For SUVs, the Bad News Only Gets Worse

Everyone knows SUVs are in trouble because of high gas prices, but this recent trend also impacts the rate at which they'll depreciate. This most affects leased vehicles coming back to dealers after the terms expire. Some 800,000 trucks and SUVs are due back at dealers in 2008, and residual values projected when the cars were leased three or four years ago will fall $6,000 short per vehicle, according to CNW Research.

"Ouch" is the word you're looking for.

Money lenders will be hit hard. Banks, the credit arms of car companies and credit unions will take a $5 billion smack in the face for 2008. A year later, returning SUVs will cost them another $5.29 billion.

The good thing for consumers is they will be able to buy their leased vehicles for drastically reduced prices, although only 20 percent are predicted to do so. Even as SUVs fall out of favor with car buyers, their financial impact will continue to ripple for years.

SUVs: The Hidden Costs (Autoweek)

Comments

The title should read: For the betterment of society, SUV values plummet.

greedy carmakers trying to make some quick bucks building a fat version of pickup trucks, cars, blah blah need to change their strategies quick!

What if the market for these things totally tanks and they simply can't sell them at any price?

A large part of the SUV market was based solely on image. That image has now changed from "tough" or "safe" to "idiot". That will hurt even steeply discounted sales.

The full sized SUVs are expensive to own and operate. I think many people who drive them are of the mindset that others will think they are well-off financially and can afford the fuel. It's a silly idea, but one that I believe is true.

I know several people who have recently bought slightly used, two year old, top of the line, SUV's for around $11,000. They are only too expensive to own and operate for average Americans who are forced to drive little cars. I'm proud not to be average (no cc debt, no mortgage, etc) so I am in the market for one of these great buys. I'd much rather drive a SUV than a Cobalt or Corolla.

It must suck to be poor.

SUVs and Big trucks aren't bad. They're simply mis-used by thier owners. If they were only used when truly needed, we'd all be alot better off.

No, the lessees will not be able to buy their vehicle out of the lease for less than the residual value. Most captive finance companies and banks have stopped negotiating residual prices because they purchase insurance for the residual values. If the predicted residual value is wrong, the insurance makes up the difference if the vehicle is sold at auction. If the buyer negotiates a lower price, the insurance does not apply.

That said, buyers will be able to buy a near-identical vehicle, once it has gone through the auction, for substantially less than their quoted residual.

Scott S., it's not always a matter of being poor when it comes to not wanting to pour gas into an SUV. It's generally a matter of priorities in financial matters. I'd rather put that money into my home or toward a child's upper education than just turning that money into exhaust from and SUV. My home is nearly paid off and when that time comes, I'll still think it's silly to spend so much money on fuel for personal transportation. Each to their own, I suppose. It's not all about having the ability to pay for the fuel anymore ... it's also about conservation. A day will come when there is no fuel and persons such as yourself might be left wishing you'd shown more concern in regard to fuel supplies. Then again, probably not if your comment above is any indicator. I don't intend to offend anyone, I just hope you understand my opinion.