Make us your home page
Instagram

Swapping old gas guzzler for new fuel sipper may not pay off

It may not be pretty, but this 1992 Chevrolet Suburban is likely paid for and easy on insurance.

Associated Press (1992)

It may not be pretty, but this 1992 Chevrolet Suburban is likely paid for and easy on insurance.

Soaring gasoline prices led Susan A. Sylvest to consider giving up her 2007 GMC Yukon — fondly named "Betsy" — for a smaller vehicle.

"At first blush, it seems like a really great idea — sell my beast and buy a puppy," said Sylvest, who makes a 45-mile round-trip commute daily from her Coppell, Texas, home to her Dallas office.

But after crunching the numbers, Sylvest, a partner at financial planning firm Murphy & Sylvest LLC, discovered the savings would be outweighed by several costlier factors.

So she's sticking with Betsy.

Many consumers may be contemplating a similar change as gas hits $4 a gallon and fillups cost $100. But, experts say, most consumers should resist the urge to quickly trade in their gas guzzler.

"If you have a large SUV and are wondering whether to trade it, I would say absolutely not unless something dramatic has changed in your life — like the miles you drive daily," said Jesse Toprak, vice president of industry trends and insight at TrueCar.com. "You're trying to buy something that's hot and trade something that's not — which is not a good scenario."

Do the math, say the experts, and factor in more than just gas costs. Take what you pay monthly for your current vehicle, including insurance, and compare it with the monthly costs of a new vehicle.

Say you drive a Suburban that averages 15 miles per gallon and you commute 30 miles daily to and from work. At $4 a gallon, your daily gas cost is $8.

If you traded the Suburban for a small sedan that averaged 30 mpg — probably accepting too little for the Suburban and paying too much for the economy car — your total gas savings would be $4 a day, about the cost of a Starbucks coffee.

And you'd no doubt also be facing a monthly car payment and higher insurance costs.

"If you have a 5-year-old SUV that's worth $10,000, one temptation might be to buy a really fuel-efficient car for $20,000, but you're spending an extra $10,000, plus your insurance costs might go up, plus you might be financing," said Jeff Bartlett, online deputy editor for Consumer Reports.

"A new car may provide better safety and it may be more reliable, but that $10,000 — if money is the whole motivation for doing this — can buy an awful lot of gasoline."

Here are some factors you need to consider before dumping your gas guzzler for a smaller vehicle:

Monthly payments

"Buying a new car will bring monthly car payments with it," said Greg McBride, senior financial analyst at Bankrate.com. "If you borrow at low interest rates, the gas savings can offset the interest costs pretty quickly, but from a cash-flow basis, you've got this new car payment for the next five years instead of the vehicle you owned free and clear."

Even if you plan to buy a small car with cash, you'd be out that money.

If you're still making loan payments on your vehicle or are leasing, making the move to a small car could leave you owing more on your vehicle than it's worth.

Price fluctuations

Rapid increases in fuel costs are typically followed by swift declines, said Jerry Reynolds, a former Ford dealer who hosts the Jerry Reynolds Auto Advice Show on radio.

Consumers who "panic-trade" a large vehicle such as an SUV for a small one often regret it, he said, frequently trading back into large vehicles when gas prices fall.

And they typically lose thousands on both transactions, "which will buy one heck of a lot of gas," Reynolds said.

Declining value

In three years, the average new car loses almost half of its value — 47 percent — with the most severe hit taken in the first year, Bartlett said.

"Once it leaves the dealer, it transitions from being a new car to being a used car, at which point its whole status changes," he said.

By the end of the first year, the typical new car has depreciated 30 percent, said Phil Reed, consumer advice editor at Edmunds.com, an automotive information website.

Car insurance

New vehicles generally cost more to insure than older ones because the value of the new car is higher. Also, auto lenders' requirements that new car owners carry collision coverage — which experts advise you to drop on an older vehicle — will push insurance costs higher.

Reed said consumers could see their insurance costs as much as double with the purchase of a new vehicle.

Swapping old gas guzzler for new fuel sipper may not pay off 03/20/11 [Last modified: Sunday, March 20, 2011 8:15pm]
Photo reprints | Article reprints

    

Join the discussion: Click to view comments, add yours

Loading...
  1. Study: Florida most friendly state for retired veterans

    Working Life

    Florida is the nation's best state for military retirees looking for somewhere to settle. That's according to a study released Monday by WalletHub which rated Florida the most friendly when it comes to economic factors, quality of life and health care.

    Veterans watch the Tampa Bay Buccaneers during training camp in 2016. Florida is the most friendly state for retired veterans according to a new WalletHub study. | LOREN ELLIOTT, Times
  2. Department store chain from Puerto Rico coming to University Mall

    Retail

    TAMPA — Grand's, a department store chain from Puerto Rico, will open inside the former Dillard's space at University Mall in September.

    Grand's, a department store chain from n Puerto Rico, will open inside the former Dillard's space at University Mall in Tampa in September. Coloring rendering of revamped University Mall.
[CBRE Group]
  3. Bistro 60 offers inviting buffet in surprising location on Adamo Drive

    Business

    While many families scrambled to find a brunch option that didn't have a line out the door and a long wait so mom could enjoy her special day earlier this week, a new posh eatery boldly entered the local market in time for its first Mother's Day buffet.

    The Bistro 60 at the Clarion Hotel on E Adamo Drive features three bars, including a well-lit one inside.
  4. AP Source: Ford replaces CEO in push to transform business

    Autos

    DETROIT — Ford Motor Co. is replacing CEO Mark Fields amid questions about its current performance and future strategy, according to a person familiar with the situation.

    Ford Motor Co. President and CEO Mark Fields speaks during a media preview of the 2018 Lincoln Navigator at the New York International Auto Show in New York in April 2017. Ford is replacing its CEO amid questions about its current performance and future strategy, a person familiar with the situation has said. Fields will be replaced by Jim Hackett, who joined Ford's board in 2013. [Associated Press]
  5. St. Petersburg hopeful Congress will add a NOAA facility, research vessel to downtown waterfront

    Local Government

    ST. PETERSBURG — The city's efforts to energize its downtown port could get a big boost from the federal government.

    There is vacant land next to SRI International, 450 Eighth Ave. SE, that could be the site of a new National Oceanic and Atmospheric Administration center in downtown St. Petersburg.