There is no doubt about the fact that the smaller car that you purchase will give you a better average mileage than the older SUV. Typically, an SUV would give you a mileage of around 15 miles per gallon and a new smaller vehicle is likely to give you a mileage of around 26 miles per gallon. If you assume that you run 15000 miles in a year, you would have spent $3700 (assuming $3.7 per gallon) if you had continued to use the SUV. With the smaller new vehicle you are likely to spend $2135. This is a saving of $1565 per year.

But remember that you have added another $180 to your monthly payout by trading the SUV. This works out to a value of $2160 per year and therefore is higher than what you save by way of fuel efficiency. In effect you are loosing out about $595 ($2160 - $1565) per year (or approximately $49.5 per month) and opting for a smaller car that is less spacious and has lesser power.
Additionally, you will have a new car loan that would imply paying out for the next five years (instead of the four years that you would have had to if you kept your older, larger and more powerful SUV) and would be taking a loss twice.

The only way in which you can make money by trading in your old SUV is to ensure that you are not loosing out on the trade that you are making. If that is possible given the current marker scenario, the cost saving that you accrue due to fuel efficiency shall actually reflect true saving.

The above scenario is a hypothetical one and if you are planning to trade in your SUV for a smaller car make sure that you run your numbers through such a formula before you take a decision. To understand how to make an educated decision about mortgage, credit cards, credit reports and auto loans, log on to slicemypayments.com.

Eddie Momeni is the president and CEO of Slicemypayments.com, a company that provides helpful support to consumers who are looking for someone who can help them in obtaining approved credit cards, auto loans, credit report resolution and mortgages at the click of a button. Eddie has been in the finance field for more than 23 years and continues to bring value to his customers by providing relevant and timely information and updates.

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