Trading in your gas guzzler
Eager to unload that big truck or SUV and start saving at the pump? Not so fast. The cost of dumping your inefficient vehicle may be more than you end up saving. John Dimsdale reports.
Gas prices over $4 per gallon. (Justin Sullivan/Getty Images)
More on Auto Industry, Oil
TEXT OF STORY
Tess Vigeland: You heard that mention of gas prices forcing people to choose between buying food and driving to work. Well, one solution if you've got a gas-guzzler might be to downsize to a smaller, more fuel efficient car.
But Marketplace's John Dimsdale cautions you need to look carefully at all the costs and benefits.
John Dimsdale: Mike Graff is the used car manager at Page Toyota outside Detroit. He's seen the look on the faces of customers tired of paying $150 to fill up.
Mike Graff: You know when somebody pulls in in a truck they're trying to get out of the truck. You know, they're just spending so much money.
Graf says he's happy to help customers out. The problem, though, is that the value of used trucks and SUVs is dropping fast. There's little demand for them and since car dealers are offering huge discounts on brand new ones, used ones are even cheaper.
Graff says owners who are still paying off a car loan frequently owe more than they'll get from a trade-in.
Graff: You're talking sometimes $8-9,000 difference between what the payoff is and what the car's worth.
Plus there's the rising cost of hard-to-find fuel efficient cars. Toyota dealers say there's a six-month wait for a Prius and some are tacking on $2,000 or $3,000 to the $24,000 list price.
Tempting though it may be to unload that big car for a more fuel efficient model as soon as possible, it may not be the best financial decision, says Jeff Bartlett, the deputy editor for ConsumerReports.org.
Jeff Bartlett: There are a couple somewhat hidden costs to owning a car that people looking to downsize may not see. They include depreciation, which is greatest in the first year. The other is the interest that would be paid on the loan. So while you may save $1,000 or even more in exchanging for a more fuel efficient vehicle, that vehicle may depreciate thousands of dollars.
According to Consumer Reports, depreciation makes up nearly half of an average new car's costs while fuel, even at today's prices, averages only a fifth of a new car's costs. That means the longer you keep your car, the better.
One way to avoid the cost of depreciation is to buy a used car instead. Bartlett says you'd have to drive a new Prius 100,000 miles before it became more cost effective than buying a used Toyota Tercel.
Bartlett: Buying used is always a smart economic choice as long as you're buying a model that's new enough to have good reliability and the latest safety features and still perform well. There are many used models that have very good fuel efficiency. You may give up a mile or two per gallon versus the latest model, but you'll be saving your money in other ways.
A used smaller car may save money, but not if it's too used, says Clarence Ditlow at the Center for Auto Safety.
Clarence Ditlow: We wouldn't support going to a 10-year-old small car simply because the ones being built over the last two or three years are much better vehicles.
Ditlow says don't let high gas prices drive you into an unsafe small car.
Ditlow: You need to have electronic stability control, you need to have side curtain airbags, need to have strong, well-engineered occupant compartment integrity. Those were not primary design concerns on the small cars that were built in the mid-1990s to 2000.
Consumer Reports has developed a way to compare the cost of fuel efficiency by dividing the new car price by the miles per gallon. Topping the list of price per miles per gallon is the Honda Fit Sport with a manual transmission. The Prius and Honda Civic Hybrid with their much higher prices are farther down the list.
In Washington, I'm John Dimsdale for Marketplace Money.
Comments
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From Saint Paul, MN, 03/21/2009
I've never felt to off balance with the fuel hikes we went through I just cut down driving..a lot, I have a full size Conversion Van, the sad thing is that the American Dealerships mislead you when you buy so-called Certified Units, I got mine with 62K, from now defunct Denny Hecker's lol, my Damn tranny started acting up at around 81K +_ thing slips in "D" unless I up the RPM range past 25-30 MPH then it still runs at slightly higher RPM and slips at 50-60, Denny Hecker did'nt even want to give me any assistance, I've been a Chevy Man most my life even had a 56, Well if this is how our Dealers treat used car customers they can have em, I want a Volvo! just hope next yrs. income tax will help get me there can't even drive on my meger four day vaction now, Flying is too dangerous with Airlines trying to be cheap cutting dwn on fuel supplies in flight what a joke! I bet they fill Airforce One, I'm a Vet I'll only take Hops!
From Cary, NC, 07/28/2008
I am driving a 1997 red Miata in mint condition and with 53,000 miles on it. I had been thinking of selling it but now am so glad I didn't! Even filling up this "little thing," is costly and outrageous. I can't imagine my indignation if I had a gas guzzler!!! People laughed at me for still driving this thing, but who is laughing now-
07/28/2008
I appreciate this article and the comment above. While shopping for a new car last year, we noticed that the small fuel efficient cars like the Tercel, Martix, and Corolla didn't have the same standard safety features that other models like the Camary had. Then we saw that the Prius had the safety features we were looking for, not to mention the fuel efficiency, and we were sold, and we really like the car. We also wanted to make a statement to industry by our purchase to signal them to let them know that there is a growing market and money to be made in greener technology.
From Lakeville, MN, 07/26/2008
I think you missed a couple good points in your discussion...first, is it all about only the dollars and cents--how fast a hybrid pays for itself--or, isn't there something intrinsically GOOD about burning less gas, regardless of how quickly the hybrid pays for itself...It is GOOD to lower your carbon footprint, period. Wait, there's more...have it both ways (quick monetary payoff AND hybrid efficiency): Buy a USED PRIUS. I did that a few years ago, and liked it so much I bought a second one. Hybrids depreciate just like other cars, and using websites like carfax and autotrader makes buying used cars easy and worry-free.
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