Considering a new SUV, Think Again!

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So you want to buy an SUV.  Now is not the time.  I pulled some data from KBB.Com and to show just how crazy the numbers are.  The chart below shows three cars, a Jeep Cherokee, Chevy Tahoe, and Honda Accord (for the non-suv comparison).  For each car you can see the 2008 MSRP, then three years of blue book value with a very low 12K miles a year put on the vehicles.  The Value lost is how much the car has decreased in value after the end of each year in that year.  The final column, is what your monthly loss is per month based on one, two, or three years of keeping the car.bluebook3.JPG


It is shocking to see that a Jeep Cherokee will lose 40% of its value in the first year with a small amount of miles.  The Tahoe, a very popular SUV, will lose 44% in two years. 

I believe what we are seeing is an over reaction to high gas prices.  I value the data from KBB, but it can not always account for irrational behavior and as such you should avoid buying any new SUV unless you are the type that does not care about losing 10K or 20K.  If you need the space, buy a wagon or other vehicle that is perceived to get better gas mileage as it will hold it value better.  If you have to get that SUV, then buy used from a private party if anyone is stupid enough to sell at the super low prices.  Retail rates on any of these cars at the dealers will be inflated by at least 2-4K above private party, so don’t think buying a used SUV at the dealer is a good idea either.

Basically, until the market settles, don’t even consider buying a new SUV.  If you are selling one, keep in mind the very low KBB values and take the time to do the math.  Is the extra loss in the value of your car a fair exchange for the more fuel efficient car now?  It is simple math, don’t get caught in the hype as you will be burned.

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