Wednesday, May 17, 2006

SUV dealers blame slump on pump

By Blanca Torres
Chuck McKinney remembers when he could place an ad to sell his sports utility vehicle, get flooded with calls and close the deal in less than a month.
That was years ago, and those days are over. Now, McKinney's black 2004 Chevrolet Tahoe has been on the market for close to three months, and the process has been like offering fur coats in Phoenix -- no one's buying.
"The first question I get is, 'How much gas mileage does it get?'" the Pleasant Hill man said. "If they ask what the gas mileage is, gas is an issue. In prior experience, they usually ask how many miles it has on it, not the mileage it gets."
These days, the luxury of extra space and ability to hover over other cars apparently is not worth the cost of low mileage. Record gas prices are causing SUV owners to feel an extra pinch at the pump.
The average per-gallon price of gas in the Bay Area is $3.35, up 48 cents since a month ago, according to data released Tuesday by AAA of Northern California. Statewide, the per-gallon cost of gas has climbed 52 cents to $3.38, while prices nationwide are up 24 cents to $2.93. Prices are expected to linger above $3 through the summer.
McKinney gets roughly 15 miles per gallon in his Tahoe, which can hold about 25 gallons. Based on the Bay Area average prices, that means it'll cost him about $84 to fill up his tank.
Car dealers say they can't sell the vehicles as easily as they used to.
A year ago, Concord Mitsubishi sold about 25 SUVs in a month, now they are lucky if they sell five in a month, said salesman Brian Skrehot.
"I've had a pretty good drop in income, not to mention that you can make more money selling SUVs," Skrehot said. "Now the people who are buying them need a large-capacity vehicle. Now, people buy for need instead of want."
Large SUVs are seeing the most sales declines, said Jesse Toprak, executive director of industry analysis for, a Santa Monica-based automotive information firm.
Sales of large SUV models such as the Chevrolet Tahoe and the Ford Expedition have declined about 35 percent in the past two years, Toprak said. Sales of other smaller and luxury SUV models are stable. also reports that the cost of used, large SUVs had dropped 4 percent from a year ago while the resale value of used compact cars has risen by 17 percent.
"The long-term outlook for large SUVs is not extremely bright," Toprak said. "Although gas prices seem to be stabilizing, it doesn't look they are going to go down below $2.50. Gas prices in the long term will have more of an impact on what people buy."
Some people have called McKinney about his Tahoe, but none have been willing to pay the $26,700 sticker price he is asking.
"I generally trade my vehicles every two and three years and have never had trouble selling them, and I get top dollar for them," said McKinney, who is the general manager of a construction company.
He has put 36,000 miles on the Tahoe visiting various work sites and towing trailers carrying equipment. He was confident his 2004 Tahoe would sell quickly, so he purchased a 2007 model in February and is now making two payments.
"I didn't even consider trading it in because the trade-in value was so low," McKinney said. "Now I'm kind of kicking myself for not doing that."
For some SUV drivers, the cost of gas is a concern -- but so is having a large vehicle.
"I need this size -- it is convenient for me," said Bill Sobotka of Concord, who uses his 2001 Cadillac Escalade to haul equipment for his air conditioning business. "Gas prices don't determine what I drive. ...The price of gas is a concern, but it's something I don't have any control over. I can shut the door to my business."
Linda Lenches of Walnut Creek, who drives a Lexus LX430, said she plans to buy a small hybrid like a Toyota Prius in the next few months to lower her gas bills.
"This is my (Lake) Tahoe car and I'm not giving it up -- I need it for the snow," Lenches said. "I bought it in 2003. At that time, gas (cost) wasn't excessive. If I was buying a car just for regular living, I wouldn't buy an SUV."

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