Hot at the used-car lot: Big SUVs
- Article by: NICK BUNKLEY
- New York Times
- May 10, 2012 - 10:25 PM
Car dealerships have many customers like David King, who traded in his 2007 Chevrolet Tahoe in late April because filling its 26-gallon tank with $4 gasoline had become so expensive. He now drives a Chevrolet Volt 25 miles each way to work, where he can charge the plug-in hybrid so it rarely uses any gas.
But the old gas guzzlers don't just disappear when their owners give them up. Many are quickly bought by someone else, sometimes before the dealer even has a chance to clean them up and put a for-sale sign in the window.
Mike Mayhan, a sales manager at the Victory Automotive Group, the Alabama dealership that took King's Tahoe, predicted that the black sport-utility vehicle would not last long. "I have people waiting to get one, so they turn around pretty fast," he said.
That is because dealerships also are getting more customers like Jason Frank, who said he was thrilled with the 2003 Ford Explorer he just bought, even though "the gas mileage is kind of depressing." Frank and his fiancee each drive more fuel-efficient cars for work, but neither of those vehicles can fit their two large dogs, carry their mountain bikes and pull a boat for weekend trips.
"It's basically our extra vehicle just to use for our fun stuff," said Frank, 28, an information technology manager at a bank in Chesterfield, Va. "We just got it because it fits our needs and it's very versatile."
In 2008, when gas prices first reached $4 a gallon, Americans could not trade in their hulking trucks and SUVs fast enough, and the castoffs piled up at dealerships as their value seemingly plunged by the hour. A year later, hundreds of thousands of additional gas guzzlers were sent to scrap yards through the government's cash-for-clunkers program.
But today, in spite of high gas prices and low fuel economy ratings, big SUVs are no longer the pariahs of the used-car lot. Dealers and analysts say demand for the vehicles is steady and inventories are low, causing their values to stabilize or even increase.
Retail prices for five-year-old full-size SUVs are 23 percent higher than a year ago, according to Edmunds.com, an automotive information website. That is more than double the average price increase of 11 percent for all five-year-old vehicles. Prices for three-year-old SUVs are up 6 percent, triple the 2 percent average increase for all vehicles that age.
In recent months, large SUVs and crossover vehicles have also accounted for a larger percentage of the used-vehicle market, according to Kelley Blue Book, another research firm. They made up 4.5 percent of sales this year and 4.2 percent of sales in 2011, up from 3.8 percent in 2008.
Alec Gutierrez, Kelley's senior market analyst of automotive insights, said consumers were reacting to gas prices more rationally than in 2008, when some hurriedly bought vehicles that turned out to be too small for their lifestyles. Although SUVs no longer sell just for their image, people still want them if they have three or more children, need greater cargo capacity or want to tow a trailer, and more of those buyers are coming back into the market after putting off a purchase during the recession.
"A lot of people with larger families or whatever have just swallowed that gas prices are what they are and there's not much you can do about them," said George Fussell Jr., director at AOW Select, which operates two large used-car dealerships near Fort Lauderdale, Fla. "They're not buying them for looks. They're buying them because they need them."
Even though automakers have made big vehicles more fuel-efficient in recent years, the lower upfront cost of a used SUV appeals to some buyers who need something large. For example, the 2013 Ford Explorer with a four-cylinder EcoBoost engine gets 28 miles per gallon in highway driving, compared with 18 mpg for a 2003 Explorer. But the new Explorer has a sticker price of more than $30,000, while the Kelly Blue Book retail value for the 10-year-old model is about $8,100.
"You're going to pay a little bit of a penalty in fuel economy, but ultimately the savings are going to make up for that fuel-economy hit," Gutierrez said. "Still, I don't think you're going out to buy a used Tahoe or Expedition because you want to drive it every day to work 30 or 40 miles away."
King, the Alabama man who traded in his Tahoe for a Volt, said he was pleasantly surprised by how much he received for the trade-in. Although buying the Volt was more expensive than paying for gas, he said he preferred to put his money toward a new, more efficient car.
"I was spending between $400 and $500 on gas every month for my Tahoe, and I thought, 'There's got to be a better way,'" said King, co-owner of an accounting firm.
But even though an SUV no longer fit his needs, he decided to buy a two-year-old Jeep Wrangler for his teenage son at the same time. Gas mileage was not as big an issue in that case because his son will not drive the car as far, King said.
Besides, he added, "he's going to be responsible for the gas, so he'll be getting some important life lessons."
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