Archive for May 2nd, 2008

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Dump The Truck

May 2, 2008

Today I spotted this NYT article (via memeorandum): As Gas Costs Soar, Buyers Flock to Small Cars

DETROIT — Soaring gas prices have turned the steady migration by Americans to smaller cars into a stampede.

In what industry analysts are calling a first, about one in five vehicles sold in the United States was a compact or subcompact car during April, based on monthly sales data released Thursday. Almost a decade ago, when sport utility vehicles were at their peak of popularity, only one in every eight vehicles sold was a small car.

The switch to smaller, more fuel-efficient vehicles has been building in recent years, but has accelerated recently with the advent of $3.50-a-gallon gas. At the same time, sales of pickup trucks and large sport utility vehicles have dropped sharply.

In another first, fuel-sipping four-cylinder engines surpassed six-cylinder models in popularity in April.

I post this as a follow-up to the Gas Price Rant Thread, but also because I work at a dealership (yes, every once and awhile Chamber visitors will learn a little more about ChenZhen the man, and it’s true that I sell cars).

So, I guess I can say that this is hardly surprising to me, but I’m amazed at the change in the market in just the last 6 months.  We can’t give these trucks and SUV’s away, and the cars that many people would have previously laughed and pointed at (like the pictured Chevy Aveo) are now holding their values and flying off the lot.  People are doing the math at this point, and the cost of ownership of these V8 trucks is simply getting outta hand.  

For an example, let’s compare fuel costs between the Chevy Aveo (since I mentioned it) and the Chevy Tahoe (since the NYT mentioned it’s 35% drop in sales in the article), using my 10,660 mi. annual commute to work and back that I used in the “rant” thread:

 

That’s a difference of $832, or about $69 extra a month…just to drive to work.

Or, if one uses the default EPA estimates of 15K miles/year with 45% hwy and 55% city average, there is a difference of $1264, or an extra $105 a month.  Within the context of buying a new vehicle, it’s definitely going to be a factor because when you’re talking about a $600/month payment on a new Tahoe, you’re really talking about $700/month in relation to picking a more fuel efficient car instead.

The additional problem for those who already own one is that the market is so soft on them that they won’t get squat for it on a trade-in, so you’ll see more and more people flipped upside down on their payments (lingo we use to describe a situation where the owner owes more on their vehicle than it is worth), perhaps to the point that they can’t get out of it even if they wanted to.   We’re seeing these people more and more.

It’s getting rough out there, let me tell ya.