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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.  

 

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13 comments

  1. General,

    Do you wear a houndstooth jacket to work? Just pulling your rug there my young friend. Can you get a good price on a new Toyota Prius? I’m having problems finding a used one.

    This is good news (except for SUV owners) because for once, Americans are getting serious about conservation. Everyone in America should be doing what they can to conserve. And though I own an older SUV, I don’t drive it much anymore and then only when I have to haul something.

    I could be wrong, but if our illustrious leaders get their …. together and begin working on strengthening the dollar, it is possible that gas prices may actually begin to drop later this year; perhaps significantly drop.

    No matter what party you belong to, we ought to all agree that being beholden to the Sauds, the Reds, and the dictators in Africa is not good.


  2. I’ll have to be honest, I don’t give much thought about conservation. But gas prices are digging deep into my bottom line. And that, I do care about. I am strongly concidering getting rid of my baby (2001 Pontiac Grand Prix GTP) for some gutless, gas-saving nag because it’s just getting too expensive to drive fast these days. And not even because of the tickets!

    The weakened dollar has been the excuse du jour since oil got around $100 a barrel, but before that it was “Hurricane Katrina,” “conflict in the Middle East,” and “the war with Iran” that everyone swears we are going to have.

    The ME is always going to be a flashpoint. Until we stop relying on that region and become more self-sufficient with our energy needs, I don’t think strengthening the dollar will have that much of an impact.

    In my opinion, a good start would be to start tapping into our oil reserves to put more domestic oil into the market. Also, not putting all of our refineries in the same region that is regularly vulnerable to powerful forces of nature.

    But it is interesting to see that a market is reacting as it should. In the end, I guess the bottom line is what everyone really cares about.


  3. It’s good to see that so many people are finally coming to their senses.
    CZ, since you’re a car guy, what do you think of Tesla, or the SmartCars?


  4. Red Pill,

    The weakened dollar has been the excuse du jour since oil got around $100 a barrel, but before that it was “Hurricane Katrina,” “conflict in the Middle East,” and “the war with Iran” that everyone swears we are going to have.

    The ME is always going to be a flashpoint. Until we stop relying on that region and become more self-sufficient with our energy needs, I don’t think strengthening the dollar will have that much of an impact.

    Actually, in this case the weakening dollar is the only reason for the current $40.00 a barrel increase and your $3.50 gas. Demand, both international and domestic has recently decreased to a small degree. To be more specific, the weakening dollar provides the convenient excuse of trading manipulation which is exactly why prices have increased, whether now or during Katrina.

    Domestic drilling needs to be increased, no doubt. What most don’t understand about ANWR is that even if we drilled today, it would be quite some time before the effects begin to show. I think a better suggestion is to get the infrastructure in place for domestic drilling. I would prefer not to tap reserves exactly for the reason the ME is so unpredictable. In fact, I would begin to increase reserves – more short term pain but something tells me we are going to need it and soon.

    My suggestions would be the following:

    (1) Elimination (or reduction) of the federal and state gas tax since our feckless Congress is partially to blame for our dilemma.

    (2) An emphasis from our feckless Congress leading to a greater incentive for “wildcatting” to locate domestic drilling reserves. And this would include are our coastal regions – quit listening to the chicken little crowd. The impact on the environment is at best negligible.

    (3) A greater emphasis on nuclear energy. The libs can blame their lefty ancestors for much of current energy shortage and this is a perfect example.

    (4) Less emphasis and less incentive concerning biofuels – it’s an inefficient use of resources and is partially to blame for increased food prices. Farmers have little incentive to grow wheat when “sawgrass” becomes valuable.

    (5) A monetary incentive emphasizing conservation and not some short-term tax break gimmick. And how about some American spunk like we used to show about everyone chipping in this time? Quit waiting for your neighbor to do it.

    (6) A greater emphasis on alternative hydrocarbon production, including shale, NGL and propane which is still plentiful domestically.

    (7) A removal of the inept EPA restrictions concerning hydrocarbon production, including incentives for greater refining capacity.

    (8) A national push for alternative energy led by our feckless federal gov’t.

    (9) The American people toughen up and start learning to fend for themselves and quit depending on your government for solutions to your problems. Nobody does it worse. A basic understanding of economics would be a start.

    (10) Working with big oil instead of making them the boogey man. Domestic big oil is incredibly efficient in their operations.

    (11) Tell OPEC (more specifically the Sauds and Kuwait) this manipulation of the oil price will stop or we will invite their brother Osama into their palace. Our cozy relationship with this scum is one of my real beefs with the Bush crowd.

    I could name a dozen more but that’s a start.


  5. Chen,

    Your post got me thinking. Who in their right mind, unless they’ve got money to burn, would make a $600.00/month car or truck payment?

    I suspect these are the same folks that buy twice the house they can possibly afford?

    Which reminds me. Nobody needs a 5000 sq. foot home either – another thing that needs to be addressed in a conservation conversation.

    Channeling Albert “Hot Air” Gore


  6. “I’ll have to be honest, I don’t give much thought about conservation. But gas prices are digging deep into my bottom line. And that, I do care about.”

    Yeah! You show those weak-kneed ‘libtards’ who give a shit about things like resource depletion and pollution! It’s all about economics 101, granted we stop reading right before the chapters on externalities and planning for the long term!


  7. RP-

    I’ll have to be honest, I don’t give much thought about conservation. But gas prices are digging deep into my bottom line. And that, I do care about. I am strongly concidering getting rid of my baby (2001 Pontiac Grand Prix GTP) for some gutless, gas-saving nag because it’s just getting too expensive to drive fast these days. And not even because of the tickets!

    From a certain point of view, it is the people who drive the less fuel efficient cars who are driving up the demand and therefore the price for all of us. Heck, just the fact that people are driving around on under-inflated tires, collectively, means that we’re wasting millions of gallons of gas as a nation (which, if anyone has wondered why newer autos have tire pressure sensors as standard equip, that’s why). Imagine for a second if everyone drove around in a V6 or smaller (those who didn’t need to for business purposes anyway), and it isn’t hard to see our gas demand drop significantly. And i haven’t even talked about riding a bicycle.

    I heard this guy call up Rush the other day and proclaim that he’s proud to drive a gas guzzler. Rush sounded enthused (like he gives a rats ass; he’s chauffeured around in his Maybach after all), but that is idiotic on so many levels.

    CZ, since you’re a car guy, what do you think of Tesla, or the SmartCars?

    by Kurt

    Not sure about the Tesla, but the SmartCars are good as long as you’re not that concerned about safety. I suppose they would be ideal for hopping around in a city.

    Tex-

    Your post got me thinking. Who in their right mind, unless they’ve got money to burn, would make a $600.00/month car or truck payment?

    As a rule of thumb, you pay around $200/mo for every $10k borrowed on a 60 month loan. This would mean that a $30K SUV would run you around $600 a month if you didn’t have a trade or money down. Sure, there are people who pay that, but I’d say that the average for the customers that I deal with is somewhere in the $300 range.


  8. Increased demand in India and China are not helping anything. They all don’t ride bicycles anymore.

    Which is a big part of why I don’t concern myself much with conserving fuel just for the sake of conservation. We aren’t the only ones using the resource nor are we the only ones polluting with it.

    It is all about Economics 101. Increased demand will either be met with increased supply or it will result in increased prices.


  9. “But it is interesting to see that a market is reacting as it should. In the end, I guess the bottom line is what everyone really cares about.”

    I’m confused as to how a series of market and governmental failures equates with “market reacting as it should.” How is this not obvious inefficiency brought on by some of the things that Tex Taylor brought up?


  10. Blogo,

    Excellent gravatar! LOL. I’d like to think I somehow inspired some of that.

    The setting of petroleum prices or the market as you would call Blogo it is not only inefficient, but IMHO predatory, almost salacious on certain “traders” behalf, and open to some real corruption. As long as the price of gas is treated as almost inelastic, we will continue to be taken to the cleaners.

    However, little or no part of that blame should or needs to be attributed to “big oil.” You can accuse them of taking advantage I suppose but they certainly aren’t the cause of it. In many ways, Americans have no one but themselves to blame for our dilemma.

    And our feckless, do nothing Congress isn’t helping in the manner. Hillary’s suggestion of “windfall profit’s tax” is not only laughably bad but actually kind of scary in that it seems to receive approval from a bunch of American consumers who should know better.


  11. Blogo:

    The market I was referring to is the automotive market, which was the topic Chen wrote about in this article.

    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.


  12. And I will add that Chen’s…

    People are doing the math at this point, and the cost of ownership of these V8 trucks is simply getting outta hand.

    Looks a lot like my:

    In the end, I guess the bottom line is what everyone really cares about.

    But keep trying. You’ll get that Strawman Award, yet.


  13. Red Pill-
    Oh, doye. Now that makes a lot more sense!



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