NEW YORK--With gas approaching $4.50 a gallon and your 6,000-pound SUV using a lot of it, you may lose sight of the big picture.
Don't.
We all make bad investments. We buy stocks with a solid rationale and expectations, and then they take a hit. The company announces a horrible quarter, say, and our long-term view goes out the window. We can't resist the urge to sell.
Now, I take today's gas prices seriously. High energy costs are probably here to stay and it's time to adjust. But if you already have that Suburban or F-250, be careful. It doesn't necessarily mean it's time to sell.
You see, vehicles aren't really like stocks. The total cost depends on how you use them, and there are lots of costs -- not just the gas. Much higher transaction costs, for instance. So it's a more complex deal. Really, it's a matter of running the numbers.
Avoid the impulse
You bought your truck for a reason. To haul a family, to tow a boat, to run your business. Or, maybe you just liked the solid, safe feel. Whatever. It's yours.
Now, what happens if you sell it and buy a more fuel-efficient vehicle? You'll save on gas. But you'll still need your checkbook:
Soft market. Used trucks and SUVs are abundant now. Dealers are offering next to nothing. According to some reports, trade-in values have dropped $5,000 to $10,000 in a few months. So take that hit, plus the depreciation on the new car? No thanks. Sales tax, at least in some states. That's perhaps $800 to $1,500 on a compact car.
Financing costs. Just like those home-foreclosure horror stories, you may be underwater on your current vehicle and have to take a check to the closing. Then there's the $365 a month to pay on the new car ($15,000 loan, 8%, 48 months).
All to avoid $4.50 a gallon? Not so fast.
The real deal
Your SUV or truck, let's say it gets 15 mpg. At 12,000 miles a year, that's 800 gallons of gas a year, or $3,600 a year. Now $3,600 is a lot, but compared those other numbers? Hmmm. Now suppose you're considering downsizing to a 25 mpg car. That car uses 480 gallons annually, or $2,160 in gas. So, all those new costs -- just to save $1,440?
The bottom line is:
Do the math. See how much you'd really save. Drive less. You can match that 25 mpg by limiting that SUV to 7,200 miles per year, or about 100 miles per week less. People are doing it; according to recent surveys, total miles driven in 2007 actually declined for the first time since 1960. So, car pool, use public transit, use your other car more, stop taking the kids to school - you get the idea. And you may be able to lower insurance costs by driving that big rig less, too.
If you find a bargain, act. If Aunt Maude is selling her five-year old Camry with 26,000 miles on it, maybe it's time to cut your losses. Again, run the numbers. Consider a scooter.
If you need a second car, consider a scooter. They get 100 mpg vs. about 20 for a car, a savings of literally thousands in gas each year, not to mention the insurance. Just remember: They generally make sense for shorter distances, such as short drives to work, a run to the grocery store, even a ride to school, as I did in my younger days.
It's just like with taxes. Don't spend (or lose) a buck to save 35 cents.
Not only will slowing down save you gas. . . anybody paid a speeding ticket lately? My last one was in 2004. . . cost me $350 to do deferred adjudication. That's 3 tanks of gas right there!
2005 Chevrolet Silverado 2500HD Crew Cab SB LS 6.0L 4x4 4.10
DW, DD (May, 2007), DS (October, 2008), and me
Agree with you 100%. I have told this to other people as well. Last year going to and from Florida cost about $1400. This year will cost maybe $2000. So it does not add up to stay home from 6 months for the sake of $600 or $100 per month. Would spend more than that in heating costs for the winter. I will keep my truck thanks.
When we moved to Ohio last year, I traded a company car for a car allowance. With that, I bought a 25mpg commuter car so I didn't have to drive my truck. Even with today's gas prices, I would have been money ahead if I didn't buy that car and put the miles on my truck.
Buying that car was good for my health though. The roads arond Cleveland have to be the worst in the nation.
DW wanted a new car. She has bad knees and the 1996 Sentra with 190k miles is just too low to the ground. So I now drive that as my commuter instead of the 1997 Dodge Dakota. The Dakota is used to tow an ATV trailer and when I need to haul stuff.
We have two trucks and two cars. I'm keeping them all. Each serves a different purpose and the insurance cost is not all that bad.
Wayne in San Jose
TV1:2002 Chevy 1500HD 4wd Crew Cab,Valley Odyssey brake ctlr,McKesh mirrors
TV2:2008 GMC 2500HD long bed 4wd Crew Cab,GMC brake ctlr,GMC mirrors
TT:Trailmanor 2720
Honda 2000
Yamaha WR250R,Polaris Sportsman 700 X2,Polaris Scrambler 500
My only regret is the fact that I can't afford to take advantage of others ignorance.
With $30,000.00 trucks selling right now for about $15,000.00~$20,000.00, I only wish I were in a position to take advantage of these "deals."
Agree with O.P. I have weighed the #s myself, and even if one doesn't change their driving habits at all, after considering depreciation on your old rig, trading to a more fuel efficient vehicle just doesn't compute.
Also there is a mentality that some fall into after trading for a smaller vehicle. Because it now costs $60.00 to fill their tank, instead of $120.00 they unconsciously convince themselves that they can drive more, and are right back to where they started as far as total gas purchased, in addition to the fact that they are paying for a more expensive newer vehicle.
Engineer9860 wrote: My only regret is the fact that I can't afford to take advantage of others ignorance.
With $30,000.00 trucks selling right now for about $15,000.00~$20,000.00, I only wish I were in a position to take advantage of these "deals."
Agree with O.P. I have weighed the #s myself, and even if one doesn't change their driving habits at all, after considering depreciation on your old rig, trading to a more fuel efficient vehicle just doesn't compute.
Also there is a mentality that some fall into after trading for a smaller vehicle. Because it now costs $60.00 to fill their tank, instead of $120.00 they unconsciously convince themselves that they can drive more, and are right back to where they started as far as total gas purchased, in addition to the fact that they are paying for a more expensive newer vehicle.
Obviously you've mistaken me for someone that gives a damn.
My 70's Show - Tom Kent Radio Network - KLTH - K•HiTS 106.7
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