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WSJ: When Buying a Gas Guzzler Makes Sense
By JLP | June 5, 2008
I saw this in today’s Wall Street Journal:
The gasoline-price-induced collapse of the sport-utility-vehicle market presents a quandary for consumers. With gas at $4 a gallon, SUVs no longer make affordable commuter vehicles. But at the same time, they’ve never been cheaper.
Manufacturers are offering between $2,000 and $5,000 in discounts on once strong-selling models like the Ford Explorer and Chevrolet Suburban, and dealers say there’s plenty of negotiating room after that. Discounting is even heavier on used vehicles, with some selling at roughly one-third the price they would have fetched new four years ago.
With gas at nearly $4 a gallon (or higher in some places), saving $2,000 to $5,000 on a $40,000 to $50,000 vehicle isn’t enough. Prices for SUVs may go even lower but that also means that their resale value will also decrease. I suppose for some people, an SUV might make sense but I don’t think I would bite on this one. I’m not nearly as optimistic as this guy:
“It is the ultimate buyer’s market,” says John Casesa, managing partner at Casesa Shapiro Group LLC, a New York advisory firm that owns some dealerships.
Ultimate buyer’s market? I doubt that. Of course we should expect this guy to say such a thing since his company owns dealerships with lots of SUV inventory.
I guess my question for you is: if prices for SUVs dropped far enough, would you consider buying one?
Topics: Cars | 19 Comments »
June 5th, 2008 at 3:13 pm
It depends a lot on the vehicle in question and what I planned on doing with it. I currently have a smaller SUV (2001 Ford Escape) and it’s the perfect size for what I tend to use it for (camping trips in the mountains and snowboarding treks during the winter). For vehicles like this, 4 wheel drive and the approproate tires are a necessity. Nevertheless, I tend to try to keep my driving of said vehicle to a minimum, and use it for when I actually need it. If I were to make a trade up for a different vehicle, I *might* make the tradeoff to buy something like a Toyota tacoma with the super cap and 6 foot bed, but that’s because I are more about what the car can do and what it can haul rather than the mileage it gets. Now, if they were to come out with a super crew pickup hybrid that supported 4 wheel drive, I’d be all over that!!!
June 5th, 2008 at 4:10 pm
When my 1994 Buick Regal dies, I’d consider a three-year-old SUV, simply because they’re giving them away and I drive, maybe, 20 miles per week.
My price point would be about $5000.
I’d look in Craigslist.
Yours,
Bozo
June 5th, 2008 at 4:24 pm
I saw this and all I can do is sigh.
I drove a brand new Navigator last week (because I was a volunteer at a Charity event). It cost $98.42 to fill the tank, and that 24 gallons of gas got me 302 miles of in-town driving. That’s 33 cents per mile.
My car is a Honda CRV. It cost about $42 to fill it up my 12 gallon tank over the weekend, and I got 341 miles out of my last tank. That’s 12 cents a mile.
I put on about 15,000 miles a year. Assuming gas prices stay flat, it would cost me $4950 to run a Navigator for a year. My CRV, $1800.
To get me to consider a big SUV, the rebate better be about $12k.
June 5th, 2008 at 4:46 pm
I was just talking about this this past weekend with my father. But, quickly, to answer your question…no,even if they were less than the cost of a sedan I wouldn’t buy one cause I don’t need an SUV.
However my father is an outdoorsman – he’s always had an SUV, even before they were cool. He would need one in order to get to his cabin in the mountain – you have to cross a small creek – something you can’t do in a sedan. Anyway I told Dad he could get a sweet deal on a Denali or some other high-end SUV. Of course the downside is that he wouldn’t get much trade-in on his current SUV.
You are still going to see SUVs on the road and they are going to be driven by people who need them (Dad), have lots of money, have a paid for car and don’t want a payment (Dad), or are just stupid. But I have a feeling the latter will decrease quickly.
June 5th, 2008 at 5:26 pm
I bought my first SUV in December 2007, and I’m not sure I’d ever want a car again. I want reasonable gas mileage and have it, but I would not buy a hybrid at all and would not be enticed to buy any other vehicle unless I had to replace my current one. Any vehicle I buy has to be reasonably priced in the first place, and value for the money. Most economy cars and hybrids hold no appeal whatsoever to me, except that I loved my old Ford Escort and might consider the Focus, if I ever wanted a car again. However, I would most likely buy another SUV if forced to replace the one I have.
June 5th, 2008 at 6:27 pm
I think the SUV would have to cost less than a decent used car, just for starters. But even then I’m a real fan of saving gas because it’s a finite resource. So it’d have to get at least average (for a car) mileage. Then I might consider it, but I’d probably find a used car with better gas mileage for less anyway.
June 5th, 2008 at 6:45 pm
Much like Heidi above, I ran the numbers. I assumed 12,000 miles a year, $3.80 per gallon, and 15mpg for the SUV. My current car gets about 27mpg on average.
I plan on keeping my car 10 years. The cost of my car new was $14,000. Using the numbers above I would spend approximate $30,888 for buying my current car and ten years of fuel.
At 15mpg the fuel alone for the SUV for 10 years would be $30,400. So if I were just considering fuel prices and price of the vehicle, the price of the brand new SUV would have to be $488 or less for this to make financial sense.
I won’t be holding my breath for discounts that deep. The real question is, how much money did the auto makers pay the WSJ to run that article?
June 5th, 2008 at 6:53 pm
Even if SUVs aren’t exactly cheaper than smaller cars, they are more convenient for many people, so their price doesn’t need to fall too far.
June 5th, 2008 at 8:58 pm
in the examples above, i would use at least $5 a gallon going forward. imho, pump price currently is the cheapest it will be for the rest of our lives.
June 5th, 2008 at 10:39 pm
Maybe, depending on how cheap it really is. I don’t drive much so maybe. But it depends really on how many kids and what we are using it for.
June 6th, 2008 at 1:07 am
renting an SUV is better now, just like renting a house.
June 6th, 2008 at 2:02 am
It's just like buying a hybrid when your current vehicle (even if it is an SUV) is fine. That won't save you money and isn't worth it. An SUV's higher fuel costs can be more than offset by a lower purchase price. People just focus on what they have to pay every week and neglect the total cost of ownership. So do the math.
And in my area, gas has DROPPED $0.25 in the past week, so there's no way to predict future prices.
June 6th, 2008 at 7:33 am
we are considering this. my husband’s 98 sedan has a broken air compressor and our mechanic recommends NOT paying the $1000+ to get it fixed because he feels other things will start to go bad on the car. so we are looking at used cars. at first we thought about getting a hybrid or some other small, gas-saving car but we don’t want to spend a lot of money. after seeing a similar news story, i told my husband he should look for a used SUV because he could probably get a deal.
so far, he hasn’t found an SUV but he has discovered a few older luxury cars at great prices. they don’t get great gas mileage, but we live 3 miles from his work, a mile from our kids’ school and we rarely drive his car on the weekends. in the eight years we’ve owned his current car, we’ve put less than 6K a year on it.
we’re going to keep looking (but we won’t buy a new car). in our case it might be worth it to buy a car that doesn’t get great mileage.
June 6th, 2008 at 9:38 am
I am in the market for a car right now and absolutely, positively, refuse to consider an SUV because I just don’t like them and have no use for one. I will get either a Rabbit or a MINI. I am a small person and prefer small, zippy cars. The fact that this type of car tends to get much better mileage is a nice bonus.
June 6th, 2008 at 12:42 pm
People get too caught up in the MSRP and ignore the cost of ownership when it comes to vehicles. The fact is, SUVs have a high cost of ownership, because they are, in fact, gas guzzlers.
On a side note, I would never consider one for purely environmental reasons, no matter how cheap.
June 6th, 2008 at 2:27 pm
Not for an SUV. I have no need for one, and gas prices will continue to rise. I need a truck so I have a truck. Luckily for me I also have a commuter. Downside is instead of having one really nice low maintenance car, I have two decent cars that are pushing 200,000 miles. But that’s the way it goes.
June 7th, 2008 at 7:09 pm
If you do very little driving, as I do, a gas guzzler can be a great deal. I work in my house and live in a really bike friendly city. I only use my car a few times a month, big grocery trips & maybe social events in the burbs. Also, second hand is better for the environment.
In my case it’s much better to buy an old used 6 cylinder for 2k then a new prius at 22k.
June 8th, 2008 at 1:34 pm
I bought a used 2005 Highlander at the end of 2006 and plan on running it until it runs no more. If I got in an accident and my SUV was totalled, I’d get another certified used Highlander without a second thought. I drive 37 miles each way to work every day for a total of 370 miles a week. I fill up the tank once a week (every Wednesday morning) with between 13 and 14 gallons which means I get between 26 to 28 mpg, and it’s not a hybrid. Not only does it get great gas mileage, but it’s perfect for what we bought it for in the first place–fitting myself, my husband, a kid, three dogs, and all our gear for frequent road trips camping and to the in-laws.
June 10th, 2008 at 7:37 am
by the way, we ended up buying a used mazda. not an SUV.