Can’t afford to drive it; can’t afford to sell it
Stuck with a truck
Many owners of SUVs, pickups can’t trade them in for as much they still owe on them
Justin McNaughton’s ad for his SUV, a 2004 Jeep Grand Cherokee, says it all.
“I just wanna break even,” the online ad says. He’s asking $14,000, about what’s left on the loan.
But that’s more than the offers he’s getting.
“It’s evident I won’t sell it for that,” the Cheektowaga man said in an interview. “Last year, or a year and a half ago, I could have unloaded it right away.”
Bad enough that drivers of pickups and SUVs are paying $100 for a fill-up. Now, a plunge in resale value leaves many of them with no choice but to keep on truckin’.
Some, like McNaughton, are holding onto the unpopular vehicles rather than sell for less then the amount left on their loans.
Western New York may have avoided the collapse of housing prices, but it’s squarely in the path of another financial crunch. A sharp downturn in the values of full-size pickup trucks and sport utility vehicles is hitting home in this snowy, truck-friendly region.
It’s normal for any vehicle to lose value over time. But with gasoline above $4 per gallon, the resale value of gas guzzlers has fallen sharply.
According to Kelley Blue Book, a authoritative publisher of automotive resale values, prices of many full-size pickups and SUVs have plunged 15 percent to 20 percent from a year ago, about double the usual rate of depreciation.
For example, a 2005 Ford F-150 worth $15,250 at retail a year ago will go for just $12,750 now, Kelly says. A 2005 Chevy Tahoe worth $24,400 last August will bring only $19,700 today, $4,700 less.
“A lot of these customers, they might want to get a new vehicle, but they can’t” because of what they owe on a loan, said Tom Libby, senior director of industry analysis for the Power Information Network, which also tracks auto data.
Figures from the analysis firm show that nationally in July, 41.9 percent of owners of large nonluxury pickups who traded in for new vehicles were “upside down,” compared to an average of 28.8 percent. “Upside down” refers to owing more on a loan for a vehicle than its trade-in value.
“They are the ones where they were able to get a deal,” Libby said. The figures don’t include owners who kept their vehicles rather than trade them in.
Desperate moves
Some drivers are desperate to flee their fuel costs.
Paula Parent of Blasdell is charged with arranging the disappearance of her leased 2005 Chevy Trailblazer. According to the state Insurance Department, she reported the SUV stolen while accomplices submerged it in Lake Erie, using a rock tied to the gas pedal. She admitted to investigators that she plotted to buy something with better mileage, the insurance department said.
Parent couldn’t be reached to comment Friday.
In the Hudson Valley, Rebecca Williams of Lake Katrine was charged in July with paying an accomplice $500 to stage the theft of her 2005 Chevy Trailblazer, the Insurance Department said. The vehicle was set on fire, and Williams put in a claim for insurance.
While insurance fraud isn’t new, it’s on the rise as drivers are crunched between falling values and rising gas prices.
“We’re beginning to see more SUVs being stolen and dumped,” said Frank Orlando, director of the Insurance Department’s Fraud Bureau. Rather than try to sell the vehicle, the owner hopes to collect book value from the insurer.
Of course, low prices for sellers mean deals can be had for the buyers still out there.
Tony Helta, general manager of West Herr Ford of Hamburg, said being inhibited from trading in for a new vehicle tends to be more of an issue for people driving late-model vehicles. But with the deals available on new and used SUVs and trucks, those vehicles still have appeal for many people, he said.
The F-150 truck ranked third among used vehicles sold last month by West Herr Automotive Group. The Ford Explorer SUV was fourth, and the Chevy Trailblazer was seventh. And while new passenger car sales were up, sales of new F-150s did not decline much from a year ago, he said.
“A lot of people are going to drive what they want to drive, no matter what the price of fuel is,” Helta said. They also consider factors like winter driving and a vehicle’s utility, he said.
Duane Paddock of Paddock Chevrolet said prices for full-size SUVs and pickup trucks have been moving up in the past six to eight weeks, though not back to where they were several months ago, as gas prices have started to drop.
A gallon of regular unleaded averaged $4.12 Friday in Western New York, according to the AAA Daily Fuel Gauge report. That compares with $4.27 a month ago. A year ago, the average price was $3.03.
While trade-in values for big vehicles are down, GM’s various incentives are helping close the gap on lower trade-in prices and encouraging customers to make deals, Paddock said. “Cash rebates have gone up dramatically,” he said.
Some customers are shifting out of mid-size SUVs into passenger cars or even full-size pickups because the offers on them are attractive, Paddock said.
Do trade-in math
Edmunds.com, an auto research and information Web site, kept getting questions about whether trade-ins made good economic sense. It responded with a “gas guzzler trade-in calculator” on its site. Users plug-in key numbers to determine the payback period and the fuel savings connected to switching to a more fuel-efficient vehicle. (The calculator excludes sales tax.)
Edmunds.com offers an example of an owner who trades in a four-year old GMC Yukon worth $13,483 for a $21,647 Toyota Prius hybrid, a difference of $8,164. If the driver averages 1,200 miles per month and gas is $4.07, which is below the Buffalo Niagara average, the monthly fuel savings would be $201.34. But because the Prius costs much more, the owner would need 41 months to recoup the price difference.
People considering trading in a truck or SUV should take a close look at their options and the financial impact, said Philip Reed, senior consumer advice editor for Edmunds.com. For instance, if a shopper chooses to buy a car with good gas mileage priced comparably to the trade-in value of a SUV or truck — instead of the premium price of a Prius — the owner will start capitalizing on gas savings more quickly, he said.
“Think long and hard before you make a transition just to save some money on gas, and look at the big picture,” Reed said.
Part of that process, he said, involves securing a good trade-in price and not settling for the first offer. “The temptation with trade-ins is to say, “I know it’s going to be ugly and just get it done.’ ”
Reed noted that Edmunds.com was selling a 2007 Chevy Silverado V-8 with a crew cab it had owned as part of its longterm testing fleet. CarMax offered $15,000 for it; a broker later found an offer of $17,500. That was still far below the truck’s purchase price of about $39,000 from just two years ago, but an additional $2,000 or so in trade-in price
can cover a good number of fill-ups, he said.
Avoid panic selling
George Hoffer, an economics professor and automotive expert at Virginia Commonwealth University, said low trade-in values for SUVs and trucks can pose a problem for owners who want to make a change.
“It’s very hard for anyone to do anything right now because they’re so upside down, which could prevent some people from making a terrible mistake,” he said.
Hoffer suggests vehicle owners in that situation who are tempted to trade-in to “stick it out” despite the pain of high gas prices. “Things can only get better,” he said.
Relatively speaking, McNaughton of Cheektowaga is one of the lucky ones. He doesn’t have to sell his truck to cut costs. He can share his fiancee’s Honda Civic for many trips. For limited driving, his Jeep’s 21-22 mpg highway performance, 16-17 mpg in the city, isn’t a budget-breaker.
But as the 27-year-old begins to look for a house, he’d like to extinguish the truck loan to strengthen his credit.
“It’ll free up $280 a month,” he said. Plus what he spends on gasoline.
fwilliams@buffnews.com, mglynn@buffnews.com
