Does size matter?

gasoline

#1

Oh wise people,

When do I come out ahead financially by selling my gas-guzzling 2004 SUV and buying a new economy car? Oil hit $120 bbl today. Additionally my business pays gas costs to a driver. As a percentage of my income the gas costs are killing me.

I would need to buy an inexpensive car with my budget. Should I just suck it up and quit whining? Or marry an Arab sheik?

Liz


#2

You have to sit down and do the math. It’s one for all formula. Each is different. If you drive very very little then selling a Big SUV to buy a small econobox doesn’t make sense. You’ll end up loosing money. If the cars you’re driving only get about 10mpg AND you drive 50k+ miles per year…then selling them and buying new fuel efficient cars that get 40mph is worth it. But if you’re thinking of trading in a car that gets 20mph for a car that gets 35…it’s probably not.

Do the math or post back with all the information and we’ll do the math for you.


#3

I don’t really understand how your work compensates you for gas costs. Can you explain that a bit better? Also, how much driving do you do a year that you pay for yourself?


#4

You begin to come out ahead right now by trading your gas guzzler for something economical. This fall, when gas is upwards of $4/gallon, you’ll be glad you did.


#5

These are heavy times to try to sell a used gas-guzzling SUV… but matters will only get worse. And so will your driving expenses. If you do only a small to moderate amount of driving, or if you really need the huge beast, hold your ground and stand pat. Suck it up – like everyone else.

If these conditions do not apply then act promptly. Don’t bother with calculations; they will only sicken you. Just assume that if you keep your little compact happily running for eight or more years you will be 'way ahead of the game.


#6

How many miles do you drive each year? How many are business miles? How much does your boss pay you each mile? What truck is it, and is it 2WD, AWD, or 4WD? If you answer the questions, we ca do the math for you.


#7

I did the math for my civic, comparing it to the prius, since i’d be a good candidate for it(mostly short hop driving in the city) and it gets almost twice the fuel mileage as my civic. however, I’ve averaged about 6500 miles per year since I bought my civic almost 7 years ago(Halloween '01). Since my civic is paid for, I can rule that part of the equation out. If I got a prius with quite a few amenities, I’d be spending about $25k. So, assuming $4 for gas, it’s take me about 48 years to make up the difference.


#8

Another thing to consider is it is the worse possible time to be trading in a full size SUV. Some dealers are refusing to even take them in trade as their wholesale value plummets. If they allow too much in trade, and the SUV languishes on their lot, the can lose a lot of money.
On the flip side good deals on small cars are very hard to find right now.
I’d say try and ride the storm out rather than take a huge beating trying to get good mileage now. The time to make this move was about 12 months ago.

benzman


#9

I agree that a lot more info is needed about the type of SUV, miles driven per year, possible alternative car, etc, etc. If your current SUV is paid for, or nearly paid for, then it may not be cost effective to buy another car and start the interest cycle all over again.

Interest is a bigger demon than higher gas prices IMHO.


#10

Go to www.edmunds.com and find out the true cost to own (TCO) for your vehicle and for the vehicle you are considering buying. For example, the TCO for a 2004 Ford Explorer XLS for five years is $42,968. Subtract the $2235 in total financing costs (if you already own the SUV outright) and you get $40,733 for the TCO.

By comparison, the TCO for a 2008 Honda Fit is 37,085 for five years. Your mileage may vary, of course, depending on your credit rating (and thus, the interest rate you can get), how many miles you drive, how hard you are to insure, your region, and so forth.

Scrabbler


#11

As always, the only number that really matters is the total cost per mile, that includes the cost of fuel, maintenance, repairs, depreciation, insurance, etc. When you crunch the numbers, you may find that the fuel cost is not the major expense but you you need to do the math. If this is a business vehicle, you also need to talk to your accountant about tax advantages/disadvantages.


#12

Without knowing the details I would be willing to bet your overall cost is cheaper to keep the SUV, even with gas going up over $4/gal. What do you mean when you say, “my business pays gas costs to a driver?” Is this your business, and therefore gasoline costs are an expense for you, or do you mean you work for a business that pays your fuel costs for work travel? If it’s your business and fuel is an expense, then you should have the numbers to calculate how much less fuel would cost in a smaller vehicle over a typical year and what the payback time is. If you are just getting reimbursed for fuel costs, then why worry about it?


#13

Good answer; it really is a function of how much you drive! The break-even is noramlly for pepole who druive a lot for their work, such as 25,000 miles per year and up. Like you, I would need 22 years to justify a Prius, but I go rid of my rear drive V8 Caprice last year and bought a Corolla.

Back in the 70s a colleague of mine had a big Ford V8 station wagon when the gas price jumped. I advised him to keep the car, since it towed his camper, and buy a small economy car as his daily driver. He got a French Simca (no longer made), saved gas, and was still able to go camping.


#14

First off, I am with you bscar. I drive only about 5000/year at 20 mpg. If I bought a 40 mpg vehicle, it would take me 40 years to get back investment on a $20, 000 car. So many people fail to look at things in a quantitative manner.

As an added comment, sometimes I wonder if those sort of calculations apply to me . Most of the urban driving I see involves having a heavy right foot on either on the accel or brake pedal and never off of both. I doubt I would get as much benefit from an Hybrid purchase as I am an urban (mixed urban interstate and street) driver that had 90 k+ on both front and rear brakes before I had to replace them. What is the point of hauling around all of that regenerative braking equipment if your brake use is low? (In fact, I do use the accel pedal pretty hard, but not the brakes.)


#15

See:

http://www.boston.com/news/local/massachusetts/articles/2008/05/06/frustrated_owners_try_to_unload_their_guzzlers/


#16

Dear Liz
Don’t sell the farm just yet. Here’s another idea.

First, IMHO these are “peak” prices. They’re not going to stay this high. And when they drop, the resale price for your SUV will come back up. Just stick it in the garage for the summer and leave your comprehensive insurance on it. Go out and look for a used Honda or Toyota, years 95 to 97. You should be able to find something decent for about $4000 if you hunt around. Drive that baby. When gas prices drop you can resell it and get back in your SUV. Or you can store the small car and drive your behemouth till our next coital exchange with the oil companies.

See here’s the thing. Say I’m crazy, but this is all political. The world is angry at us for screwing up the mideast, and since thats where we get most of our oil, guess how they are retaliating? Now I’m not discounting the global growth of China or the pipeline problems that crop up in Nigeria, or our near-100% refining capacity. I’m just saying that I don’t think we are getting ALL the information from this administration. Chavez thinks Satan is running our country… The Arab population thinks that WE ARE SATAN… and the Russians are mad we stole the role. So you see? Its payback time. (See your doctor if you find nubby growths on your forehead, however.)

So… my guess is that at least $1.00/gallon of this problem is directly related to America’s militaristic behavior under GWB (and the 50.0000000000001% of Americans who re-elected him.) As soon as our political direction changes prices should begin to remit.

And they will change, even if McCain is elected.


#17

Wise responders,
I am blown away by the responses!!! But then again what else should I expect from the Cartalk crowd. I agree with BluAquarius that some of the gas price inflation is political (or should I say most of it?) I just saw a chart showing what other countries pay per gallon: Venezuela 12 cents. Hmmm…I could defect since my Spanish is improving.
Let me offer some more info that may clarify my situation: I own a housecleaning business with one crew (thus the term Small Business Owner). I pay the woman with the car $15/day just for her driving expenses. (I started out paying $3/day in 2002.) That amount varies with gas prices but must be paid IMHO since I have a fantastic crew. My 2004 Hyundai Santa Fe has 41K miles and is paid for. I drive about 13K miles/yr, 80% is business. Because I live in a rual areas miles accrue quickly. I drive 20 miles to town on beautiful, non-trafficked roads. Great views but mucho miles. Where I live in Northern California I have been paying $4/gallon for over a month for cheap gas. Most places sell gas for $4.11 to $4.25/gallon. My county actually exceeds Marin County (San Francisco area) on gas prices. I actually only leave my house 2-4 days a week but still rack up the miles. I HAVE cut back. There is no public transport and I live in the foothills so a bike would be a rough alternative. I am frugal due to income and like to be green because I think it is the correct thing to do. I had the gas guzzling SUV since my previous house was located 1.5 miles down a deeply-rutted dirt road. I now have a little house on a paved road and can actually own a CAR. Based on all of that info, some pertinent some not, perhaps the wise and wonderful viewing/reading audience can offer advice more specific to my sitiuation. And I actually like little cars. Thanks.
Liz


#18

Well, if you drive 13,000 miles per year at (assumed) 20 mpg you are using 650 gallons per year. If you drove a 30 mpg economy car, you would use 433 gallons per year. At $4.25, that’s a difference of $920 per year. You have to run the numbers, but I suspect buying a new car will cost significantly more than $920 per year.

I would just keep the current car and pay myself the $0.505/mile (before tax) allowance for personal car use (in your case, that’s about $5200/year). Consider buying something more efficient when you need to buy a newer car for other reason.


#19

First, IMHO these are “peak” prices. They’re not going to stay this high.

You’re right. They’re going to go Higher.


#20

I agree with Mr New Hampshire. Last night I spoke with the the local station owner about the trend and he said his prices (and therefore the public’s) went up .50/gallon in the past 60 days and an increase is anticipated with his next delivery. It is like buying an Rx from an American pharmacy. Who’s getting the seemingly disproportianate profit? America is the greatest but at what financial cost?
Liz