Friday, June 6, 2008
Fuel prices make SUVs less desirable, but more affordable
By DOUG LEDUC
Consumers looking to cope with rising gas prices have made fuel efficiency a bigger factor in their vehicle selection. And auto industry observers in the area say people in the market for a sport-utility vehicle might find it a good time to buy one.
On June 4, AAA Motor Club reported the average price for regular unleaded gas in Fort Wayne was $3.94 per gallon, up 18 percent from $3.35 a year earlier. The price had been even higher in recent weeks, setting records at many service stations and convenience stores as it hovered around $4 per gallon.
The higher prices have influenced recent changes in vehicle production plans at General Motors Corp., and have had an impact on bidding at area vehicle auctions and sales at used car stores.
At Indiana Auto & Truck Auction, “the fuel-efficient vehicles are starting to increase in price. The big trucks and large SUVs have started to slow just a little bit in the last two or three weeks,” said Eric Autenrieth, general manager and co-owner of the business at 4425 W. Washington Center Road.
“The (gas) price, once it hit $3.99, started to have an impact; but prior to that, (it) didn’t have much impact,” he said. “I think now consumers are becoming proactive in terms of trying to find solutions for themselves.”
Jason Kennedy, who manages the Bart’s Car Store at 5510 Illinois Road, said higher gas prices have forced some people who are on budgets to change vehicles to make ends meet.
“People budget X amount for monthly payments, X amount for fuel and X amount for insurance, and one of those has got to give,” he said. “One way is in the payment and the other way is on the fuel.”
The store has received a lot of SUV and full-size pickup trade-ins, “most of the time from people upgrading from older vehicles from the late 1990s,” he said.
Pickups and SUVs saw an explosion in popularity during that period, he said.
“A lot of people just wanted to drive a truck and didn’t need to drive a truck. And a lot of people have traded out of them,” he said.
The most recent mileage-adjusted average national price data from the National Automobile Dealers Association showed in April, pickup trucks were averaging $14,553 at wholesale auctions, down 5 percent from a year earlier.
SUVs were bringing an average wholesale auction price of $15,373, down 11 percent from a year earlier, but average prices brought by small cars rose 2 percent, to $9,470.
Paul Taylor, chief economist for the association, said the outlook might be a little better for pickups than SUVs, because “the need for trucks in the used market is going to continue, as opposed to the sales of used SUVs, which are more of a luxury item for some consumers.”
For the first four months of this year, data collected by the Community Research Institute at Indiana University-Purdue University Fort Wayne showed combined truck and SUV sales were down 8.8 percent, compared with the same period last year.
At the same time, 2008 data for January through April show “cars were up 9 percent, which is pretty good,” said Valerie Richardson, who works for the center in public and environmental affairs.
During the first four months of 2007, area car sales had risen only 2.7 percent, compared with the same period the previous year. And combined truck and SUV sales had fallen only 3.7 percent in that part of 2007, compared with the prior-year period.
Richardson said area pickup sales for the first four months of this year were down 24 percent, and SUV sales were up 3.9 percent.
“The market’s flooded with SUVs, which … drives the trade-in price down and makes them a little bit less, retailwise,” said Scott Pieri, sales manager for Kelley Automotive Used Car Superstore, 910 Avenue of Autos.
“Cars are really quite high right now and SUVs are quite inexpensive. It’s just a supply-and-demand thing,” he said.
“The auction really drives the price … At an auction, just watch a Civic roll through and everyone is jumping on top of that. The more bidders there are, the higher the price is going to go.”
Much of the bidding is driven by a perception that everyone wants to get into a smaller, four-cylinder car, Pieri said.
But there is still a market for mid-size SUVs and minivans, he said, among families with more than a couple of kids and among people who want to travel safely during the winter.
In some cases, “consumers who use these vehicles for special purposes would be attracted to these lower prices,” Taylor said. “There’s a home for everything at some price.”
“People who can afford toys — boats and large SUVs — are still going to have large SUVs. And the people who are unable to afford that are going to cut their (gas) usage down to save money,” Autenrieth said.
The pickup business provides more than 3,000 jobs at GM’s Fort Wayne Assembly Plant, which makes full-size Chevrolet Silverados and GMC Sierras. It appears the facility will not be affected by changes announced June 2 to the company’s pickup production.
“U.S. economic and market conditions have become significantly more difficult,” said Rick Wagoner, GM chairman and chief executive officer, in an announcement of the changes. “Higher gasoline prices are changing consumer behavior, and they are significantly affecting the U.S. auto industry sales mix.”
The company said its Oshawa Truck Assembly in Canada, which builds the Silverado and Sierra, likely will cease production next year, while a Moraine, Ohio, plant, which builds the Chevy TrailBlazer, GMC Envoy and Saab 9-7x, will end production at the end of the 2010 model run or sooner.
A Janesville, Wis., plant will cease production of medium-duty trucks by the end of 2009, and of the Tahoe, Suburban and Yukon in 2010, or sooner. Chevrolet Kodiak medium-duty truck production will end in Toluca, Mexico, by the end of this year.
The Fort Wayne Assembly Plant’s production schedule has not been reduced, said spokeswoman Alicia Kocher. “It’s based on the products we’re making,” she said.
“The type of product Oshawa makes is not a work truck or type that farmers or construction workers would be purchasing,” Kocher said. “The type that they’re making is the type that consumers would be purchasing.”
With the housing market down, the home construction industry is demanding fewer pickups. But “there’s some good news in the midsection of the country in terms of demand for trucks,” Taylor said.
“Farm prices are very strong this year, so the farm demand should offset some of that decline in construction demand for trucks.”
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This story posted by LeaseTrader.com, the automotive service company that lets people transfer out of their Car Leases early. If you're looking to swap a lease or transfer out of your car lease, please visit www.leasetrader.com