If you want an SUV – and these days, who doesn’t? – buyer beware. You will likely end up paying significantly more for it than you would for a similar car.
The average price of a sport utility vehicle is about $10,000 more than for an equivalent sedan or hatchback, according to Robert Karwel, senior manager of the automotive practice at market research firm J.D. Power Canada.
“The average vehicle price of a compact car in Canada right now is about $25,000 and the average price of a compact SUV is about $34,500,” Karwel said.
South of the border, it’s a similar story. Buyers are paying roughly US$8,000 more to drive off the lot in an equivalent sport ute. The average transaction price for compact cars was US$20,400, while compact SUVs and crossovers averaged US$28,700 as of December, 2018, according to Kelly Blue Book data.
What makes the price difference so jarring is the fact that crossovers are little more than high-riding cars with some rugged-looking plastic cladding. Crossovers are almost identical, mechanically, to equivalent cars. In most cases, they’re even built on the same basic platform. (Crossovers are not quite the same as traditional SUVs, which are built on truck chassis. However, you’ll find the term SUV used as a catch-all to describe both crossovers and SUVs, including in these pages.)
The reason for the huge price difference between cars and SUVs is, to some extent, simply because drivers have shown they are willing to pay it. Nearly three out of every four new vehicles sold in Canada are light trucks and SUVs, according to data from DesRosiers Automotive Consultants. Sedans and hatchbacks continue to fall by the wayside.
“Compact crossovers are on fire in terms of sales, and constitute an ever-growing part of the Canadian retail marketplace,” Karwel added.
In other words, SUVs are trendy. Just like anything trendy – from Kanye West’s Yeezy sneakers to the latest must-have wellness product endorsed by Gwyneth Paltrow on her website Goop – the high price is at least partly a result of high demand.
There’s more to the price gap than pure demand, though. “The all-wheel drive will account for about $3,000 of that [$10,000] gap, with another $3,000 going to the other materials,” Karwel explained. The extra height and size of SUVs means more glass and steel. Suspension components may need to be beefed-up to cope with light off-road duty. Larger wheels and tires cost more, too.
“But, you do still have about $4,000 left over, which represents the premium Canadian customers are willing to pay to get into the [SUV] segment,” Karwel said.
In 2017, Automotive News found an even more striking price gap. Average transaction prices for SUVs were 39 per cent to 51 per cent higher than for sedans and hatchbacks of corresponding size.
The higher prices consumers pay for SUVs serve
s to fatten profit margins for car companies.
It’s no wonder Ford Motor Co. has decided to stop selling all cars except for the Mustang in North America.
That’s not to say SUVs are purely an aesthetic choice and don’t offer drivers real advantages. The higher seating position makes getting in and out easier, especially for older drivers, since it requires less bending and ducking down. For some, sitting higher also provides an added sense of safety and security. The extra ground clearance and suspension travel is a distinct benefit on bad roads. And, in terms of cargo capacity, sedans can’t compete. For many, these advantages are worth the price difference.
Practically speaking, SUVs have their downsides, too. On top of the extra purchase price, buyers should remember to factor in higher running costs when choosing an SUV. They generally burn more gas than a similar car. For example, a Honda CR-V SUV and Honda Civic hatchback have the same 1.5-litre engine and transmission, but the SUV will cost roughly $180 more in gas over a year, according to estimates by Natural Resources Canada.
Out of favour as they are, sedans and hatchbacks still offer distinct benefits: They’re generally lighter, more fuel efficient, and – from a driver’s point of view – more responsive and fun to drive.
You should expect to find better discounts on cars, too. Compact cars sit longer on dealer lots compared with SUVs, and require more incentives to entice buyers, Robert Karwel explained, citing J.D. Power data.
Don’t expect the price difference between cars and SUVs to shrink any time soon, not as long as we keep buying SUVs in record numbers. If you are looking for the absolute best value in a new vehicle, look to sedans and hatchbacks while you still can. If SUVs become much more popular, they could kill off mainstream cars altogether.
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