Saturday, December 31, 2011

Forget electric cars, used SUVs are hot now

Forget electric cars, used SUVs are hot now
David Zalubowski / AP

By Dan Carney

Think cutting-edge electric vehicles like the Chevy Volt and Nissan Leaf are hard to get? That’s nothing compared to the challenge of buying a three-year-old full-size SUV. 

That’s because while there is still plenty of demand for big SUVs -- Chevy sells about 5,000 new Suburbans and 8,000 Tahoes every month -- there will soon be virtually no supply of late-model used ones.

New big-SUV sales are percolating along now, but that wasn’t the case three years ago, when the aftershocks of the 2008 financial meltdown were still reverberating around the industry and there was no loan money available to those remaining customers who still wanted to spend $40,000 or $50,000 on an SUV.

The result: today there are no three-year-old SUVs because three years ago there weren’t any new ones. It's sort of the automotive equivalent of the baby bust faced by countries like Japan that find themselves short of able-bodied workers decades after childbirth rates flatlined.

According to the National Automobile Dealers Association, in 2010 the normal number of SUVs returning to dealers from leases every month was between 2,500 and 2,750 nationwide, giving shoppers ample selection.

“This made them easy to find and kept pricing reasonable,” observed Jake Moore, general manager of Country Chevrolet, in Warrenton, Va.

Last month, the number of SUVs returning from lease was fewer than 200. In the whole country. Chopping the supply of used vehicles to less than a tenth the normal volume is going to give used Tahoe shoppers a real headache.

“This will cause a severe shortage of used SUVs for the used car market, which in turn should drive up prices,” Moore said. “I think we will feel the impact of this in late January due to the time it takes to process, sell and market the lease turn-ins.”

So, about the time the first big blizzard of the season convinces drivers that they need an affordable used 4x4, there won’t be any to be had. With a shortage of used SUVs and high prices on the few that are available, many shoppers will decide to buy new ones, giving the domestic car makers a sales boost for a few years.

Moore said his dealership has stocked up on used SUVs in anticipation of the bust, but with a finite number of vehicles available, not all dealers can do the same thing, and they will eventually run out anyway.

“As far out as April of 2014, the return volume for big SUVs is only going to be around 500 a month,” Moore said. 

That’s a long time to wait to buy a used SUV, so shoppers who are in the market for one should act quickly or start considering buying new. And if you have a three-year old SUV, in a couple months your current ride will be worth its weight in, well, if not gold, at least copper. That will put you in position to upgrade to a new one with a nice trade-in.

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