Posted on 05/23/2008 12:48:59 PM PDT by KeyLargo
Trading in gas guzzler may cost you By Terry Jackson • Bankrate.com
Like a lot of people, you may be watching the price at the pump soar and wondering whether it's time to dump your current, less-than-efficient SUV, truck or car.
It's tempting to simply haul your 15 miles-per-gallon vehicle down to the dealership and drive out in something that gets 30 mpg or more. But that may not be smart, at least from a financial point of view.
People thinking of going this route need to take several factors into account.
For starters, your gas guzzler is worth considerably less as a trade-in than it was even six months ago. By some estimates, the value of used sport utility vehicles has dropped more than 20 percent since January.
Even if your current car is paid for, you're likely to incur new monthly payments on that fuel-efficient replacement.
Finally, it could take years to realize actual savings at the pump when other factors are taken into consideration.
Here's an example:
Suppose you have a two-wheel-drive 2001 Ford Expedition XLT. According to Edmunds.com, it is worth about $5,700 as a trade-in and gets about 16 mpg in city driving, although most owners of that model know real-world mileage is less than that.
At $3.70 a gallon for regular fuel, it costs about $97 to fill the Expedition's 26-gallon tank.
To cut that bill, the Expedition owner is looking at a two-wheel-drive 2008 Ford Escape Hybrid, which can likely be bought (assuming reasonable options on board) for about $28,000, plus taxes, title fees, etc.
The Escape Hybrid promises to deliver about 32 mpg in normal driving, double what the 2001 Expedition delivers. A fill-up of the Escape's 15-gallon tank at $3.70 a gallon would cost about $55.
But what are the real savings?
Assuming you own the Expedition free and clear and use the trade-in value as your down payment -- and cover the sales taxes and other fees in cash -- the Escape will come with a loan for about $22,300. At current rates, financing for 60 months means a monthly payment of about $439.
So let's add up the costs for a year:
If you stick with the Expedition and drive 15,000 miles a year, it will cost you about $3,500 to keep it filled with gasoline, assuming prices stay at about $3.70. If they go to $4 a gallon, the bill will be about $3,750.
In the new Escape, your annual fuel bill, assuming the same mileage and $3.70 a gallon, would be about $1,730, a savings of about $1,770 a year.
But the new Escape will cost you $5,268 in payments, not counting out-of-pocket fees and the value of the Expedition used at trade-in.
Even after factoring in the one-time federal tax credit that comes with an Escape Hybrid, swapping a serviceable gas-guzzler for a more fuel-efficient new vehicle is unlikely to provide a financial benefit for five years, when the new vehicle is paid off.
Of course, there are reasons to get a more fuel-efficient vehicle the go beyond bottom-line economics. They include concern for the environment and helping to reduce our oil imports.
And if it's simply just time for a new vehicle -- the old one is worn out, or you've budgeted to trade vehicles at this time anyway -- then by all means it would be foolish to not consider something that gets considerably better fuel mileage.
But if your prime motivator is the sticker shock at the gas pump, act with caution. While a new vehicle may help you save at the pump, it can significantly increase your overall costs.
The article should have given two examples, not just the expensive hybrid Escape....maybe a good used car also.
Some people are considering a more reasonable purchase, maybe a used Corolla or used Ford Focus. Can get these cars for around $8,000 or so, depending on model and year.
Still may not be as economical as keeping the old SUV that’s already paid for, but having to pay $90 to fill up at the gas station is almost robbery.
Check out post 22.
Use guzzlers for short trips (such as weekly shopping), and make fewer of those. Fuel economy is worse on short trips. Use a small, fuel efficient, basic car for commuting.
“there would be more fuel to go around, and it would be at a lower price for everyone.”
Prove it!!!!!!
Here’s another way to look at the math.
If you have paid for your old SUV, you are likely ready to trade it in for something else anyway. The average American does not keep their vehicle for more than 4 or five years.
Most people that buy SUVs would probably buy a 6 cylinder Escape rather than the 4. A similarly equiped Escape hybrid is priced within a few hundred dollars of a V6 Escape. The acceleration is very similar between the two vehicles the only thing you really give up is towing capacity.
Now you are comparing two vehicles that cost about the same with one getting about 25% better miliage. In our case, my wife was trading in a 4 year old Trailblazer that got 14 mpg that we bought used two years before. It had a 6 year loan, financing was about 3%, we had 4 years left to pay on it. We financed the new vehicle for 4 years. Figuring savings with gas priced at $2.50 we figured that were getting a new vehicle that would be paid off at the same time our old one would have been at no additional expense. With gas at $4.00 we are actually spending less money on the new car than we would have been keeping the old car.
The Escape is 4wd, handles the mud, ice and snow with aplumb. It is big enough to protect my family and gets an honest 32 mpg bumping round our semimaintained gravel roads as well as in town and cruising down the highway.
I never thought I would buy a hybrid but the Ford is priced very well for what it does and does a terrific job with the effiency.
Your situation sounded like it worked out best for you.
My comment was more toward the content of the article. The author should have given two examples, a low price car along with the high price Escape.
He claims you don’t save money with purchasing the Escape. My point was give another example with a less-expensive car and see if the savings are there.
Some families cannot even afford the Escape and have to look for something cheaper. Other families may have two cars, both gas-guzzlers, and are considering getting rid of one and buying a good used car with better mileage (used Focus, used Corolla, etc.).
So, the article would have been better to include a second example of a less-expensive car-—and then compare to see if you end up better off with that purchase or just keeping the old SUV.
Guess I could figure it out myself, but it’s nice to have someone else do the work for you in an article. :)
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