Market puts brakes on resale value of pickups, SUVs


CHICAGO - A boom in truck buying in the 1990s helped push the resale value of pickups and sport utility vehicles to lofty levels well above most cars, but market forces are starting to pull them back down.

When Paul Taylor, an economist for the National Automobile Dealers Association, tracked the values of the best-selling 1999 vehicles from January 2000 to January 2001, four of the five biggest losers were trucks. The Ford Explorer dropped 20 percent, the Ford Expedition 14.5, Dodge Grand Caravan 14.4 and the Dodge Ram pickup 14. (The car that cracked the top five was the Chevrolet Cavalier, losing 16.5 percent of its value.)

Popular SUVs such as the Chevy Blazer, Jeep Grand Cherokee and Dodge Durango also are losing value as buyers embrace so-called crossover SUVs based on car platforms, including the Ford Escape, Honda CR-V, Toyota Highlander, Subaru Forester, Acura MDX and Lexus RX 300.

"That is consistent with the market and a shift in consumer preference for crossover utility vehicles," Taylor said.

It also is a matter of supply outgrowing demand, Taylor said. An abundance of Explorers, Blazers and Grand Cherokees on used-car lots is lowering values.

The Explorer, for example, has been the most popular SUV for 10 years, usually selling 400,000 or more units annually. In 1998, the NADA Official Used Car Guide pegged the retail value of a 4-year-old Explorer XLT at about $16,800, roughly the same that a 4-year-old Explorer is worth today. The big difference is that a 1994 Explorer XLT had a retail price of about $26,000, and a 1997 model was around $29,000 to $30,000.

Taylor says the Explorer's resale value began to erode before the Firestone tire recall last summer simply because so many are available.

The resale value of the Grand Cherokee also has suffered, despite price increases on new models, which usually help increase used-car values.

Three years ago, the NADA guide said a 1994 Laredo model was worth $16,150. Now, a 4-year-old Laredo is worth $15,900, despite price increases of more than $2,000.

Derek Humphrey, manager of North American forecasting for J.D. Power and Associates, said values of SUVs and full-size pickup trucks are falling faster because their product life cycles are shortening. Consumers are reluctant to buy a vehicle they know soon will be replaced by a model with fresh styling and new features.

"In the past, it wasn't unusual for trucks to go 10 or 15 years without a redesign. Now you're seeing a pretty dramatic decrease in product life cycles," Humphrey said. "When you get near the end of the product cycle, you see a pretty dramatic decrease in the residuals."

The Explorer reigned as the top-selling SUV despite a design that dated to 1991, and a larger, substantially different one didn't appear until this March.

By comparison, the Ford F-150, new for the 1997 model year, is due for a redesign for 2004 because buyers expect fresh products sooner. General Motors' full-size pickups were redesigned for 1999, and Humphrey says GM's goal is to introduce a new version by 2006.

Sales of Ford's full-size Expedition tumbled more than 8 percent in 2000, a record year for SUV sales and the auto industry, and are running 13 percent lower in 2001.

Though the Expedition was introduced as a 1997 model, Doug Scott, SUV brand manager for Ford, blamed the vehicle's age and newer competitors from General Motors and Toyota for the fading sales.

"We're in the tail end of the life stage for this vehicle, and we'll have a new Expedition about a year from now," he said. "GM's products are newer, and they're competitive, and they weren't competitive before."

GM redesigned the Chevrolet Tahoe and Suburban and GMC Yukon and Yukon XL for the 2000 model year, and sales grew 8 percent last year and are up 20 percent in 2001.

GM's newer SUVs also are getting higher ratings from the Automotive Lease Guide, which projects residual (or resale) values for the leasing industry. ALG predicts that four years from now the Tahoe will retain 45 percent of its original value and Suburban 48 percent. The ALG says the Expedition will retain 40 percent. In the fall of 2000, ALG predicted that the Expedition would retain 52 percent of its value in four years.

ALG Vice President Raj Sundaram said the SUV market is experiencing the same kind of reality check as dot-com stocks falling back to Earth after a meteoric rise.

"In a way, it's like the stock market. Some of the SUVs are like the Internet stocks that were real hot for a while, and then they burned out," he said.

ALG has reduced residuals for most SUVs in the last six months, and Sundaram said full-size SUVs as a group "may be losing a little bit of luster," though not because of high gas prices.

"When somebody is spending $40,000 on a vehicle, the incremental cost of higher gas prices may be only $350 to $400 a year. That is not going to stop them from buying," he said.

Instead, there are now midsize SUVs such as the Acura MDX, Buick Rendezvous and 2002 Explorer that offer seven-passenger seating like the full-size models but at lower prices.

Charlie Vogelheim, editor of the Kelley Blue Book used-car guide, said midsize SUVs are cooling off as part of a normal maturation process after years of double-digit growth in sales. "They're aging a little, and there is a lot of competition out there," Vogelheim said.

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