SUVs and Trucks Plunge in Trade-In Value

The market for new SUVs and trucks is suffering. Just imagine how bad it is for used SUVs and trucks

by Jim Henry

• View Slide Show

Add your pickup truck or SUV to the list of things like your stock portfolio, your 401K, and your house that aren't worth what they were just a few months ago.

Used-car values are closely tied to new-car values. Thanks to $4-a-gallon gasoline, the bottom has dropped out of new-vehicle demand for pickups and SUVs. The housing bust has also hurt pickups directly, since many are bought for use in construction businesses. Those factors have had a corresponding effect on used-car values for those vehicles.

"I've never seen anything like it, where segments have fallen as much as they have and as quick as they have," says Ricky Beggs, vice-president and managing editor of Black Book, a widely used industry benchmark for trade-in prices and used-car auction data.

For instance, according to Black Book data, the average trade-in value of a 2006 Chevrolet Tahoe, once one of General Motors' (GM) top sellers, has fallen around 29%, or more than $6,000, since March. The Tahoe is a full-size SUV that also comes in a hybrid version.

Wholesale auction prices for used, full-size SUVs averaged $10,507 in June, according to Carmel (Ind.)-based Adesa, a used-vehicle auction company. That was down an average of $3,167, or 23.2%, vs. the year-ago month. Full-size pickups were down $3,203, or 27.3%, to $8,513, Adesa said. The fall in price for some individual models is much greater than the Adesa average.

Trade-In Effect

The drop in values is good news if you're in the market for a new or used pickup or SUV. Otherwise, falling used-vehicle prices can be bad news in several ways.

For instance, automakers said low trade-in values are inhibiting shoppers who want to swap their gas-guzzling truck for something more fuel-efficient. They're suffering from sticker shock when they learn how little their trade-in is worth. Many shoppers turn on their heels, keep their trucks, and don't buy anything.

Owners of large pickups are more likely to be "upside down" than any other product segment, according to the Power Information Network (PIN). That is, about 40% of full-size pickup owners who bought a new vehicle in May and June owed more on their trade-in than it was worth, vs. an industry average of 29.2%, according to PIN data from dealership finance departments.

Along with the iffy economy, low trade-in values have served to hurt sales in general, and crossover vehicles in particular, since automakers expect many SUV defectors to buy crossovers. In June, sales for AutoData's crossover/sport wagon category fell 16.6% from the year-ago month, to 184,871. First-half crossover sales were down 2.8%, to 1,196,360.

Crossovers Slashed

For the industry, U.S. car and light-truck sales were down 10.1%, to 7,411,682, in the first half, according to AutoData. Within the total, cars were down only 1.5%, but trucks were off 17.9%, including crossovers.

A crossover combines the people-hauling capacity of a truck with car-like handling, a quieter ride, and improved fuel economy. Instead of a traditional truck platform, which amounts to a body bolted onto a heavy, ladder-like frame, a crossover has a more car-like "unibody," welded in one piece. The trade-off is less capability for off-roading, carrying heavy loads, or hauling heavy trailers.