DALLAS – Full-size sport utility vehicles, the one-time high-and-mighty kings of the road, are in a skid.
While used-car prices in general are stronger than they have been in five years, the average trade-in values of full-size SUVs are $700 to $1,500 lower than a year ago – and it’s the weakest segment in the industry.
High fuel prices and a well-earned reputation as gas guzzlers have cut deeply into big SUVs’ stature. The segment has also been hurt by the age of many full-size SUV models and the fact that consumers today have more choices of SUV-like vehicles than ever.
Sales of new full-size SUVs nationally, for example, fell 15.1 percent in the first quarter of this year. Some of the segment’s former giants suffered huge drops, with sales of the Chevrolet Suburban falling 29.2 percent, the Chevy Tahoe down 22.5 percent and the Ford Expedition plummeting 26.8 percent.
Dealers are adjusting to the SUV decline.
In November, low-mileage Ford Expedition and Chevy Tahoe SUVs commanded front-row spots on Subaru of Dallas’ used-vehicle lot.
Today, when the dealership gets one as a trade-in, it often sends it to a wholesale auction – the destination for cars and trucks a dealer doesn’t want.
“Our position is, if it’s a good gas-mileage SUV, we keep it,” said David Thomas, managing partner of Subaru of Dallas. “If it’s a Suburban or an Expedition, we won’t. I’m scared of them.”
For consumers, the decline means their SUVs are probably worth hundreds less than they were six months ago.
And the fading segment has also touched the local economy. The General Motors Assembly Plant in Arlington, Texas, which builds the Tahoe, GMC Yukon and Cadillac Escalade, has been forced to shut down for four weeks this year because of slumping sales.
And when a new vehicle’s sales start to sputter, that usually causes used values to drop – especially if manufacturers start offering big incentives to spark sales. According to ADESA Inc., which operates 50 used-vehicle auctions in the U.S., full-size SUV values have dropped 4.1 percent in the last year – or about $700 on a five-year-old vehicle.
But that number is an average. At times, the value of some newer SUVs has fallen $2,000 or more in monthly auctions.
“It scared us,” said Mark Brueggemann, senior analyst for Kelley Blue Book, a longtime guide to used-vehicle prices. “It’s easy enough for us to report values online because those can quickly be changed. But for 75 years, we’ve also put out the Kelley Blue Book, which is a two-month publication.”
On many used-car lots nationally, the Hyundai Elantra, Honda Civic, Ford Focus and Toyota Corolla are the new stars – though they don’t generate the profits that full-size SUVs once did. Over the last year, the average wholesale value of a five- or six-year-old compact sedan has risen 12.8 percent, more than any other segment.
Although full-size SUVs and pickups share similar platforms and get comparable gas mileage, prices of full-size pickups are still strong. That’s partly because pickups are viewed as work vehicles and there are few alternatives to them. The prices of full-size pickups increased 3.7 percent last year in the ADESA survey.
The used-car market as a whole is at its highest point, in terms of rising sales prices – since the late 1990s, said Tom Webb, chief economist for Manheim Auctions of Atlanta, which operates 115 auction facilities worldwide. Overall values are up between 3.8 and 5.3 percent, depending on who is doing the figuring. Both are considered good growth.
“And used-vehicle prices can continue to move up. This has been a rather sustained rise,” Webb said.
“I’m calling this (used-car market) a sellers’ market, and I haven’t used that term in a long time,” said Tom Kontos, ADESA’s vice president of analytical services at its headquarters in Carmel, Ind.
About the best outcome anyone can predict for full-size SUVs – even in this robust economy – is firming values.
“I think the worst is over for SUVs, at least for now,” said Jesse Toprak, a senior analyst for Edmunds.com. “This is still a strong-demand segment. But in the long run, the health of the segment will depend on the new introductions” next year of full-size SUVs by GM and Ford.
Ray Huffines of Plano, Texas, is counting on it. Four or five years ago, Huffines’ Chevrolet dealership was the nation’s top seller of Tahoe full-size SUVs.
“In the market we’re in, that’s what does well,” said Huffines, who owns Ray Huffines Chevrolet, Huffines Chrysler-Jeep-Dodge and Huffines Hyundai, all in Plano. “The numbers are not what they used to be, but we think they can come back.”
So does Jerry Reynolds, managing partner of Prestige Ford in Garland, Texas, one of the nation’s top truck retailers. Like other dealers, Reynolds is ordering more small and midsize SUVs for his new-vehicle business and buying more compact cars for his used-vehicle lot.
But, he said, he’s still selling full-size SUVs on his used-car lot.
“I just don’t think the days of full-size SUVs are over,” Reynolds said. “People have just gotten too used to them.”
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