New SUV Incentives Make Buying an Option
By Dale Mayer, Autotropolis Contributor
In the past few months SUVs have taken a huge price hit. With the gas going over $4 a gallon, consumers spun away from the larger vehicles with poor fuel economy to the smaller and more fuel efficient cars. This left entire car lots full of unwanted trucks and SUVs at the same time factories were pumping out these gas guzzlers as fast as they coulud make them based on prior sales.
So, what to do with an abundance of supply and no buyers – the age old solution has always been to drop the price. In the auto industry that means create rebates, incentives, employee discounts and any other sales program to make the unattractive product appear more attractive. This is the rule of supply and demand – no demand means lots of supply and lower prices.
| With the many excellent rebates and incentives on offer - it might be time to evaluate the cost of buying an SUV against the cost of owning one
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That’s what happened initially and still sales slumped, so these sales ‘gimmicks’ became even bigger and more attractive. Then when it looked like these incentive programs still weren’t going to be enough, the price of gas stabilized…and slowly started lowering again. Now we have slightly more affordable gas prices and many large vehicles with incredible buying incentives.
So, let’s look at the more fuel efficient small cars. True they offer great fuel economy at a time when it just hurts to go to the gas station to fill up but they don’t have the same buyer incentives attached to them. As the supply of the small car decreases the prices go up. This is the other side of the supply and demand law – high demand and low supply means higher prices.
When does the market reach the break even point where SUVs are worth a second look? Can you save enough money on the dramatic price cuts to make up for the higher fuel mileage? For many analysts, the answer is yes. There is an important caveat here, if you don’t ‘need’ a large truck or SUV then realize there is never a good time to buy what doesn’t fit your needs or lifestyle. However, if you have many people to carry to toys to tow then sometimes nothing else but a truck or a SUV will do.
Each consumer has to decide what a ‘good deal’ is for them. Some of these gas guzzlers are being promoted with incentives as high as $8,000 and even $10,000 dollars. That buys a lot of gas, even at $4 a gallon. There is also the depreciation cost to look at. Chances are the vehicle could be difficult to sell if you are planning to buy new again in a few years. However, if you plan on keeping the vehicle for longer than three years then the depreciation is not such an issue.
Also consider the large amount of SUVs sitting on the used car lots. A ‘newish’ SUV that is only one to two years old might be an excellent deal especially considering that the previous owner has already paid the worst of the depreciation costs. These used vehicles are much cheaper than their new counterparts and dealers are just as anxious to move out ‘dead’ stock as the new car dealers.
So, get out the calculators and take a second look at the gas-guzzlers. The results might surprise you.
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