Trade in a gas-guzzler? Do the math first

Soaring gasoline prices led Susan A. Sylvest to consider giving up her 2007 GMC Yukon - fondly named Betsy - for a smaller vehicle.

"At first blush, it seems like a really great idea - sell my beast and buy a puppy," said Sylvest, who makes a 45-mile round-trip commute daily in the Dallas area.

But after crunching the numbers, Sylvest, a partner at financial-planning firm Murphy & Sylvest L.L.C., discovered the savings she would derive from driving a more fuel-efficient vehicle would be outweighed by several costlier factors. So she is sticking with Betsy.

Many consumers may be contemplating a similar change as gasoline prices march upward in the face of turmoil in the Middle East. But even if gasoline hits $4 a gallon and fill-ups cost $100, most consumers should resist the urge to quickly trade in a gas-guzzler for a small vehicle, several experts said.

"If you have a large SUV and are wondering whether to trade it, I would say absolutely not unless something dramatic has changed in your life - like the miles you drive daily," said Jesse Toprak, vice president of industry trends and insight at TrueCar.com. "You're trying to buy something that's hot and trade something that's not - which is not a good scenario."

Do the math, say the experts, and factor in more than just gasoline costs. Take what you pay monthly for your current vehicle, including insurance, and compare it with the monthly costs of a new vehicle.

Say you drive a Suburban that averages 15 miles per gallon and you commute a total of 30 miles daily to and from work. At $4 a gallon, your daily gasoline cost is $8.

If you traded the Suburban for a small sedan that averaged 30 m.p.g. - probably accepting too little for the Suburban and paying too much for the economy car - your total gasoline savings would be $4 a day, about the cost of a Starbucks coffee.

And you would no doubt also be facing a monthly car payment and higher insurance costs.

"If you have a five-year-old SUV that's worth $10,000, one temptation might be to buy a really fuel-efficient car for $20,000, but you're spending an extra $10,000, plus your insurance costs might go up, plus you might be financing," said Jeff Bartlett, online deputy editor for Consumer Reports.

"A new car may provide better safety and it may be more reliable, but that $10,000 - if money is the whole motivation for doing this - can buy an awful lot of gasoline."

Here are some factors you need to consider before dumping your gas-guzzler for a smaller vehicle:

Monthly payments

"Buying a new car will bring monthly car payments with it," said Greg McBride, senior financial analyst at Bankrate.com. "If you borrow at low interest rates, the gas savings can offset the interest costs pretty quickly, but from a cash-flow basis, you've got this new car payment for the next five years instead of the vehicle you owned free and clear."

Even if you plan to buy a small car with cash, you'd be out that money.

If you are still making loan payments on your current vehicle or are leasing, making the move to a small car could leave you owing more on your vehicle than it is worth.

Additionally, while most people view hybrids as the ultimate in auto fuel efficiency, a recent analysis by CarGurus concludes that gasoline prices would have to hit $7 a gallon to offset hybrids' high price.

Price fluctuations

 Rapid increases in fuel costs are typically followed by swift declines, said Jerry Reynolds, a former Ford dealer who is host to a radio show on auto advice.

Consumers who "panic-trade" a large vehicle such as an SUV for a small one often regret it, he said, frequently trading back into large vehicles when gasoline prices fall.

And they typically lose thousands on both transactions, "which will buy one heck of a lot of gas," Reynolds said.

Declining value

 By the end of the first year, the typical new car has depreciated 30 percent, said Phil Reed, consumer advice editor at Edmunds.com, an automotive-information website.

"It's about 20 percent after you drive it off the lot, then 30 percent by the end of the year," he said.

Insurance

 New vehicles generally cost more to insure than older ones because the value of the new car is higher. Also, auto lenders' requirements that new car owners carry collision coverage - which experts advise you to drop on an older vehicle - will push insurance costs higher.

Reed said consumers could see their insurance costs as much as double with the purchase of a new vehicle.

But insurance industry officials said your costs will also depend on your driving record, where you live, the type of vehicle, and other factors. So before you buy a new car, ask your insurance representative how much it would cost to insure it.

So is it worth it, particularly for a situation that most believe is short-term? Probably not, say most experts.

"A knee-jerk reaction in trading in a car could lead to deep regret if gas prices go down in a year because you will have spent so much money," said Bartlett of Consumer Reports. "And really, the whole goal was to save the money."