Under 30mpg car values plummeting?


#1

A rant to those who say it’s foolish to pay higher than book value for a fuel efficient car. I think these cars will only become more valuable as time progresses. Pretty soon any vehicle that gets under 30mpg will go the way of the 8 track, cassette tape, and carburetor and only fetch pennies on the dollar. Unfortunately, there aren’t many cars at the present time the average American consumer can buy that will retain their high value and are fuel efficient. Even going to run some quick errands in your neighborhood now in your standard automobile isn’t cost effective. Sometimes it costs you as much to go to the store as the item you are going to get.



I forsee the next shoe to drop in this poor economy is the American automobile that gets under 30mpg. Many more will be affected by this than the current housing crisis. It will probably take as long to sell your rapidly depreciating automobile as it will your tract home in the outer suburbs. Pity those who are lease.



Thoughts on this? Do you all think SUV and large sedan (even Lexus’) values are in for a big tumble and would it be wise to sell them now?


#2

I don’t know the answer to the question, but last summer I convinced myself gas would be $5/gal by the time Bush left office, so I bought the most fuel-efficient, well-made car I could afford: a 2001 Honda Civic HX (I average 42mpg combined). I would have bought a hybrid if I could have afforded it. (I would have bought a Tesla Roadster if I could have afforded it).

The Honda replaced a Ranger that averaged 23mpg combined, which is pretty good for a little truck, but … $5/gal. The higher gas goes, the sooner the car pays for itself.


#3

To me this looks like deja vu all over again. Remember Jimmy Carter and the 1970s? Remember waiting in line before gas stations were even open hoping you could fill up before the station sold out of gas? Remember when Chrysler had to be bailed out of bankruptcy because they could no longer sell their land-yachts?

I sure do! Did we learn anything the first time?


#4

No car, even one that is extremely fuel efficient, is an investment. Those rare curcumstances where hybrids sell for more used than new are anomalies. Even those will eventually depreciate. So I think it is misleading to to say that any car will become more valuable as time goes on. The only exception is those antiques that are not driven, and if you don’t drive a car, why would you care about its fuel economy? If there are cars the average American consumer can buy that will retain their value after being driven, please name them.

Regarding your comments about quick errands, the average American can plan ahead, combine errands into a single trip, and refrain from those “quick errands.” A good rule of thumb would be if you are going to spend more on fuel than the item you are purchasing, don’t go. Just add it to the grocery list and buy it on your weekly trip to the store. Then next time you can plan ahead. Problem solved!

The SUV and the truck will never go away. There are too many people who have a legitimate use for them. The problem the auto makers have is they need to make fewer SUVs and trucks, and they need to make more fuel efficient cars. Those who don’t really need a truck or an SUV will choose a more fuel efficient vehicle for their next vehicle. However, there is a consensus among financial and economics experts of all kinds that a basic break even analysis will reveal the truth, which is nobody should buy a new car just for fuel economy. When you factor in the premium you pay for a new car (or even a new used car), depreciation, financing, and the loss you will take on a trade-in, you are better off driving whatever you have now until you are ready for a new car for reasons not related to fuel cost.

You know, most economy cars only give you better than 30 MPG at highway speeds. Yet most of us do most of our driving in stop-and-go traffic. Even my Honda Civic only gives me 29 MPG in summer city driving. So you might want to do a reality check before you formulate your economic forcasts. Right now my 29 MPG Civic looks pretty good next to my neighbor’s minivan and pick-up truck.

One last thing. Basic math will show you that improving a vehicle’s fuel economy from 10 MPG to 11 MPG saves more fuel (91 gallons per 10,000 miles) than an improvement of 30 MPG to 40 MPG (83 gallons per 10,000 miles) . Looking at miles per gallon is deceptive. You should really look at gallons per mile for an honest comparison. Better yet, look at gallons per 10,000 miles. So we would be wise to focus on raising fuel economy on trucks and SUVs for those who really need them. That will save a lot more fuel than squeezing out a few more MPG from an economy car.


#5

Yes BLE I remember those times. Everyone was worried that gasoline might go up to $1/gal and stay there. I also remember my cousin Arnie, a shrewd businessman, swam against the current and bought himself a near-new Lincoln. What a yacht! He paid nearly nothing. In a few months the gas crisis was over, prices stabilized, and Americans went back to their old gas-guzzling ways. His Lincoln’s value went back to where it was in its pre-crisis days.

My cousin knows practically nothing about the innards of automobiles but he understands markets and human economic behavior. He currently drives a Lexus. (He brags he got it nearly for free, but that’s a story for anther time.)

So my answer to SJGUY99 is “I don’t know, but cousin Arnie says buy Lexus!” I hate to admit it, but Arnie has always proven himself more right than me, time and time again.


#6

If memory serves, it all started under Nixon. Isn’t Nixon the one who lowered the speed limit to 55 MPH?


#7

" Thoughts on this? Do you all think SUV and large sedan (even Lexus’) values are in for a big tumble and would it be wise to sell them now?
Posted by: SJGUY99"

How can you sell them if you don’t own them?? Virtually everyone who finances a car is upside down on the loan…By the time you pay off the loan, the vehicle has little retained value…There are MILLIONS of vehicles for sale on Craigslist and e-Bay, the owners asking dream-world prices as they try to bail out… Dealers are so over-stocked and strapped for cash, they won’t take any more “gas hogs” in on trade…The big SUV’s are selling for fifty cents on the dollar at auction. Americans are still in shock, not realizing what is happening and what it’s going to mean long-term…


#8

Retain value ??? whats this, are swapping vehicles every couple of years ? Why not get the truck you want and need and KEEP IT ? When you own your car you don’t have monthly payments and get to keep you money for you. I woudn’t race out right now and buy a new car because I don’t have a spare $500.00 a month lying around. I still have my '79 c10 pickup, '92 explorer AND '06 escape hybrid. NONE of which have I ever wondered their “value” to anyone but me.


#9

Good post! It seems like small cars these days have a lot more weight than those of 15 years ago–probably due to government mandated stuff and don’t get better gas mileage. I agree that no regular use automobile is an investment, but as oil prices increase, some will depreciate faster than others.


#10

You made one particularly poignant point. “Pity those who are leas[ing]”.

I’ll try to remember this when posters ask “should I lease”.


#11

I’d still shell out 20k for a very low mileage 2003-04 Mustang Cobra.


#12

No, Congress did. Nixon’s part was to sign the legislation, but couldn’t mess with the highway system unilaterally. And while we’re at it, the Judiciary let it slide, too. That’s 3 out of 3.


#13

Heck yeah.


#14

I hope the prices plummet, I’m looking forwad to getting good deals on some older cars.