Should You Sell Your Gas Guzzler to Save Cash?

06.11.08 | Consumerism | 0 Comments | by Fred Siegmund

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

I just heard a story on the TV about a guy who wants to sell his gas guzzler and get a high mileage car to cut his gas bill. Trouble is he owes $8,500 on his car loan and all he can get for his guzzler is $3,000.

He loses $5,500.

As all good savers know, he should only sell if he can save a minimum of $5,500 plus interest. According to the United States Department of Transportation, the average passenger car travels 12,400 miles a year and gets 22.4 miles per gallon for gas. That works out to 46 gallons of gas a month with a monthly fuel bill of $184 if we use $4.00 a gallon for the gas.

I regret to say that is probably low, but we will go with it.

Double his gas mileage and he saves $92 a month. Figure a savings of $92 a month for 5 years at 4 percent interest, and the savings is $6,119.84. Sad to say, but the $5,500 he loses would also accumulate interest. If we use the same 4 percent interest over the same 5 years, the total he loses is $6,715.48.

He loses $6,715.48 to save $6,119.84; a net loss.

This particular comparison does not account for the price of the new car, only the loss on the trade. If we assume he is going to own a car, either an old one or a new one, the premature trade represents the loss from not using the remaining life of the old car, which I hypothetically set at 5 years.

Different interest rates or time remaining for the life of the car will affect the result.

However, the most important comparison is the price of gas. Using $5.00 a gallon with the same mileage and interest rate, savings will hit $115 a month with a total of $7,649.80. At $5 a gallon, he can save doubling his mileage.  He should trade the car. For those with mileage over the average of 12,400, saving gas money also will be more likely to pay.

I did the calculations on MS Excel using the FV, future value, function. It has a help file. Try it yourself for your exact situation.

Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at

Technorati Tags: , , , , ,

Tags: , , , , ,

Subscribe to Email Updates

Enter your email address:

Read More Related Posts

Example: %customfield2%

have your say

Add your comment below, or trackback from your own site. Subscribe to these comments.

Be nice. Keep it clean. Stay on topic. No spam.

You can use these tags:
<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>



« How Much Money Do I Need to Retire? ING Your Number
» Money Saving Links: 6/13/2008