Does it pay off to buy a small car?
(DETROIT FREE PRESS) - Small-car sales are surging as gas prices race toward $5 a gallon -- regular unleaded rose 41 cents a gallon in the past month -- but Free Press research shows that it can take time for the purchase of a new small car to really pay off.
Regular unleaded averaged $3.96 a gallon in Michigan on Monday, up $1.05 a gallon from a year ago. And small cars generally get better fuel economy, often up to or more than 40 m.p.g. on the highway, but their prices are rising.
"This summer is going to be very tough. The predictions were made that we would hit $5 a gallon sometime next year, but it seems to be happening much sooner," said Edmunds.com consumer advice editor Philip Reed.
Excluding insurance and maintenance, it costs between $4,000 to $6,000 a year to own and operate many small cars. Actual costs vary depending on a consumer's credit score and trade-in circumstances, among other factors. Though some drivers may panic and rush out to buy small models, it may be cheaper to stick with what you have, so experts advise careful analysis. But there are more choices now.
"Back in 2008, there were only two cars that got over 40 m.p.g," Reed said. "Today there are 15."
What to consider in a small car
Volkswagen unveiled a new slightly larger 2012 Beetle Monday at the New York Auto Show. Hyundai is showing a new Accent subcompact. And BMW said it will offer 700 ActiveE electric vehicles in the U.S. this fall for leases of $499 per month with a $2,250 down payment.
The moves come as small car sales jumped 32% last month from a year earlier, while total industry sales rose 12.4%. They are one way to offset the return of $4-a-gallon gas.
But consumers should move carefully in reacting to rising gas prices. Before trading in that pickup or large SUV for a compact or subcompact car, consider the following:
The trade-in value of your current vehicle may be falling, making the new purchase more expensive.
Cargo- and child-hauling requirements may make a much smaller vehicle impractical.
Check the smaller car's safety rating from the Insurance Institute for Highway Safety.
The length of time until your future gas savings offsets the new loan cost and sales tax.
Edmunds.com offers a tool to calculate the difference between the price of a smaller new vehicle and the trade-in value of the larger, older model: www.edmunds.com/calculators/gas-guzzler.html .
It aims to show drivers how much they'll save on gas each month at a variety of gas prices and how long until that savings offsets the added cost.
Also keep in mind your own tastes as you move aggressively to save. Back in 2008, when prices peaked just slightly above $4.10 a gallon, many consumers moved out of their large SUVs and pickups.
When gas prices plunged to nearly $2 again, many returned to the larger vehicles they really favored.
"We are on a roller coaster. The problem is the roller coaster is on an upward trajectory," said Jack Gillis, spokesman for the Consumer Federation of America.
"It's really important not to panic," he added. "Instead, spend some time planning your trips, take extra weight out of your vehicle if you have a couple bags of salt in the trunk."
Plan carefully
Reducing highway speeds by 5 miles per hour can make a difference. So can regular tire pressure checks.
"Think about what's likely to happen in the next 48 to 60 months of your life? How many children will you have and what ages will they be?" asked Dave Sullivan, an automotive marketing consultant with AutoPacific. "Are you willing to trade the convenience features in your 10-year-old vehicle such as leather seats and moonroof for a new small car with cloth seats and fewer features?"
Americans' long-held wariness of diesel engines is beginning to change, given the rising price of gasoline, too.
Diesels deliver about 30% better fuel economy and are much cleaner than those that chugged along U.S. roads more than 30 years ago.
LeaseTrader.com released a survey last week showing that consumer searches on its site for Mercedes-Benz, BMW, Audi and Volkswagen diesel models increased between 4% and 7% between January and early April.
The good news for those intent on reducing their gas consumption is there are more choices than ever.
Nearly every automaker has used technology to improve the efficiency of their entire product lineups.
"One of the most important factors to consider is the payback period," said Gillis of the Consumer Federation.
"Now is a great time to make fuel efficiency a priority. Just remember that the costs and expense of selling your old car is greater, especially if it has poor fuel economy."
This story posted by LeaseTrader.com, the automotive service company that lets people transfer out of their Car Leases early. If you're looking to swap a lease or transfer out of your car lease, please visit www.leasetrader.com