time to get another vehicle, but rather, keeping the SUV as a second or third household vehicle.
The rationale employed by these consumers is that the market value of the high-mileage full-size SUV they have is so low that it is not worth trading in, but, the SUV still looks great and runs great, and since they have the room in the driveway, they simply keep it around for those “maximum-use” instances that that may crop up. These run the gamut from ski trips to needing to carry a lot of people at once to trips to Home Depot. From their point of view, the value of having a vehicle available to the household for these infrequent, but important, “maximum-use” instances far exceeds the minor expense and/or hassle of keeping the high-mileage SUV around. Which, of course, is a pretty valid rationale, all things considered.
What about the new vehicle that replaced that high-mileage SUV as the daily driver or commuter car? More and more, it seems to be a real car that gets much better fuel economy than that full-size SUV. It seems that some percentage of the SUV-driving population has come to the conclusion that doing 40 miles to work every morning and then 40 miles back in the evening by yourself in a 3-ton vehicle that gets 15 mpg is not in their own best economic self-interests. So they’re replacing the big SUV in the driving rotation with a more fuel-efficient car, but they still love that SUV for what it’s good at, so they keep it around.
Now, obviously, this scenario of owning both a full-size SUV and a commuter car (or, in the case of the stay-at-home parent, an errand car) makes no economic sense unless you already have the high-mileage SUV and were due to cycle into another new car anyway. But, a lot of people are in that exact situation because they bought a full-size SUV during the last 10 years, when SUV sales were going through the roof.
COPYRIGHT Autosavant.net – All Rights Reserved