Wednesday, July 9, 2008

Trading into a High Mileage Vehicle Calls for Analysis

Should we join the herd and sell our beloved Trooper to get a high mileage vehicle? As we always do, the numbers are worth looking at. Simply.

Sell 2002 Isuzu Trooper, pay tax- $7,550
Buy 2008 Toyota Prius, pay tax- -$29,800
out of pocket -$22,250
Mileage differential between the two- 13
Price per gallon of gas $5
Miles driven per year 15,000
Gallons of gas saved per year 1154
Gross savings per year $6346
Cost of money out of bank per years @ 4.5% -$1,058
Net savings per year- $5,388
Years to pay off trade 4 years 1 month

Of course this is simple, not taking depreciation (favors keeping the old one), or technological obsolescence of the Prius' technology, but it illustrates a point. Rushing to buy a car to replace one for mileage benefits is dubious. Moral of the story: Use a calculator to make financial decisions.

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