Let's take the typical American who bought a $35,000 Expedition Eddie Bauer 2 years ago before gas prices tanked. They financed the entire amount because most Americans don't have any cash. Financing $37,287.50 (including TTL) at 6% for 5 years. Payment is $718.94.

At the end of 2 years, the balance owed is around $24,200. The car now has 30,000 miles on it.

So, what is this Expedition worth? KBB trade-in in excellent condition is $15,400. The person is now $8,800 upside down. Ouch.

So, this person is sick of 14mpg and wants to trade it in on a Camry Hybrid that gets 30mpg average. Over double the gas mileage.

How many years of driving at 15,000 miles/year would it take to make up the $8,800 they are upside down on the Expedition in gas mileage savings? At $4 gallon, that would be 3.85 years. Almost 4 years.

At that point, the Expedition is probably worth $8,000 or so and the Camry has depreciated even more in that 4 years than Expedition's already depleted value because it was already low to begin with.

I guess my point is, sometimes it just doesn't make sense to unload an SUV that is worth basically nothing to buy a car with better gas mileage. So, the next time you jokers laugh at the poor sucker who is driving around in an H2, understand that he probably still owes $50k on a truck that is probably worth $30k at best. Some people can't afford to take a $20k hit to get better gas mileage. I'm not saying to feel sorry for them that they were stupid enough to buy an H2, just realize that sometimes it's less of a financial hit to keep driving it and pay the extra gas cost.

 

Math is hard. Sensationalism is easy.

 

This is fun...free accounting!!

I dont owe anything on the S but will sell it early next year for Honda's Global Small Hybrid(50mpg.) It will be my DD.

I'm not even sure I would even want to finance the difference.(10k at max)

Does it make sense?

Not like it matters, but I'll be buying a ''performance car'' not too far after.

 

Perhaps people should NOT finance the total price of the vehicle.
A good down payment goes a long way.

Or ... here's an idea ... pay cash for a slightly used vehicle.

 

You don't even have to be upside down to see the numbers often don't favor a trade with their driving habits... We only drive our family car about 8K miles a year... the difference between our 21mpg and the 33mpg we might get is maybe $600 a year... hardly enough to get us to buy in todays market.

 

I agree, I brought up a similar question to my co-workers, and they all said that none of their driving habits has changed. Gas isn't even really that expensive, unless maybe you are a delivery driver, 18-wheeler driver or you are in poverty.

 

Good points..but I highly doubt anyone is getting KBB values for their SUVs at this time.

 

And that only strenghtens the argument that people will be better off just sticking w/ what they've got.

 

math is hard.
watching celebs and popping xanax is easy.

 

I agree, it only makes sense if you're dumping a 30,000 H2 for a used Civic LX, Corolloa or something but not for a 25K+ new car that gets good MPG.

$7.00 a gallon gas wouldn't affect me too much. Both my cars take less than 10 gallons to fill up and I can drive each nearly 2 weeks on a full tank so either way my gas bill is less than $150 a month. That is just commuting (10 miles round trip a day and I go home for lunch) and driving around but doesn't include racing.