Time to Trade?


Trading cars to get better gas mileage seems like a good idea when gas prices are rising (unlike today), but people seem to get amnesia when gas prices start falling. We haven’t seen gas this cheap for a long time, and a predictable thing is happening—big gas hogs are selling again (and gas-sipping hybrids are not). The prudent thing to do is to think “long term” when making a vehicle purchase decision. Gas prices will go up again (I promise), and they are still a significant expense in every household.  So should you trade in your gas hog just to get a car that gets better mileage? I get that question a lot. If it costs you $10,000 extra to trade for a car that gets 5 miles per gallon better than your car, and gas costs $3.50 a gallon AND you drive 15,000 miles per year, you will have to drive that car 19 YEARS just to break even!! Now, if you ignore the investment and just focus on the payment (assuming you can get the same payment as your old car) and improve your mileage, then it may be worthwhile. But not if you have to extend the terms to 72 or 84 months--you may save on gas, but you will be so upside down in your loan that you will have to unlace your shoes to breathe. Just do the math and make a logical decision. And don't rely on the fuel economy labels to determine your gas savings--the gas mileage you get depends on a lot of factors like the length of your trips, city or highway mileage and your driving habits. For example, If all your trips are short (5 miles or less), you aren't going to get great mileage with any car.
In short, use a calculator before you use your pocketbook and think long term.
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