The debate about the suitability of Sports Utility Vehicles (SUVs) for everyday use has become increasingly heated over recent months, fuelled by negative publicity about emissions from cars perceived to be ‘gas-guzzlers’.  However, new analysis by EurotaxGlass’s, publishers of the Glass’s Guide to Used Car Values, indicates that this has had a negligible impact on the registrations and residual values of prestige-brand SUVs – those vehicles often referred to as ‘Chelsea Tractors’ by opponents.

“Dealerships have not been reporting any meaningful drop-off in demand for prestige SUVs, with sales of new and used examples currently in line with what we saw at the same point last year,” explains Richard Crosthwaite, Prestige Car Editor at EurotaxGlass’s. 

“Given the investment required to purchase and run this type of vehicle, the scale of the proposed increases in Congestion Charge penalties and the new road fund duty are unlikely to impact sales significantly.  While owners may have a concern about running costs, this is more likely to result in an ever-higher proportion of diesel models being sold compared to petrol, rather than a migration of buyers away from the sector as a whole.”

Sales of new prestige SUVs for the 11-month period up to December 2006 topped 51,667, representing an 7 per cent increase over the same period in 2005, and 20 per cent more than in 2004 [see Table 2, below].  Crosthwaite continues, “Looking forward, the rapid rise of new car sales in this sector over the past few years will probably mean there will be a natural levelling-off, or even a slight drop, in prestige SUV sales as demand naturally becomes satisfied.  However, ecological concerns will not drive down registrations in the way that many people currently think.”

Residual values remain strong

There is little prospect of a dramatic fall in residual values within the prestige SUV segment, suggests Crosthwaite.

 “The recent increases in rates of depreciation for prestige SUVs are only slightly worse than those seen in the ‘Prestige Large’ segment [BMW 5 series, Mercedes-Benz E Class etc], and are certainly nothing unusual considering the growth in used car supply following record sales in the segment over recent years.”

Residual values for this type of vehicle have come back from being the best in the market, down to more realistic levels.  “This is due to a higher number of used examples now available, something that will only be boosted by the arrival of more new models, such as the Audi Q7.  However, it should be remembered that the values of prestige SUVs are still among the strongest in the market, and the modest further falls in values expected for these vehicles during 2007 will simply attract more buyers to the sector.”

Crosthwaite adds, “People buy prestige SUVs for their desirability, as well as their perceived practicality and safety.  Cost is not a critical issue in this segment.  Despite the negative media coverage, there is still no other comparably desirable niche sector for these buyers to migrate into.  I believe it is unlikely that many buyers will move into conventional vehicles which they think are less safe or less practical simply to placate the anti-SUV lobby.” 

SUV values set to suffer more in the volume market

While rates of depreciation for prestige SUVs are unlikely to fall dramatically during 2007, EurotaxGlass’s says the values of volume-brand models will not be so resilient.  “There will be a further sizeable influx of mid-sized SUVs from the volume-brand manufacturers this year, yet there is little to suggest that there will be a commensurate uplift in demand necessary to bolster residuals over the medium term,” adds Crosthwaite.

Table 1: Sample trade values for one-year-old prestige SUVs

Table 2: Pattern of new prestige SUV sales since 2004