Monday, August 20, 2012

Buy a Fuel Efficient Car or Keep the Used Car?

Automobile
Automobile (Photo credit: A*A*R*O*N)

The cost of gas these days is driving consumers to avoid purchasing larger cars and choose more fuel-efficient cars, but is this the right move? Many people think only about the rising cost of gas at the pump, and forget about the long-term effects. Trade-in value, driving habits, how much is owed on a car loan; these should all be considered before deciding to purchase a new car.

First, do not to sell a car less than 3 years old. According to the American Automobile Association (AAA) this is the time when a vehicle depreciates the most, losing 40 - 50% of its original value. A car can be used for a few more years, and still retain nearly as much value. Fuel inefficient cars in particular are quickly depreciating in value (8% in the last 6 months on average). Still, trading in the gas-guzzler may not save money. The gas may still be expensive, but it’s better in the long-run to get the most value out of the vehicle while being able to drive it for twice as long. It’s also important to know that the savings may not be immediate. For most, trading in an older car for a compact will cost more right now, but balance out years later.

Here is an example: A consumer trades in a four-year old GMC Yukon, worth $15,726 for a new $21,677 Toyota Prius. The difference is $5,951. If the consumer drives 1,200 miles per month and gas costs $3.80 per gallon (national average), the monthly fuel savings will be $186.97. At this rate, it will take 32 months to pay back the additional cost of the Prius over the trade-in value of the Yukon, and start saving money from the lower fuel price.

Buying a small, fuel-efficient car is an excellent way to combat rising gas prices, but the sticker price is what dents your wallet. The average price of a compact car has increased by $2,532 since 2010. That’s nearly double the average price increase of all other cars. Right now is the worst time to sell an SUV or gas guzzling car, and also the worst time to purchase a compact car. Every situation is different and it may take some time to see the savings, but consumers must weigh all of the factors and compare all of the costs before making a change.

5 comments:

  1. Of course buy a used car. Its by far the wisest way to purchase a car these days and protect yourself with an extended service contract from a reputable company, backed by a reliable insurance company and you're all set.

    Used cars for sale in Bangalore

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  2. I suggest that buy a fuel efficient car.Because Gas prices are on the rise, averaging 40 cents more per gallon than a year ago.Since gas prices are likely to remain high in the coming months with increased demand for summer driving, it's unlikely the demand for fuel-efficient used cars will wane in the near future.

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  3. Buying a used car will be less expensive in comparison to buying a new car and a new car loses its value after few years so it is right to buy a used car if you want to save money. Buy a fuel efficient used car and it will also save our environment from pollution.
    Buy best used cars in Ireland

    ReplyDelete
  4. the second guy is pretty much right. people are harsher on rentals because it's not their personal car.
    http://www.qtccars.com/

    ReplyDelete
    Replies
    1. Yes, people are harsher on rental cars but cars are pretty tough. I would buy on. Most used cars that are 3 years old in the car lot are either trade-ins, off-lease, or rentals. It can't be avoided.

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