California Autos Examiner

Thursday, November 29, 2007

Big SUVs: Come Back to Daddy

We're gonna have to face it, we're addicted to big vehicles. Data from Black Book indicate the average resale values for large SUVs are bouncing back from their 2006 low. The residual on three year old large SUVs are presently 48.6% of their original sale price, compared with less than 46% last year. With fuel prices no cheaper than in 2006, what gives? Basically, the sting has worn off and consumers have come to the realization that for a few more dollars in gas money they can get back all the room they lost. Sales of new SUVs are down more than the market in general, so there isn't a miraculous rally going on here, but rather a slight correction in the used market.

I stuffed the family into the Jag wagon for the road trip to Oregon and it was a huge difference from the Odyssey. We weren't piled on top of each other, but there was no room to spare. I took the wagon for the AWD and to keep the miles down on the van as it is nearing the end of its lease, but it was definitely a sacrifice. The moral? Size matters.

There's more help on the way for large SUV buyers: dual mode hybrids, diesels and perhaps hydraulic launch assist. Those technologies don't come cheap and will undoubtedly be subsized by a reduction in profit margins in addition to higher sticker prices. Combined with existing tricks such as cylinder deactivation and six speed transmissions there should be an ever increasing uptick in fuel mileage for our land barges. Will it be enough to retain buyers or will crossovers rule the day? Looking at this site's traffic and reading posts on enthusiasts sites, I definitely see lukewarm responses to forthcoming body on frame SUVs such as the Kia Borrego/Mohave while the unibody Hyundai Veracruz was white hot months before its launch.

No matter what the improved residual numbers say, I see a big shift away from body on frame SUVs to car based, unibody crossovers. Given the needs of customers and the big advantages that the lighter crossovers bring to the table, I think full sized SUVs will shrink back into a much smaller segment of buyers who actually need their rugged capabilities.

source: business week via msnbc

On a side note, I think it's pretty funny that the cartoon's "outrageous" $2.33/gallon would be considered a bargain today.

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