With a big push for more fuel efficient vehicles in an era of high gas prices, we have all likely heard about the seeming exodus from large SUV’s and trucks to smaller fuel efficient vehicles. Driving around in many towns throughout the country it’s common to see “For Sale” placards in the windshields of parked SUV’s. With a glut of large vehicles for sale and the high demand for smaller hybrid vehicles, the value of larger vehicles is simply shrinking. 

For the insurance adjuster handling auto claims or anyone who’s an owner of a large vehicle faced with a total loss, the claim settlement process may be an eye opener. Large trucks and SUV’s simply are not holding their value. Many dealerships are not accepting them as trade ins and there is a glut of these vehicles on the market. A supply and demand phenomena is occuring. Low demand matched with a large supply ultimately equals lower prices. A fomerly high priced fully loaded SUV a few years old could have an Actual Cash Value ( Fair Market Value ) a fraction of it’s original purchase price.  When it comes time to settling an auto damage claim, the insurance company will only owe typically for the ACV plus any state fees and taxes. This means that vehicle owners may be in for a big shock if they have a large loan exceeding the ACV of the vehicle. The second issue that has occurred is that with declining truck and SUV values there is a great potential for more salvaged vehicles. Typically an insurance company will total a vehicle and obtain a salvage title at somewhere between 70-80% of the vehicle’s value. A hypothetical vehicle that was worth $10,000 and would have totalled at $7000 using the 70% threshold would total at a lower figure if the ACV dropped below $10,000 in this example. With a recent data from the U.S Department Of Labor, the Consumer Price Index on auto body repair has been rising. The combination of lower vehicle values in the “larger” size market and higher repair costs may ultimately lead to more salvaged trucks and SUV’s.

There are alot more factors at play but this is definitely something to think about. Time will tell how things will play out, but if trends continue the U.S. vehicle market may be encountering a complete transformation.