Allow me to introduce a new economic indicator. I call it the H2PRS, short for the Hummer2/Prius Resale Ratio. It's a slightly idiosyncratic measure of the amount of additional depreciation owners of low fuel efficiency vehicles may suffer relative to fuel-efficient vehicles.

The figures for the indicator come from Kelley Blue Book, one of the major sources of information on used car and truck values. Here is how the indicator is constructed. Kelly Blue Book says the MSRP on a new Hummer2 in January of 2003 was $52,200 while the MSRP on a Prius was $20,730. Divide the Hummer2 by the Prius and you get a ratio of 2.52.

From there, we track the wholesale used value of both vehicles at regular intervals. If the ratio rises above 2.52 it means the Hummer2 is holding its value better than the Prius. If the ratio sinks below 2.52 it means the Prius is holding its value better than the Hummer2. Since the Hummer2 was a new introduction in 2003 while the 2003 Prius was about to be replaced by the redesigned and much awaited 2004 Prius, it's reasonable to expect that the Hummer2 would hold up better in the resale market than the Prius, at least for a while.

That is exactly what happened during 2003.

The resale value of the Hummer declined less than the resale value of the Prius. The H2/PRS was 2.58 in January 2004.

Since then the ratio has reversed, declining to 2.35 by this January and 2.29 in March.

The Hummer2/Prius Resale Ratio
Compares original MSRP for new vehicles followed by wholesale resale prices after original sale.

MSRP Jan. 2003

Jan. 2004

May 2004

Sept. 2004

Jan. 2005

Mar. 2005

2003 Hummer H2







2003 Toyota Prius







H/P Resale Ratio







Source: Kelley Blue Book

A ¬†confirming indicator of a shifting market is offering prices for the same vehicles on the Internet. According to a recent search of Autotrader, for instance, there were 1,007 Hummer2's from the 2003 model year listed for sale. The average offering price was $42,659. Only 187 Prius from the 2003 model year were for sale, at an average offering price of $19,738. Those aren't actual sale prices, of course, but the H2PRS of offering prices is only 2.16.

How far can this go?

Your guess is as good as mine. After the 1973 OPEC embargo big gas guzzling cars could not be sold. Anything with four cylinders was hot.

The decline would be more extreme already without the continuing tax subsidy to heavy vehicles being provided by our legislators. While it has been expensive to buy and depreciate a luxury car for decades, the Jobs and Growth Act of 2003 made it possible to do an immediate 100 percent write-off of a heavy SUV, provided it had a gross weight capacity of at least 6,000 pounds. That's the weight of the vehicle plus fuel, passengers, and cargo. While the write-off was reduced with the passage of the American Jobs Creation Act of 2004, it's still hefty. Last week, for instance, I pointed out that Uncle Sam will send you a tax refund that will pay for up to 6 years of gasoline if your business buys a Porsche Cayenne Turbo, MSRP $89,665.

The same tax break is available if you purchase your qualifying gas-guzzler used. Basically, Uncle Sam is subsidizing guzzlers. If our elected representatives find a magical way to raise their I.Q.s above room temperature, the subsidy will be repealed and we can expect used guzzler values to drop faster than Enron shares as market forces (rather than tax subsidies) guide vehicle purchases.

Another indication of a market shift is the trailing prices of three-year-old vehicles. According to, the average trade-in value of small cars rose 16 percent from 2001 to 2002 models. The trade-in value of SUVs fell 9 percent from 2001 to 2002 models.

Stay tuned. We'll update this ratio monthly on