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Stuck in your truck

By Claes Bell, CFA · Bankrate.com
Wednesday, May 4, 2011
Posted: 3 pm ET

People say they "hate to say I told you so" all the time, but in this case, I actually mean it. I argued last year when gas prices were in a relative slump that it wouldn't last, and that people who were going back to driving trucks and SUVs because of low gas prices would eventually regret it, because they'd be stuck with low-mileage behemoths nobody wanted.

Because a number of people I care about own trucks and SUVs, and I hate to think they'll get smacked in the face with excessive depreciation and high gas costs, I don't relish seeing the first signs I might have been right. The latest used-car sales report from CNW Research show used trucks becoming a tough sell in world where $5 gas seems a question of "when," not "if":

Used-truck sales slowed dramatically in April. While trucks made up 58 percent of all vehicles for sale at franchised and independent dealers as well as through the private party (casual) channel, sales were only 43 percent of the total. The imbalance is a reflection of a growing number of consumers replacing vehicles with higher fuel mileage cars and crossovers.

Over the past 11 years, according to CNW data, trucks have made up an average of 53 percent of vehicles for sale and often were in short supply. April marked only the second month trucks were responsible for less than half of used-vehicle sales since a brief post-9/11 run-up in gas prices and concerns about possible oil shortages.

Truck buyers seem to be getting this, to a certain extent. Chris Shunk of Auto Blog finds V-6 trucks becoming a larger share of Ford's truck sales:

Ford announced in its monthly sales totals release that V6-equipped F-150s accounted for 50 percent of retail sales, up considerably from the 40 percent mix in March. The 3.7-liter V6 offers truck buyers 305 horsepower and 23 miles per gallon on the highway, so it's not surprising that some owners are opting for the smaller mill.

But the more popular V6 offering is the 3.5-liter EcoBoost V6, which boasts 365 horsepower and 420 pound-feet of torque. Ford says 75 percent of those V6 sales are of the EcoBoost variety, which makes sense, given the fact that the boosted mill accounted for 36 percent of all F-150 sales in April. The EcoBoost F-150 gets up to 22 mpg on the highway, which is still as good as or better than the other pickup trucks on the market.

Sure, 22 mpg on the highway isn't exactly setting the world on fire, but it's a start. While even the highest mileage trucks can't hold a candle to most sedans or station wagons in terms of fuel economy, it's a good sign that truck buyers are starting to come around to the need for good fuel economy.

I can't stress this enough: If gas prices continue to rise, which it appears they will if there's any kind of global economic recovery over the next few years, and you buy a low-mileage vehicle today, not only will you pay a lot more for gas, but you will experience a much higher depreciation rate than you would if you bought a high-mileage vehicle. Paying more for gas stinks, but the depreciation will likely cost you much, much more over the long term.

And that's not the only issue here. More depreciation means you'll likely be "underwater" much longer in your truck. Although it's often possible for people with good credit, rolling over an old balance into a new auto loan is a big financial no-no, meaning you'll be stuck in your gas-guzzling vehicle longer than you think.

If you're in the market for an auto now, unless you absolutely have to have a large, low-mileage truck or SUV for your business, I would seriously recommend you consider going for something more fuel efficient.

What do you think? Will high gas prices mean trouble for truck owners, or is it no big deal?

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7 Comments
Elaine
May 22, 2011 at 1:31 am

I actually just bought an SUV, and although I'm going to be paying more in gas to do so, I don't have a car payment anymore because I paid cash for it. I was able to get a good used SUV because their values are dropping quickly. In the end, if you pay cash for a vehicle, gas prices don't matter as much anyway.

Claes Bell
May 09, 2011 at 4:38 pm

That's a good point, Debra. There are a lot of people who legitimately need a high-capacity vehicle for work or to carry around a big family, and they have a tough time when gas prices rise. I'm glad that Ford and others have begun offering more high-mileage options for these folks. I think your cost-benefit analysis is right on, and others would do well to emulate it.

Debra
May 09, 2011 at 4:06 pm

I agree with Joe & Kevin, the necessity of a truck/SUV depends upon the owners lifestyle. I live in an urban area, but my husband needs a truck for his work to carry tools and equipment. He used to have a V8, but sold it to get a more efficient V6 in 2008 when gas went up to over $4. The final selling price was 30% of the original cost just 4 years before; OUCH!

When we bought the newer truck (you know we only buy used vehicles), we did a calculation regarding how long it would take for us to recoup the vehicle purchase cost from the savings we we get for fueling it; it was about 4.5 years. That's not too bad considering we plan to keep this truck until it's so totally broken that it can't be fixed.

Joe from hell
May 05, 2011 at 8:39 am

in Oregon every body has a truck you need one ...because everything is a drive away and ever thing requires lots of cargo room . Costco is 65 miles away so if your going, your gonna load up on stuff....plus wood for the stove (we do live in another age out here) lots of big trucks with bad gas mileage and the DL is way over 4 bucks a gallon.....lots of old little cars too since no one can afford a new car.....we have a PT cruiser turbo..conv and an old jeep suv with a in line 6 .......what can you do....

Claes Bell
May 05, 2011 at 8:18 am

I agree Kevin. If you've got a big family or already own your vehicle, it's usually not cost effective to trade it in just for better mileage. I'm really aiming this at all the folks driving around by themselves in huge trucks/SUVs who are intenders for another one in the near future. I understand the allure of driving trucks; they look awesome and have a ton of utility for home improvement, etc. I just want people to know what they're getting into.

Kevin
May 04, 2011 at 9:07 pm

Most truck / SUV drivers I know of will stick with them. The V-6 option is becoming more relevant IMHO due to the increase in HP / torque. Today's V-6's are close to the V-8's of a few years ago. Personally, I may consider trading my truck for an SUV, but there is no financial justification for me to purchase a higher MPG vehicle - the mileage driven wouldn't make up the savings for many many years (12+), and I would still need the passenger space for family outings. Double the mileage is pointless if you have to pile into 2 cars to get everyone there!