Is big back? How soon we forget!

[Bravo Zulu]

Is big back? Shift away from buying large vehicles may be waning
Friday, August 22, 2008
By Don Hammonds, Pittsburgh Post-Gazette
What many thought could be a permanent shift by consumers to smaller cars and trucks has evaporated with the decline of gasoline prices in recent weeks.

"We certainly are seeing more interest in full-size SUVs and trucks over the last several weeks," said Jack Nerad, editorial director of Kelley Blue Book. "Remember, we are in our eighth week of declining fuel prices in the U.S." (Although yesterday, light, sweet crude for October delivery rose $5.62 to settle at $121.18 a barrel on the New York Mercantile Exchange after earlier spiking as high as $122.04, crude's highest trading level since Aug. 4.)

Some Pittsburgh area dealers say they have started seeing more interest in trucks and SUVs -- boosted by sales incentives and the lower cost of gasoline. A month ago, a gallon of regular unleaded gas was selling for an average of $4.010 a gallon, according to the AAA East Central. Yesterday, that average was $3.705.

"In May, we were selling one truck for every one car we sold at our dealers, and we had never been one to one -- it was always three trucks to two cars," said Joe Thurby, chairman of the Ford Dealer Advertising Association's Pittsburgh region, which includes 87 dealers in Pennsylvania, Ohio, West Virginia and Maryland. Industry analysts consider Ford's bottom line to be heavily dependent upon sales of SUVs and trucks.

"However in June, when Ford came out with employee pricing, things changed. My theory is when something is cheap enough, people buy it. We began to see the trend for sales go back more toward trucks," Mr. Thurby said.

"July was really something. We had our best truck month in the Pittsburgh since August 2007. That really blew our minds. So the incentives, combined with the reduction in gas prices greatly increased our truck sales."

Jiu Du, director of decision optimizations for Kelley Blue Book, agreed that the shift away from trucks, big SUVs and large cars had eased. "Last month, when you saw gas prices going down a little, we noticed that the price and value reductions for big cars and trucks slowed down. Also, the increases in the residual value of small cars leveled off too. They are still increasing, but at a reduced rate."

As for the thought that consumers' shopping tastes had changed permanently to small cars, Mr. Nerad added: " Our experience has been that American consumers adapt pretty rapidly to fuel price spikes and higher fuel prices. I think people were initially shocked, and there were some people who reacted in knee-jerk fashion and said, 'Hey, I gotta get out of my SUV,' or, 'Hey, I don't want to spend $100 for a tank of gas.' Now, people are starting to have a more rational take on all of this."

Moreover, most analysts say gasoline prices would have to remain at the $4 or more per gallon level for at least a year or so before buying habits for small cars will become a permanent preference.

"Residual values for trucks and full-sized SUVs declined at about twice the rate at which they normally declined . That was very steep," Mr. Nerad said.

"Now things are starting to level out again. Some SUVs, like Chevy Tahoe, Ford Expedition and Toyota Land Cruiser, had dropped by as much as 25 or 30 percent over a six month period of time. Those residual values have now stabilized."
http://www.post-gazette.com/pg/08235/906137-185.stm

[OwnedByFerrets]

1. Tole ya!

[grannie4peace]

2. this bothers me also

i realized how happy i was when gas started to go down some. it's like you forget about the jerk of the noose because you can breath again. there are some people who will forget & get stupid

[carlyhippy]

3. another reason is the huge price reductions on the SUVs and pickups at the dealerships

people are still wanting these vehicles, it's a buyers market right now, and they are buying.

My theory is the automakers and the oil people wash each others' hands often. The price of gas went up, the automakers were hurting, hoping that if the gas prices were lowered, Americans would go back to buying big vehicles again; it happened as planned, now the automakers are getting rid of the big vehicles they couldn't give away a few weeks ago, after these vehicles are off the lots in a fairly large number, the gas price will go back up again, and so will the prices of these little fuel efficient cars that are coming out..again, this is just a theory in the dark corner of my soul.