Is Now the Time to Buy a Gas-Hog Vehicle?

Here's an interesting piece from MSN Money. It asks if now is the time to buy an SUV, but the question can be expanded to all vehicles with low gas mileage. Here's their rationale:

Manufacturers are offering discounts of $2,000 to $5,000 on once strong-selling models like the Ford Explorer and Chevrolet Suburban, and dealers say there's plenty of negotiating room after that.

Discounts are even bigger on many used vehicles, with some selling at roughly one-third the price they would have fetched new four years ago.

The bottom line is that, for people who don't drive much, today's deeply discounted SUVs may actually make financial sense.

"It is the ultimate buyer's market," says John Casesa, managing partner at Casesa Shapiro Group, a New York advisory firm that owns some dealerships.

I've been seeing a ton of ads for Ford trucks that have both "employee pricing" and HUGE cash-back incentives (In the $4k to $6k range, I believe.) If you need the room, power, four-wheel-drive, etc., even if you have to drive a decent amount, it seems like now is the time to buy one of these vehicles since they're practically giving them away.

Anyone else thought of this issue?

Comments

[dino]

Buy a diesel. Twice the gas mileage as a regular unleaded truck.

[Chris]

I completely agree! I bought a 3 year old Ford Expedition for 25k less than the previous owner paid for it. There's no way the value would be depreciating $1000 per month if it weren't for the fear of high gas prices. Besides, when you sit down and actually do the math, the "$2.99/gallon" gas gimmick won't net you anywhere near $1000 a year. Is buying a brand new vehicle really worth that???

[Chris]

I completely agree! I bought a 3 year old Ford Expedition for 25k less than the previous owner paid for it. There's no way the value would be depreciating $1000 per month if it weren't for the fear of high gas prices. Besides, when you sit down and actually do the math, the "$2.99/gallon" gas gimmick won't net you anywhere near $1000 a year. Is buying a brand new vehicle really worth that???

[Jason Kratz]

The fear of high gas prices??? There *was* fear of high gas prices. Now we have them and they're only going to get higher. I have a 2006 Dodge Grand Caravan which is not driven that much but when it is it's around the area and we get about 16mpg. Right now it costs about $50 to put in half a tank. If you're driving a "decent amount" as stated above you're going to be putting a lot of $$ into the tank.

Assuming everything else is put aside (environmental concerns, etc) how is that good financial sense? It's like saying it's OK to buy stuff on sale that you don't need just because it's on sale...."I don't really need this but it's such a good price!"

The auto market sucks in general right now. It should be a good time to buy a car as well that gets far better mileage. The discounts might not be as steep as on an SUV but you'll be thanking yourself later.

[Sean Mathena]

I am glad someone finally acknowledged this, I just bought a Dodge Ram 1500, and was feeling really guilty for buying it, being a reader of free money finance and all.

Thanks,

Sean

[mom of 5]

FMF: To answer your question, we've certainly thought about it being a buyer's market for the vehicles we drive. I personally don't mind the drop in value, especially the used market, as we will buy used when it's time, pay in cash, and drive them for as long as we can. We will be able to buy newer/nicer for alot less. Great post!

@Jason: I've been averaging 16 MPG w/ my '96 Suburban just by changing my driving habits to a more "defensive" style-not really any "crazy" hyper-miling (like high-g turns, pulse & glide, etc.). I'm surprised that your van doesn't get at least 20 MPG. Maybe minivans should be lumped into the "gas guzzler" category as well. ?? Also, I don't think FMF was suggesting anyone go out & buy a vehicle they don't need. Rather, if you do drive these types of vehicles, is now the time to buy?

[Chris]

Penn Square was an Oklahoma City bank that in the late 70s and early 80s began giving out loans left and right to anyone who asked for them if they even hinted that they were in the petroleum business. At the time, there was this naive thought out there that prices would always go up. If you can't figure out what resulted, just google "Penn Square Bank" and see what comes up. Prices may continue to rise. Gold might continue to rise. There seem to be a lot of investors who think otherwise, regardless of what you hear on the nightly news.

Again, I was doing the simple math. At current prices with Chrysler's 12000 mile per year limit, a vehicle with 20MPG would save you $600/year in gas. If the price of gas goes up to $5/gallon tomorrow, you'd save $1200. If the price falls to $2.50, you're saving $0. I guess the real question is how much will a new vehicle depreciate in that one year. Would it really be less than what you may or may not save in gasoline??

[Almuliman]

Just be sure you really need a large (huge!) vehicle.

Driving one of those things "just because" is socially irresponsible. To your local community and to the world as a whole.

(Climbing back down off my soapbox now).

But yes, amazing deals.

[aa]

Only MPG matters these days, and SUV drivers can only cry at the pumps

[clr]

@JasonKratz - The reality is a lot of people need vehicles of this size. Just like you need your gas guzzling minivan. I have found people with below average m.p.g. almost always have too much 'stuff' in their car/van which weighs it down. Take out those golf clubs and coolers, etc. I realized a 3 mpg difference by lightening the weight in my trunk on my economy car. Also another commenter suggested your driving style. It is incredible how driving habits can affect your mileage by up to 20%. Also, the post directly says "If you need the room, power, four-wheel-drive, etc..." so I think FMF was not suggesting to just run out and buy a truck if you dont need one. These deals are unprecedented and just like Sean, we also just bought a new pickup truck. When you can save $13k+ on the price, compared to some hybrids going for above-sticker prices, it makes the decision less difficult. Certainly there are many people who buy SUV's/trucks who dont need them. But I think you will see a drastic decrease in those types of consumers. This is great news for truck-users.

[justin]

I wonder if it has gotten to the point where it would be worth getting a light pickup versus a regular sedan? I would love to have a pickup again for the convenience of not having to borrow one every time I need to haul something away. I'm thinking about something the size of a Tacoma/Frontier/Ranger, not a Tundra or a F150. I had a Ranger for 10 years and got mileage in the low-mid 20s. Anyone know of any deals right now on small pickups?

[Foobarista]

For people who actually need big vehicles, this is great advice. My mom is mobility impaired and can't easily get in and out of cars, but has no problem with SUVs - and drives about 4000 miles per year. She'll probably buy a 2 year old Ford Escape later this year to replace her old SUV that is having many issues.

I successfully talked her out of buying the hybrid version; it's over double the price of the non-hybrid version).

[dollar incense]

Deals are definitely out there.

Id been wanting something for the snow that was fun to drive. Just bought an 04 Porsche Cayenne S for 25,700! Original selling price was 28,900 before my master negotiator of a BF talked em down.

Kelly Blue Book is 34k! And the car sold for 58,100 in 04. Only has 33k miles. Crazy good deal :)

[Jason Kratz]

@clr - I was not suggesting that FMF was suggesting to get an SUV if you don't need one. Perhaps the analogy I gave was poor but my point was that even with low prices for the vehicles the upkeep is getting far more expensive.

I'd also argue that there are a lot of people who need those vehicles. Most people in fact do not need them. Before the SUV craze caught fire you didn't see quite so many large vehicles on the road. Certainly there are people who need these types of vehicles and for them it certainly is a great time to buy. The article quoted claimed "for people who don't drive much" it might be a good idea.

As to my gas-guzzling mini-van I was persuaded it was necessary and it was a mistake I've been regretting almost from day one. When the lease is up next year it will be replaced with something far smaller.

@mom of 5: depending on the mini-van they most certainly are gas-guzzlers when driven around town. On the highway for long trips the mileage is actually quite good. Thats an almost zero-percent amount of our driving tho ;)

[Skott]

I can fit quite a bit of cargo in my Civic. And just because I visit Home Depot once a month doesn't mean I "need" a pickup or SUV... I can fit just about anything in the trunk by laying down the rear seat or leaving the trunk lid open and using a tie-down strap. If I buy a new piece of furniture, the $20-50 delivery charge is much more reasonable than the true cost of driving a large vehicle.

But I am still watching like a hawk as the prices of used 4x4s drop, and eventually I plan to buy one. I'll still keep my econobox, of course, just for commuting.

[Chris]

@Jason Kratz - I think you could more easily make the argument that before the mini-sedan craze hit, you didn't see too many small cars on the road. Think of all the 60s and 70s models cars you see running around. All the "big boats" as many people call them.

My doctor actually told me to avoid getting a car. He showed me a study on how much of the back pain our society sees is a direct result of people climbing in and out of small cars all the time. The older cars and trucks with the bench seats were actually best on the back, followed by trucks and SUVs of today that don't require you to hunch down and climb out all the time.

[Anitra]

There's a possibility we'll need to replace our light truck (Ford Ranger) soon. If so, we'll probably be looking for a smallish used SUV. I never thought I'd see the day that an SUV made good financial sense for our family, but it looks like we'll be able to get one for less money than a comparable minivan or station wagon.