The rising cost of gasoline has had many consumers scratching their heads recently, wondering if they should trade their larger vehicles for economy cars.
But a study conducted by the watchdog organization Consumer Reports showed trading early actually could end up hurting the consumer.
“Consumer Reports’ study shows that if you still owe on your vehicle loan, then it might not be worth downsizing to a smaller vehicle after only three years, even if the new car’s fuel economy is much greater,” the report said. “Remember, with a traditional loan, interest makes up a larger percentage of your monthly payment initially, scaling down over time. Consequently, less is paid to the principal of the loan in the first year than the last.”
The report went on to say that by trading early, consumers discover they have lower trade-in values than they would if they had waited.
It also said the amount of money a typical owner might save in fuel costs by trading in early often is much less than the amount they could have saved by keeping the vehicle another two years.
The report suggested only trading for a smaller model after five years of car ownership.
Woody Truluck, general manager at King Cadillac in Florence, said he has crunched the numbers and found that the savings from switching to a car that gets 30 mpg is not as great as people tend to think.
“If you drive 15,000 miles per year, which is normal, and your SUV gets roughly 22 mpg, to get 30 mpg you would have to drive a very small vehicle,” he said. “That’s only a savings of $900 per year.”
Truluck said the trade-off would be the room, comfort and safety of a larger vehicle to save that $900. He said he estimated gasoline at $5 per gallon in his calculations, even though it has not reached that point yet.
“For a couple having three kids, it is hard to put them in a Prius,” he said. “Big SUVs aren’t the gas guzzlers they once were. Our Yukon Hybrid gets better gas mileage than a Toyota Camry.”
Typically, the cost to trade a vehicle in is about $10,000, Truluck said. That’s why, he said, trading in doesn’t make sense when the savings only equal about $900 per year.
“I think it’s interesting when you put a pencil to it,” he said. “There are only a few cars that get 30 miles to the gallon.”
Ray Taylor, general sales manager at Florence Toyota Scion, said it’s true that few cars get 30 mpg in the city, but many on his lot get better than that on the highway. The most talked-about of those is the Toyota Prius.
“I have nine (people) on the (Prius) waiting list right now,” Taylor said.
He said only one of those people, however, is planning to trade another vehicle for the car.
For some people, it makes sense to downside to a small car, Taylor said, but for many, the SUV remains a better choice.
“In some cases, yes (it’s better to downsize), but in some cases no,” he said. “My wife still has (an SUV). We have not (downsized) yet and we probably won’t. It’s the size and type of vehicle she is comfortable with, so we’ll just weather the storm.”
Gasoline mileage myths
Morning fill-ups: A common tip is to buy gasoline in the morning, when the air is cool, rather than in the heat of the day. The theory is that the cooler gasoline will be denser, so you will get more for your money. But the temperature of the gasoline coming out of the fuel nozzle changes little, if at all, during any 24-hour stretch. Any extra gasoline you get will be negligible.
Air conditioning versus opening windows: Consumer Reports tests show that neither opening the windows nor using the air conditioner makes enough of a difference to worry about.
A dirty air filter: Consumer Reports tests show that driving with a dirty air filter no longer has any impact on fuel economy, as it did with older engines. That’s because modern engines use computers to precisely control the air/fuel ratio, depending on the amount of air coming in through the filter.
SOURCE: Consumer Reports
On the Web
Consumer Reports: www.consumerreports.org
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