Credit Infocenter

Your Gas Guzzling Truck or SUV – It’s Probably Cheaper to Keep It

June 5th, 2008 · 1 Comment · Budgeting, Consumer Debt

by Kristy Welsh

(Last Updated On: June 6, 2008)

I know several people with big gaz guzzling trucks and SUVs who are agonizing over whether they should dump their vechicle for a more economical car. But maybe they should do the math first. Not only are car values dropping like a stone, putting many people under water on their car loans, but new financing isn’t cheap either.

From the Wall Street Journal:

The incremental expense of driving a large SUV for another year — as opposed to buying a Ford Focus — is almost certainly less than the financial hit a consumer will take trading in a big SUV right now.

About 36% of the people who tried to trade in a large SUV in May owed more on the truck than it was worth, according to data from the Power Information Network. That’s up from just under 33% a year ago. (It’s worse for large pickups. Recent PIN data suggests 40% of large pickups traded during May fetched less than the loan balance.)

A three-year-old large SUV today is worth about $2,000 to $3,000 less at trade-in than a three-year-old large SUV would have been in 2007, before gas prices began to soar, according to Marc Cannon of AutoNation Inc., the largest U.S. auto retailer. A three-year-old Chevy Tahoe that might have fetched $19,700 in September 2007, he says. Today, a three-year-old Tahoe might be worth $16,400 at trade-in.

“If you’ve got one two- to three-years-old and you’re working on a five-year loan, you will be upside down,” says Jack Nerad of Kelley Blue Book/KBB.Com. “That’s exacerbated by the fact the dealer doesn’t want that vehicle right now. It’s going to be an ugly scene.”

A Toyota Sequoia costs about $1,700 more to drive for a year than a Ford Focus, based on the government’s mileage calculations and average gasoline prices of $3.79 per gallon. Even adjusting the calculation to $4 a gallon, you’d likely lose less in a year by keeping the big rig.

What do you think? Is it cheaper to keep your Ford F100 or dump it for a subcompact?

Tags: ······

One Comment so far ↓

  • LadynRed

    The best approach perhaps is to keep the gas hog, park it, and buy an older, economical car, with cash, to drive for a while, until things settle down – and by all reliable predictions, it will. Many older cars actually get better gas mileage than the newer cars – I know mine does !

Leave a Comment