Now that gasoline is over $4 per gallon and headed towards the $5 mark any weekend now, people are flocking to car dealers, eBay and other auto sales sites, trying to unload cars and trucks that get poor gas mileage. I've read and heard about some with large payments remaining who want to just park them at the dealers or bank, take the hit on the credit and walk away.
Whoa there, partner! Stop and do some math first before you get yourself in deep kimche over this gasoline mess. Even deeper than you might already be. Look at several points and see where you are now and just where you would be better off by either continuing to drive, selling, turning in or even simply parking the higher fuel consuming vehicle.
If you own the vehicle outright, and have no payments to make, and it's a relatively new and good running vehicle, your loss in selling it will likely offset the purchase of many gallons of higher priced fuel. Check the Kelly Blue Book on line at kbb.com or Edmunds.com or the NADA pricing, and see what you would get for the vehicle realistically in fair or good condition, since that's what dealers usually give you, less $500 reconditioning costs on a trade-in; less if you want them to simply take it off your hands. In some cases, they won't be interested in buying it at all unless it's a very desirable model. You might do better with a private party sale, but again, it's a hard sell to find many people willing to give you anywhere near top dollar for a fuel hungry vehicle right now.
If your loss would be $4000, you might consider that at an up cost of $2.00 per gallon over what it was last year, you could buy two thousand gallons of fuel to offset that loss. You can't figure the full $4-5 cost per gallon, since you'd buy fuel anyway, only the excess cost of what fuel is today versus what you lose on the vehicle when you trade it in or sell it outright. Sure seems to make sense to keep the vehicle, minimize usage when possible and hope that over the next several years the prices will stabilize and come down. Even if they don't, in two years you wouldn't be any worse off monetarily on the vehicle than you are now, with the exception of depreciation. And, considering that type and fuel economy seem to be more factored in than age right now, that might not even be an issue.
Selling the vehicle for a more fuel efficient vehicle makes sense only if the loss is overshadowed by the fuel savings, and you can recoup your loss within the first 24 months of operation, regardless of where fuel costs rise to. This postulates you drive a lot, as it makes no sense to trade in a fuel hog for a fuel sipper, if you only drive a few miles a day to work. You'll never recoup your costs if you do.
Can you park the vehicle and not use it except on certain occasions? If so, that could be the way to go. Talk to your insurance agent about whether you can reduce costs of coverage by minimizing mileage and only use that 4x4 SUV or truck to haul that trailer once a month or two for play weekends instead of every day to work. If you can get along without it for the long haul, some states allow you to file a notice of planned non-operation, where you can keep plates and park it in your garage or driveway, and then notify the DMV and pay the appropriate fees when you again want to put it back on the road.
Finally, before you decide to dump your 4 wheel treasure on the finance company, or dealer or bank and just walk away, even though you give it to them, that's still known as a constructive repossession, and it will be on your credit record as such. As bad as that is in itself, in lowering your credit score and other nasty credit hits, there's more to consider. If the bank or finance company has to sell you vehicle, it will have the same market conditions to deal with as you did. They will have reconditioning costs, and selling that gas guzzler won't be easy for them either, so your vehicle will likely end up at an auto auction, and may only bring as little as half of what you owe on it.
You know where I'm going here? YOU then owe the remainder of the money to the bank or finance company and they will take you to collections to get it. YOU now have no vehicle and still owe half what you originally owed, so you're in worse shape than you started out. Plus you have no transportation, still may need another car, and your credit is in the toilet to boot! Talk about shooting yourself in the family jewels!!
Think long and hard before making a decision as to what to do in these times of high fuel prices. The prices are likely only going to go up and we can hope for some stability and relief in the months and year ahead.
By the way...I do have a 2007 SUV, so I empathize and sympathize!