As Gas Prices Drop, America Resumes Big Car Love Affair

Washington Auto Show
Basri Sahin, Anadolu Agency/Getty ImagesCheaper gas prices mean more Americans are eyeing a return to owning big SUVs, such as the GMC Yukon.

By Ben Klayman and Bernie Woodall

DETROIT — It is the automotive equivalent of Pavlov’s bell: when gasoline is expensive, U.S. car owners try to downsize, but once pump prices ring down, they salivate over big pickup trucks and SUVs.

With gas prices slipping below $3 a gallon last month for the first time since December 2010, size is back in vogue.

The migration to trucks will turn into a stampede if these gas prices go lower or stay low.

“The migration to trucks will turn into a stampede if these gas prices go lower or stay low,” Mike Jackson, chief executive of AutoNation (AN), leading U.S. auto retailer, told Reuters.

“Americans just love big.”

Helping fuel the upswing is an improving economy and better fuel efficiency that allows people to go for size and feel less guilty about it.

“A new Ford Escape (crossover SUV) is more fuel efficient than a 10-year-old Camry,” says Barclays auto analyst Brian Johnson. “The days of having to be ashamed of your Yukon seem to be fading,” he said, referring to General Motors’ full-sized SUV powered by a V8 engine.

Analysts and industry executives say SUV and truck sales have been rising already before fuel prices fell and cheaper gas could sustain the trend into 2015.

Improved Truck Sales

In October, for instance, SUVs and trucks accounted for 72 percent of Ford’s sales, up from 68.5 percent a year ago, while Chrysler’s sales surged 22 percent thanks to strong demand for its Ram pickups and Jeep SUVs.

With a greater share of big vehicles in their line-up than their European, Japanese and Korean rivals, the Detroit three — General Motors (GM), Ford (F) and Chrysler (FCAU) — are well placed to cash in on the trend.

Pickups and SUVs remain a pillar of profitability for Detroit, accounting for more than two-thirds of U.S. automakers’ global pre-tax earnings, even though they make up just 16 percent of North American vehicle production.

So far this year, they account for 77 percent of Chrysler’s U.S. sales, 68 percent of Ford’s and 54 percent of GM’s. compared with roughly 45 percent for Toyota (TM) and Honda (HMC) and less for other rivals.

Electrics, Hybrids Slip

Electric and hybrid vehicles that account for 2 percent of U.S. sales, are the big losers, with October sales of Toyota Prius down over 13 percent from a year ago, Ford C-Max down over 22 percent and Chevrolet Volt sales down about 29 percent.

The challenge for carmakers is how do you adjust to buying patterns that follow wild swings in gasoline prices?

AutoNation’s Jackson says you simply can’t and recalls 2008 when prices spiked above $4 in the summer to end the year around $1.60.

“I was trading in Escalades on Smarts and by December they wanted the Escalade back.”

Among the Detroit Three, Ford is betting that fuel economy will remain a selling point, investing in its redesigned, more aluminum-intensive F-150 full-size pickup truck.

Chrysler appears to be hedging its bets with its U.S. sales chief Reid Bigland talking of “very limited” impact of gas prices so far. General Motors Chief Economist Mustafa Mohatarem struck a more optimistic note, saying the improving U.S. economy and its newfound energy self-sustainability should sustain Americans’ appetite for size.

“All else equal, Americans want large vehicle they can drive long distances.”

With additional reporting by Paul Lienert.

    • MSRP: $26,495
    • Resale value retained after five years: 50.5 percent

    Even under Fiat (FIATY) ownership, some elements of Dodge’s mouth-breathing, knuckle-dragging, He-Man-Woman-Haters-Club approach to auto sales managed to survive. The built-by-car-guys-for-car-guys Challenger and its rebooted muscle car aesthetic still lingers to lure meatheads who value racing stripes and rims over, oh, just about any other element of their vehicle.

    Ordinarily, that alone wouldn’t make one of these vehicles worth a second look five years from now —  even among the most superficial gearheads. But Fiat helped the Challenger smarten up a little bit by coupling a 305-horsepower V6 engine or 375-horsepower 5.7-liter V8 Hemi with loads of interior space, real-time touchscreen navigation, traffic updates, Bluetooth connectivity,  Sirius (SIRI) XM satellite radio, keyless entry/starter and a whole lot of Harman Kardon audio upgrades.

    Long after Harley goes electric and all the other performance ponies start closing in on 35 to 40 miles per gallon, these updates will make a 2014 Challenger worth a half-price look.

    10. Dodge Challenger

    • MSRP: $25,575
    • Resale value retained after five years: 50.6 percent

    It’s not as American-made as the competing Ford F-150 or Ram, but it did just get a facelift in 2014, its first since 2006. That tells you just how little GM likes to fiddle with the third-best-selling vehicle in the country.

    Its new V6 engine increases the base Silverado’s brawn to 305 horsepower, but only increases its highway mileage from 22 miles per gallon in the old model to 24 mpg in the 2014. Adding updates such as Chevy’s MyLink audio system with color screen, USB ports and an audio jack on top of features including Bluetooth connectivity, OnStar telematics and Sirius XM satellite radio bring the cab up to date, though. The Silverado’s payload and towing capacities have never been the problem. Its antiquated features were, and the updates are far easier to resell half a decade down the road.

    9. Chevrolet Silverado

    • MSRP: $23,120
    • Resale value retained after five years: 50.7 percent

    For all of you just catching up, the five-passenger SUV is this generation’s station wagon/minivan/super-sized SUV that it’s going to drive to college with, throw kegs in back of and basically sully all fairly G-rated memories of its childhood with. T

    To today’s parents, however, it’s almost as big a step toward parenthood as actually having a child. It represents the end of freewheeling youth and light packing and ushers in an era of school, soccer practice, summer vacation and snow days. After the popular crossover’s 2012 overhaul, it’s only made that transition easier by adding a leather interior, heated seats and rearview windows and navigation system with controls mounted on the steering wheel. Honda also trimmed fuel efficiency to a combined 27 miles per gallon while leaving all 70 cubic feet of cargo space untouched.

    8. Honda CR-V

    • MSRP: $23,555
    • Resale value retained after five years: 51.9 percent

    Let the gearheads fight over whether the Camaro or Mustang provide more power for the money. Among those two, the Camaro gets the upper hand with a 323 horsepower, 3.6-liter V6 engine that still gets 28 miles per gallon on the highway. It also comes with fog lamps, a rear spoiler and a top that drops in 20 seconds.

    A color heads-up information display on the windshield, the MyLink app center with 7-inch color touchscreen and Pandora, a rear-vision camera and Apple (AAPL) Siri Eyes Free that lets iPhone users send text messages through voice commands are just some of the perks behind the muscle. With apps for roadside assistance and diagnostics, available navigation and a remote starter, the Camaro’s a whole lot more than just looks and a motor.

    7. Chevrolet Camaro

    • MSRP: $26,200
    • Resale value retained after five years: 52.3%

    Even with only 6 percent of the U.S. truck market compared with nearly 30 percent for Ford, General Motors and Chrysler, Toyota accelerates past the Detroit Three’s pickups when it comes to resale value.

    Toyota’s created a niche market for pickups such as the Tundra and the Tacoma and has seen its U.S. truck sales grow almost 10% year-to-date. The Tundra, much like the Silverado, hadn’t had an update since 2007. It got a makeover for 2014 that mostly involves giving it a bigger grille and sprucing up the interior with more comfortable seats and touchscreen-driven tech toys. A backup camera now comes standard, as does the Entune audio and information system with touchscreen and Bluetooth connectivity. The 4.0L V6, 4.6L V8 and a 5.7L V8 engines remain, as does the pokey combined 18 miles per gallon, but the payload, towing capacity and — above all — reliability are what give the Tundra such a huge following a half-decade after its release.

    6. Toyota Tundra

    • MSRP: $53,000
    • Resale value retained after five years: 53.5 percent

    Chevrolet hadn’t produced a Stingray version of this vehicle since 1986, but bringing back that iconic design for 2014 just boosted this car’s resale value right through its retractable roof. The pace car of last year’s Indianapolis 500, the Corvette delivers on its looks with a 6.2-liter small-block V8 engine that cranks out 455 horsepower.

    Unless you’re the one buyer who strips this beauty down to its absolute base, chances are you’re also enjoying a package that includes a Bose 10-speaker surround-sound audio system; Sirius XM satellite radio with one-year subscription and HD radio receiver; color head-up display; memory package; navigation system; heated and ventilated seats with power lumbar and bolster adjustment; and a leather-wrapped dash.

    5. Chevrolet Corvette

    • MSRP: $32,820
    • Resale value retained after five years: 56.2 percent

    The cars with the highest resale value are almost exclusively SUVs. The 4Runner are great examples of why. It’s a mix of the big school and soccer shuttle families want and the bike and kayak hauler weekend warriors crave.

    Sure, it only gets a combined 20 miles per gallon, but it’s a tailgater’s dream with a power outlet in the cargo space for hooking up a television or other electronic devices, nearly 90 square feet of cargo room and an optional sliding cargo deck. That last feature basically takes out the need for a folding table by providing counter space strong enough to hold 400 pounds of food and beverages.

    4. Toyota 4Runner

    • MSRP: $22,395
    • Resale value retained after five years: 59.1 percent

    It’s loud, it’s not terribly reliable, it sucks up gas at a combined 19 miles per gallon and it doesn’t store a whole lot unless you get the stretched out Unlimited version. That said, nothing looks quite like it and nothing’s an acceptable off-road substitute at this price.

    The ground clearance and four-wheel drive come in awfully handy in miserable winter weather, while that removable hardtop makes it a sweet open-air ride in the summer. Car-buyers don’t pick up a used Wrangler because they want to truck the kids around or make grocery runs. They buy it because they want a Jeep and all the frivolities that go along with it.

    3. Jeep Wrangler

    • MSRP: $18,125
    • Resale value retained after five years: 61.9 percent

    The Tacoma has taken this award 10 times for one big reason: You can pound on it all you want and it just keeps coming back for more. Durability is a big deal in the Tacoma’s world, where car-buyers who don’t feel they need all the size and strength of a Ford F-Series or Chevy Silverado are drawn to its off-road agility, flexible cargo options and easy handling.

    At a combined 23 miles per gallon, the base model Tacoma gets the mileage of a small SUV without sacrificing any of its midsized truck power. When you’re content with fetching big items from the hardware store or taking a load of leaf litter to the dump without flashing chrome or flexing muscle, this is the understated truck to buy, even if it’s secondhand.

    2. Toyota Tacoma

    • MSRP: $27,680
    • Resale value retained after five years: 70 percent

    No other vehicle comes close to the ridiculous resale value of Toyota’s odd-looking, amphibious landing vehicle of a midsize SUV.

    Its available four-wheel-drive system, hefty 260-horsepower 4.0-liter V6 engine and 5,000 pounds of towing capacity are beastly, while its interior is made for messy adventures. Rubber floors and water-resistant seat fabric are made to withstand mud, ash and anything else you track in. Meanwhile, its has enough gauges to make sure you never get too lost on your backwoods outings. It’s an outdoor workhorse without equal, which is why buyers will still pay dearly for it after a half-decade of rugged outings.

    1. Toyota FJ Cruiser

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