Is it a Good Time to Buy a New SUV?
We crunched some numbers. We ran some figures. Eventually, our theory proved out: Buying and driving a full-size SUV costs less today than when gas was $2 per gallon. That's a generalization, of course, but one that can't be made about mid-size sedans, compact cars or crossovers, all of which cost measurably more to operate today.
"Given the soft market in the full-size SUV segment, perspective consumers can expect considerable savings at the dealership," said Jack Nerad, Executive Market Analyst for Kelley Blue Book. "Dealer discounts with rebates are currently ranging between $5,000-$10,000. The 2008 Ford Expedition is currently discounted $6,000-$8,000 from the Manufacturer's Suggested Retail Price, while the 2008 Toyota Sequoia and 2008 Dodge Durango are available at a discount of $5,000-$9,000." All of these equate to significant savings, especially given that in 2005 -- the last time gasoline averaged $2 per gallon -- it wasn't unusual for people to pay full sticker for their full-size status symbols.
That means today's full-size SUV buyer can drive off the lot for thousands less than his neighbor might have just a few years ago. But how far will that cushion take him? Filling the tank of a full-size SUV will cost $1,600 more this year than it did a few years back (assuming 12,000 miles per year at 15 miles per gallon, $4 per gallon now versus $2 per gallon then). In three years, $4,800 of that $10,000 cushion will have been skimmed by gas pumps.
So, sell in three years and call it a $5,200 win, right? Maybe, maybe not. Resale value is the other big variable at play here. In the past year, full-size SUV resale values have positively plummeted. They've dropped so drastically, in fact, that they can't fall a whole lot farther. The silver lining is that today's deep-discount SUV buyer might recoup just as much of his investment in three years as 2005's full-price SUV buyer recouped today. In other words, that speculative $5,200 win could very well be an actual $5,200 win (or more, if gas prices continue to decline and resale values begin to rebound).
Should you rush out and buy an Escalade instead of that hybrid you were considering? No. But if your lifestyle is one that benefits from the added capacity and capability of a great big sport-ute, take comfort in the fact full-size SUVs might be the only vehicles cheaper to operate today than back in the salad days of $2 gas.
If this is the best news you've read all day, keep reading. Not only can full-size SUVs still make financial sense, but the category has never been better.