Collapse in Demand

[atlaw4u]

36% of the people who tried to trade in a large SUV in May owed more on the truck than it was worth.

Joseph B. White - WSJ - June 2, 2008

Most people who buy a new car or truck don't think they are making a risky bet on the commodity futures market. But they are. Just ask someone who's trying to unload a large sport-utility vehicle purchased in the last two or three years.

The market for large, second-hand SUVs is going through its own version of the mortgage market's meltdown -- and for some of the same reasons. GM's Hummer H2s and Chevy Tahoes and Toyota's Sequoias were adjuncts to a lifestyle built on cheap energy. Because gas was cheap, living farther from work in order to buy a larger home in a former corn field (or desert) was a reasonable economic decision. Shuttling 100 miles a day from school to work to mall to Costco was a trivial expense -- $10 or so when gas was $1.50 a gallon. You could spend more supplying all your passengers with 20-ounce bottles of Coca-Cola.

Gasoline at $4 a gallon has burst the super-sized American lifestyle. The proof: The fizz has gone out of sales of those 20-ounce sodas, in part because after the shock of filling up at the pump, people aren't in a mood to buy anything else at the quickie mart.

More seriously, lots of big homes far from town suddenly aren't worth what's owed on them, and the SUVs that ferried people around the sprawl are also "underwater" on their loans.

About 36% of the people who tried to trade in a large SUV in May owed more on the truck than it was worth… [Read More]

[phoebeisis]

Right idea,wrong numbers. An owner of a 2005 Tahoe who got $16,000 would kiss the mamager who gave him that deal. There are many 2005 Suburbans-loaded-and a Suburban is just a slightly longer,slightly more expensive Tahoe- on Ebay with BIN of $13995. This means the Ebay dealer paid about $6000-$7000 for it-probably at auction.Actual trade in on big 3 yo SUVs is about 15% of original sale price.The numbers-Kelly or Nada-are waaaay-years-behind the actual trade in prices.Kelly prices have always been waaaay high(except maybe for Prius etc).
Charlie

[Jaral]

Hmm another thought: Even if gas prices continue at this level (and we have every reason to think they will increase, not stay stable), the big 3 are going to have a REALLY hard time selling any trucks/SUVs for the next couple of years. There is starting to be a huge glut of cheap barely used barges on the market. Why buy a 2009 model for $30,000 when you can get the 2007 model for $10,000. A 2-year depreciation of 66% is incredible. And $10k is optimistic if gas prices hit $5-6/gal in the next year or two.

I would not be surprised to see a %50+ drop in sales of trucks and SUVs over the next year or two.

[Chuck]

A number of people over the years have enjoyed screaming at me they NEED these vehicles and did not care if it's $10 a gallon. Now some of them are committed in the truest sense to these wheels. Why are they quiet now?

[lamebums]

Originally Posted by Delta Flyer

A number of people over the years have enjoyed screaming at me they NEED these vehicles and did not care if it's $10 a gallon. Now some of them are committed in the truest sense to these wheels. Why are they quiet now?

Well, FSP's wont get off the market for the forseeable future.

SUV sales have hit the dumps, down 40+ percent, but that means if they used to sell 1,000,000 they are still selling 600,000. People are still getting them.

Plus many of those cars will be on the road for 15+ years especially since modern cars are built to last longer it's easy to say most of them will get 200,000 miles before breaking down.

[GreenJello]

Originally Posted by Delta Flyer

A number of people over the years have enjoyed screaming at me they NEED these vehicles and did not care if it's $10 a gallon. Now some of them are committed in the truest sense to these wheels. Why are they quiet now?

Because the server is busy?

We have 7 children. I can't fit everybody in a compact car. In looking at our options, we opted for the Toyota Sequoia, which at least gets better gas mileage than it's counterparts. We only use it when we have to haul everybody around, and have gas efficient commuter cars for going to and from work/kids' individual activities.

***shrug*** Sometimes, you do what you gotta do.

[Right Lane Cruiser]

Longevity won't help if it isn't affordable to keep the things on the road. My Elantra will easily go another 100K with the care I've taken, but that's another 5 years if I only drive that car exclusively. Even averaging 50mpg, I don't want to be paying the fuel costs for that car by then -- it will be a gas guzzler even with my hypermiling!!

[Right Lane Cruiser]

Welcome to CleanMPG, GreenJello!! We certainly don't have an issue with people who use large vehicles for the purposes they were intended for. That need will never go away -- but buying huge vehicles for status symbols and fashion statements will have to stop. Want and actual need are now being forced to separate in this area and that is a good thing!

We are glad to have you here! What are your other cars? What sort of mileage do you get in all your vehicles?

[GreenJello]

Originally Posted by Right Lane Cruiser

What are your other cars? What sort of mileage do you get in all your vehicles?

I currently drive a Scion XB, which I am getting 34mpg around town. I came here to learn how to make that mileage even better!

My husband drives a Ford Taurus, but I don't think he gets as good as mileage as I do... we're actually in the process of selling it, and looking to buy an older Subaru for the teenager to drive in a couple months.

I wish we had viable public transportation options for my family. I work at a hospital, and the bus doesn't even come here. (!!!) We'd still have to drive to the closest park and ride to catch one, but at least we wouldn't be clogging the roads up as much. The light rail is only available in the next county over. Grrr....

I am happy to have found this site! Looking forward to figuring out how to increase my gas mileage.

[Chuck]

GreenJello,

My point you quoted is a bunch of people pretending they are in your situation.