Gas prices have been at recent lows for several years now, but it looks like the price of crude oil might finally begin increasing. In fact, a recent GasBuddy survey reports gas prices will be at their highest price in four years. Although we’re not paying record high prices yet, you’ll soon be feeling more pain at the pump as you get ready to take a summer vacation.
Gas guzzlers have made a comeback in recent years. After all, Ford Motor Co. recently announced that the only car they will produce in the near future is the Mustang sports car. Instead, they will focus on their F-Series pickups and SUVs, with hybrid and electric models coming in the next few years. Right now, it’s not profitable for domestic manufacturers to produce more fuel-efficient passenger vehicles.
When Doesn’t It Makes Sense to Trade-In Your Gas Guzzler?
You shouldn’t look exclusively at how much money you’ll save by switching from a Chevy Suburban to Toyota Prius that goes from only getting 22 miles per gallon to 53 miles per gallon. Yes, you’ll save money at the pump but there are several upfront costs that can take years to recoup.
Here are some of the costs to consider before swapping to a fuel-efficient vehicle.
New Vehicles Are Expensive
Have you checked the prices of new cars lately? If you pay cash for used cars, you might be in for a rude awakening.
The Manufacturer’s Suggested Retail Price for a 2018 Toyota Prius can be as high as $30,565. Depending on how new your current gas guzzler is, you may have to find a small fortune to buy the fuel-efficient model you want to buy.
If you buy a like new vehicle, you can save some money because you’re the second owner.
Trading in Your Current Car Isn’t As Lucrative As You Think
Also, you need to keep in mind that new vehicles depreciate rapidly. After owning any car for four years, your car is most likely only worth 50% of its original sticker price. If you bought a premium vehicle that cost close to $40,000 a few years ago, you might be able to make an even trade, but you’re still losing money.
To get top dollar for your vehicle, you need to sell your car on Craigslist. Yes, it’s more work on your part, but you’ll get more money. If you trade-in with a dealer, you’re only going to get paid “wholesale value” and then the dealer is going to sell your old vehicle for the same price you can fetch on Craigslist.
If you need a vehicle immediately, trading-in might be your only option if you only have one vehicle in the driveway to fit the family and get you to and from work.
You Pay Taxes Each Time You Buy a New Car
When you buy a new car, you also need to look beyond the purchase price. If you pay $20,000 for a new car, you’ll probably pay $2,000 in sales tax and registration fees. The money you save in the first year from better fuel mileage might only offset the taxes and fees.
Don’t forget that upgrading to a new car also means your auto insurance premiums might increase because you’re insuring a more valuable vehicle.
Your New-To-You Car Might Need Repairs
If you buy a used car that gets better gas mileage, you might save money by going used instead of new. But, you might have to perform some repairs, buy new tires, or another semi-large expense that increases the purchase price of the vehicle. This maintenance is still cheaper than a new car loan, but it’s still money you might not spend if your current vehicle is mechanically sound.
A Smaller Car Isn’t Practical
If you have a large family or need a large vehicle to haul large goods that won’t fit in a car trunk, switching to a gas guzzler isn’t practical. Thankfully, newer vehicles are more fuel efficient so you should keep your current gas guzzler and keep your eyes on a newer model when it’s time to replace your current ride.
By monitoring the price trends, you can find a bargain and save some money that way.
Why You Should Trade In Your Gas Guzzler
Here’s why you should trade in your gas guzzler to get a more fuel-efficient vehicle.
You’re Going to Drive More Miles
If you have to change employment and will now have a long commute, switching vehicles can be worth the swap. The more miles you drive each month means you’ll recoup the costs of buying a new vehicle sooner.
A Used Fuel Efficient Vehicle Is Available
As long as you can buy a mechanically sound used vehicle that’s fuel efficient, you can save some cash. This can be a good strategy if you have a similar vehicle that’s brand new. For example, you might trade a 2018 Camaro SS for a fuel sipper two-door sedan. While you’ll longer turn heads as you drive down the road, your bank account and monthly budget will be happier.
By “trading down” for a cheaper vehicle, you can also use the extra cash to get out of debt or pay for another large purchase without borrowing money.
Fuel Savings Exceeds Car Cost
You should only buy a fuel sipper when it exceeds the overall car cost. Edmunds has an excellent Car Cost vs. Fuel Savings calculator to help you quickly decide if the car you have an eye on is worth adding to your driveway.
You’re Going to Keep Your New Ride Long-Term
One of the worst financial decisions you can do is trading your vehicle every couple years. Even though you’re getting a brand new mechanically sound vehicle every three years, you constantly remain in a car payment and losing thousands of dollars in depreciation every year.
If you buy a brand new car, it might take several years for the fuel savings to exceed the car cost. If you plan on keeping your new ride for close to ten years, swapping rides can be worth the financial commitment. Just make sure you try paying off your car loan (if you have one) as soon as possible to become debt-free as soon as possible and to minimize your total car cost.
In most cases, it’s not a wise decision to trade-in your gas guzzler unless you’re ready to replace your vehicle. Of course, the case for fuel-efficient vehicles grows stronger when gas prices increase or your monthly miles driven drastically increase. Before you do any vehicle swapping, crunch the numbers and see if the potential fuel savings exceeds the car cost.