Why Green Cars Are Not Always Saving Machines

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Rushing to trade in your current car for a smaller, more fuel-efficient model will likely cost more money -- not save it -- according to an analysis by Consumer Reports.

What you'll spend on less-tangible costs like depreciation and interest will outweigh savings at the pump in most cases, even with gas prices approaching $4 a gallon, the publication, which is owned by the nonprofit Consumer Union, said.

If you've owned your current car for three years or less and haven't paid off the loan, it isn't worth downsizing, according to Consumer Reports' calculations. That's because the greatest depreciation occurs during the first three years, making the car less expensive to own after that point. Depreciation -- or the declining value of the car -- makes up about 48% of vehicle costs during the first five years of ownership, on average, compared with 21% for fuel.

"It's less expensive to tough out another year or two with a gas guzzler than trade in too early," says Rik Paul, automotive editor of the publication.

As an example, Consumer Reports compared the costs of holding onto a 2005 Ford (F) Five Hundred SEL v6 sedan with buying a 2008 Toyota (TM) Prius.

Even though the Prius can drive 23 more miles per gallon than the SEL, it still cost $3,000 more to own during the first year. (That assumes 12,000 miles of driving with an average gas price of $3.75 per gallon.)

Still, Paul warns, "if gas prices rise past $5 a gallon, large vehicles may see their depreciation accelerate and owners could face new challenges in selling their old model."

If you've got an old clunker or use a great deal of fuel, it might make sense to trade it in for a hybrid or more fuel-efficient model. However, timing is key if you've got a middle-of-the-road sedan and don't drive great distances.

You can check fuel efficiency and other metrics for your vehicle and other models at Consumer Reports' Web site.

 

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