Plummeting SUV Prices Hit Local Car Dealers -- and Newspapers

August 6, 2008

As gasoline prices continue to soar, an important part of the local story involves wild fluctuations in new and used car prices and availability. It's one thing to blithely advise consumers to eschew SUVs in favor of hybrids or compacts — but can they afford what's on offer today? Plus, if you write for a newspaper, you may be part of this story, too.

The idea that prices for new and used SUVs have been plummeting, while compact and hybrid prices are climbing, makes intuitive sense and is hardly surprising. However, putting local numbers and industry statistics on this story can make eyes pop.

THE BIG PICTURE

Today the NY Times reports, "Jack Nerad, executive editorial director and executive market analyst at Kelley Blue Book, says that the rate of depreciation on large SUVs over the past six to eight months has been about twice what is normal. ...Used SUV prices were down 12 percent for the months of May and June, compared with the same period a year earlier, according to J.D. Power and Associates data. But certain models saw even sharper declines. For instance, the price of the Ford Excursion was down 27 percent, Hummers fell 25 percent, and Suburbans dropped 24 percent.

"Take a standard-issue 2005 Ford Explorer in good condition with 50,000 miles on it, for instance. According to Kelley Blue Book, a dealer might give you a stunningly low $6,740 when trading it in right now. Selling it to a private party might net you $10,000, if you are lucky."

And yesterday, The Car Connection's Paul Eisenstein gave a gloomy overview of the car industry as a whole. A big part of the crisis: "The lending crisis is actually worsening things for the auto industry. Automotive finance subsidiaries and traditional lenders alike are tightening credit and, in many cases, curbing or eliminating entirely the leasing programs that, in recent years, helped get millions of motorists out of used vehicles and into new ones."

The Automotive Lease Guide offers, for a fee, a web-based calculator to estimate current local leasing rates.

Even sales of hybrid and small cars are down. Yesterday, Green Car Congress reported: "US sales of hybrids in July dropped 6% year-on-year to 26,877 units, representing a new vehicle market share of 2.4% for the month. Through July, reported 2008 sales of hybrids in the US are down 1.6% compared to the same period in 2007, representing a new vehicle market share for the first seven months of 2008 of 2.5%. Total sales of light duty vehicles in the US dropped 13.2% in July, according to figures from Autodata. ... Through July, total light duty vehicle sales have declined 10.5% compared to the same period in 2007."

GETTING LOCAL NUMBERS

You can check estimated trade-in values for SUVs and other gas guzzlers through the calculator on Kelley Blue Book. Plug in model, make, year, your zip code, and other specifics to get an estimate customized for your region.

Incidentally, on Aug. 4 Kelley Blue Book launched a new "green" section of its site. This includes another online calculator, "Should I trade in my car?" which calculates oil and CO2 savings.

Edmunds.com offers another good resource for running the region-specific numbers if you're contemplating ditching your gas guzzler for a smaller, more efficient car.

The National Auto Dealers Association can offer national numbers on the new and used car business, as well as referrals to regional, state, and local associations. On average, US car sales slumped to a 16-year low in July. Press: Charles Cyrill, 703-821-7121.

Yesterday in Lansing, MI, Barack Obama unveiled his proposed energy plan. Playing to the state's history as an auto industry powerhouse, he touted his goal of putting one million American-built plug-in hybrid cars (getting up to 150 mpg) on the road by 2015 and floated the idea of monetary incentives to consumers to help pay for new hybrids. If you're covering Obama's approach on hybrid cars, check the numbers against current new-car costs and trade-in values. What would it REALLY take to make that a reasonable deal from the consumer's perspective?

Rumors abound that some auto manufacturers are quietly scrapping new cars that they can't sell, lease, or otherwise unload. Developing sources who work for larger auto dealers or wholesalers could shed light on this situation.

...FINALLY, when car dealers are hurting, newspapers that rely on auto advertising and classifieds start hurting. Right now, consumers are likely to get a better price selling their used car privately than by trading in at a dealer. Also, since bargain hunters are on the prowl for good deals on used cars, decent used cars are rarely available long, making advertising via free online classifieds like Craigslist much more appealing than running a paid newspaper classified ad. So although it might be an uncomfortable discussion, if you're covering the local fallout from high gas prices and the credit crunch, you should probably have a talk with your paper's advertising managers.

A July 31 report from Classified Intelligence includes in-depth analysis of how the drop in auto ads may affect the newspaper business long-term: Jim Townsend. Free sample may be available to media on request.