Stop and think it through very carefully. While on the immediate surface, selling that gas guzzler or trading it in for a small economy car, may appear to be a good idea, it just might not be after all.
You probably wonder how it could be anything but a good idea when a gallon of regular gasoline is reaching and in some places topping the $4.00 per gallon mark. However, there are other factors you should consider before making the decision to sell or trade your SUV or Truck now.
A few major factors to consider are: the length of the loan, how long you have had it, was it purchased new or used, and what terms did you get when you purchased it.
If you are lucky enough to have no note on the vehicle, you are still going to look at a drop in the value. Resale values on large vehicles is lessoning by the day as gas prices rise.
Most people finance a purchase as large as an SUV or Truck. Assuming a five-year loan on the vehicle as new, with only two and a half to three years left to pay, there is a high probability that the principal balance still has not been paid on yet.
For you, that translates to little or no equity in the vehicle. When you stop to consider the equity level, the reduced value (due to high volume of trades on similar vehicles) and the bloated cost of smaller vehicles right now, making the trade just might cost you more in the long run than the price of gas is costing you right now.
Prior to making a decision based on short term or immediate need, take all of the factors into consideration and weigh your options carefully.
Besides the aforementioned issues, consider the reasons you purchased the SUV or Truck in the first place. Will a smaller vehicle meet your family or business needs? A small car may be less painful at the pump, but will your entire family fit comfortably inside? Will the children’s or grandchildren’s car seats fit and can you get to them easily?
If there are carpool or business clients to consider, will the smaller vehicle meet those needs for the long term? If your family spends time camping, boating or pulling a horse trailer, a car simply does not have enough torque or engine power to do so.
It is extremely difficult to swallow spending one hundred plus dollars to fill the tank of your SUV or Truck a couple of times per week, especially if the purpose is simply going back and forth to work. However, many issues need to be considered before you make an emotional decision based on fuel cost rage.
There are some things you can do to assist you in your decision. Check with your finance company and learn what the actual payoff amount is on your current vehicle. Research on the computer, or with a friend who sells cars, what the true trade in value is of the vehicle you currently own. Look carefully into viable options for another vehicle that will serve all of your family or business needs. Weigh all of these factors carefully and then determine what you are willing to pay for a new or used smaller vehicle. Do you really want to take on another five to seven year loan to pay off a vehicle?
Has your credit or debt situation changed since your last purchase? Is it better or worse? If it is better, you may have a lower interest rate and possibly get a better deal than on your last vehicle purchase. However, if you had great credit then, and you have great credit now, is the current rate going to be better than what you previously had?
This decision will impact your personal or family finances for quite some time. Consider all the facts, weigh each carefully and make an educated rather than emotional choice.
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