Gas prices send SUV, truck inventory up, prices down

High mileage cars are now hot sellers

Wednesday, July 9, 2008

Click here to enlarge this photo Staff photo by REID SILVERMAN With rising gasoline prices the sun has set on booming sales of pickups and SUVs. This 2001 Ford F-150 sits with a for-sale sign along Route 235 in Hollywood. E-Mail This Article | Print This Story

But prices on used small and mid-sized cars, and more desirable, high-mileage new cars have held steady and even increased as demand for them grows.

‘‘There’s no question. SUV and truck sales are off significantly, in the 20 percent range [since last year]. The fuel prices are 99 percent of it. The price of used SUVs is dropping every day. It’s very, very hard to put a value on it because there’s no demand for them,” said Peter Kitzmiller, president of the Maryland Automobile Dealers Association.

Nationally, wholesale prices on SUVs and pickup trucks have dropped significantly on average since May 2007 – from $20,221 to $15,457 in May of this year. Large luxury SUV wholesale prices have dropped from $32,480 to $26,263 in that time, and mid-sized SUVs dropped from $14,710 to $11,948. Less hard-hit were small SUVs and crossover SUVs like the Ford Escape, Honda Pilot and Toyota Highlander, whose prices dropped less than 10 percent on average in the range from $10,000 to $14,000.

Wholesale prices of pickup trucks have dropped from $15,199 in May last year to $13,353 in May of this year. Small pickups took a smaller hit, dropping from $12,052 to $11,275.

‘‘A lot of people decided ‘I better go trade my SUV in and buy a car.’ That started late last year. The inventory’s gone up. Right now it’s very, very hard to sell an SUV. Some places ... in a lot of locations, aren’t even taking SUVs as trade,” Kitzmiller said. ‘‘My guys are in the business of selling cars. They’re going to do their best to take them but the price will reflect the value of the market. If you own an SUV you bought last year and you owe $30,000 on it, and you go to the dealer and it’s only worth $12,000, why would you take an $18,000 [loss]? A lot of people are just overreacting.”

Weak demand for cars in general has sent prices of vehicles down, even since January. The Maryland Motor Vehicle Administration reported the average sale price of a car in May was $24,482 compared to $27,511 in January. Average sale price of a used car went down to $7,911 from $9,002.

On the other hand, small car wholesale prices have increased from $9,352 to $9,685 in that time, NADA reports.

‘‘In the years past, we were known mostly for truck sales. St. Mary’s, it was basically a truck county until fuel started going up. We’ve definitely seen a remarkable market change from SUVs and trucks to smaller, more fuel-efficient vehicles,” said Gene Pellillo, sales manager at Bell Motor Company in Leonardtown. ‘‘The sales reflect this in the last few months.

‘‘Small cars are what’s moving, even in the used car department. They’re getting to the point where they’re holding more value than they normally would,” he said. ‘‘The biggest thing is getting the fuel-efficient vehicles and keeping them on the lots.”

Smaller cars stay on the lots for as little as two to three days while larger ones and SUVs and trucks stay as many as 60, at which time the dealer will take it to auction. At Bell Motor Co., the Chevy Cobalt, which gets about 30 miles per gallon, is in high demand, Pellillo said, as well as the Chevy Malibu, Impala, and Buick Le Sabre models.

A sales manager at Easterns Auto Outlet of Waldorf in White Plains, a used car dealer, said SUVs there are still selling, but like those at Bell Motor Company, at a much slower pace. Each one sits about two and a half months on the lot.

Because prices are so much lower, people are purchasing SUVs to tow boats or haul around families, both dealerships report. But Easterns said banks have tightened up financing requirements for ‘‘gas guzzlers” because the gas expense is often more the payment. Four-cylinder cars and smaller, six-cylinder SUVs, are up a couple of thousand dollars across the board at Easterns due to high demand.

While Pellillo says the Bell dealership is still taking SUVs as trade-ins, most customers opt to just keep them.

‘‘The value of [SUVs] has dropped so considerably that we’ve found people owe more than they’re worth. The big SUVs will probably be a thing of the past. We tell the customer up front, it’s a tough vehicle to trade in. We give them the numbers and let them make a decision,” he said.

Industry experts say while SUV sales may never come back, pickup sales probably will. And historically, trucks have regained value when gasoline prices have declined in past years, NADA reports.

‘‘Pickup trucks, fuel has something to do with it and the fact that the building economy is down the tubes,” Kitzmiller said. ‘‘But if you need a pickup, you need a pickup.”

Rock-bottom consumer confidence ratings, a struggling housing market and tightened lending practices are contributing to lower auto sales overall.

‘‘All those things gotta come back before we’ll come back. Last year was not a great year and that was because of the general economy. We started feeling it sooner than everyone else,” Kitzmiller said.

The nation’s franchised new-car dealers sold 16.1 million units overall in 2007 – down 2.5 percent from 2006, according to data by the National Automobile Dealers Association and the National Auto Auction Association. NADA expects a 3 percent decrease in 2008’s overall sales.

Though sales volume is down, total dealership sales in dollars are up 3 percent from 2006 to $693 billion, due mainly to higher prices and manufacturer incentives that brought in customers, which allowed dealers to maintain employment, according to NADA data. That’s despite Chrysler’s recent announcement to lay off 2,400 employees by the end of the year. ‘‘Everyone’s got unbelievably good deals,” Kitzmiller said.

For example, GM recently announced zero percent financing for 72 months and employee discounts of up to $6,000 on most of its vehicles.

‘‘This is the first time GM has had such a big sale right before its July 4th sale,” Pellillo said. ‘‘The competition is so intense.”