Friday, August 1, 2008

The Ongoing Fiscal Nightmare...

...for SUVs appears set to get worse:
If you thought $4 per gallon was a hit to the wallet, wait until hundreds of thousands of off-lease sport/utility vehicles are returned to dealerships. That's when the whammy of inflated residual values of off-lease sport/utes will hammer the market.

According to Oregon-based CNW Research, with some 800,000 truck-based sport/utility vehicles coming off lease this year, residual values projected three and four years ago will be missed by as much as $6,000 per unit.

Whom will this hurt? Those who lend the money--banks, credit unions, car companies' captive finance arms and others who write leases--will face a tab of nearly $5 billion just in 2008. That number rises to $5.24 billion in '09 and $4.74 billion at the end of the decade.
Sport utility vehicles are about to become virtually worthless to anyone other than the current owner (whether that is an individual or a bank that holds a loan). No resale, the return value in a lease is tanking, and gas prices plus insurance costs are going higher (which is strange for insurance at least since you'd think that decreased value would mean decreased premiums).

All in all, unless you can afford an SUV outright, you likely won't be getting one soon. Which, ultimately, is probably a good thing for the environment and the economy in the long term.