Friday, April 11, 2008

Why We Won't Be Trading In Our Minivan

When we bought our 2006 Grand Caravan a couple of years ago, our intention was to "drive it until it dies". Or in other words, take good care of it and drive it until it no longer makes financial sense to do so. At the time, we were thinking more in terms of repair and maintenance costs than fuel cost.

We recently decided, because of the price of fuel, that maybe we would be dollars ahead if we traded the van in for something more economical. Our life situation has changed enough that, while a van is still very convenient for us, it's no longer a necessity. We decided we could easily adapt to a small wagon, such as a Ford Focus, Dodge Caliber or Pontiac Vibe. Imports are not totally out of the question, but because Shane is a union worker, it's a little tricky to figure out which "imports" are made here or owned by a domestic company. And it could be even trickier to convince other union workers that our new Toyota or Mazda is now an "acceptable" vehicle.

Shane is getting away with driving an older vehicle for work, but for our family vehicle, we insist on reliability. For that reason, we weren't going to consider anything older than a 2006. We actually went to a dealership and drove a Caliber, but decided it was just a little smaller than we wanted. We ruled out the Vibe for the same reason. However, we found a Focus wagon to look at and drive, and decided that would be our car, if we did indeed trade.

We soon found out that 2007 was the last year the wagon was produced, so that eliminated the idea of buying brand new. Not to mention we could get the options we wanted for a lot less money if we bought a car that was a year or two old. The price of the car we wanted was $14,500. That was $1000 less than we currently owe on our van.

Sounds good so far.

Next we used Kelley Blue Books and NADA online to see what kind of trade-in offer we should expect. They both indicated we should get at least $13,900 for it. However, the two dealers we check with were only willing to give us $12,800. They explained, because the van is so common, they were able to get a newer 2007 models at auction for $14,000 any time they liked. They simply couldn't (or wouldn't) give us more than $12,800 for a 2006.

So that left a difference of $2700 that we'd have to add on to our new auto loan. Sales tax, licensing and title fees on the new vehicle would be close to $1300. That's $4000 to recoup before we'd begin seeing a savings. There would also be the additional interest (on the $2700 additional) to consider, but since I don't know what the exact terms of the loan would have been, I haven't included that in my figures.

Ok. Not so good. But it still might be the right thing to do. What we needed to do was figure out how long it would take, in gas savings, to recapture that $4000.

We priced gas at $3.00/gallon (our current average), and we know I drive the van 12,000 miles a year (or maybe less). The van gets an average of MPG of 17.

12000 miles per year / 17 mpg = 705.88 gallons per year x $3.00 = $2117.64 in fuel per year

Our research indicated that a Focus wagon would average about 27 mpg. Using the same variables:

12000 miles per year / 25 mpg = 444.44 gallons per year x $3.00 = $1333.32 in fuel per year

Our annual fuel savings would be $784.32. It would take us more than 5 years to get the $4000 back in gas savings.

Of course, the numbers aren't exact to the penny, and there are other things to take into consideration, such as the fact we'd have a vehicle that was a year newer and had fewer miles, and that ecologically speaking, we would be saving fuel. But overall, it seems like a very long wait for very little savings. $784.32 saved each year just doesn't seem like much. I suspect I can save a good portion of that amount by simply changing my driving habits and working harder at consolidating the trip I make.

This is a case where I can literally say that your mileage may vary. If you drive more than 12,000 miles a year, it might make sense to trade. If you drive a vehicle that really guzzles the gas or if gas prices goes up a great deal more, it might make sense. Every family's situation is different. For us, it makes more sense to keep what we already have.


Gay said...

Perfect reasoning.

Sometimes, the grass is NOT greener!

Lisa said...

That's great how you figured out that it would take that long to recoup any savings.

But gas down here 12 miles south of you was $3.19 a gallon today. Some keep saying it will be $5 a gallon before the summer is over. Lets you and I pray to God (literally) this does not happen.

Annie Jones said...

Granny: And that's all I really wanted to know. It wasn't that I really wanted a new vehicle; I love my van.

Lisa: Yes, I think we're in for more increases. Just sayin' that in our case, trading what we have for what we need (and are willing to get), didn't add up. I'm not saying that we couldn't get an older small car like a Metro or Aspire, but we wouldn't give up the van for it, and I just don't see having a 4th vehicle in our driveway.