Should you dump your SUV or drive it? An interesting perspective from the Boston Globe’s Terry Jackson.
He says keep the SUV if you are “upside down”. Meaning you owe more to the vehicle than you can sell it for. While there is short term pain, perhaps if you can get the vehicle down to the same level owed you can sell it. Or if you can pay it off.
Yes the short term pain of gas prices hurts, but it’s better than letting the bank walk away with the SUV. I agree. Many times people suggest dumping a car and getting rid of the debt. I think it’s a great idea if you can get financing for the difference.
Problem is that many people who are carrying so much negative equity in a vehicle might already have terrible credit. So getting a private, unsecured loan from a bank might not happen. They could take a cash advance on a credit card, but I don’t reccomend that since it usually is about 30% interest.
So the only other choice is to suck it up and pay down the SUV until the financing is equal to what it’s worth.
But should you just dump your SUV? Or is it worth keeping?
3 responses so far ↓
1 Sean // Jul 14, 2008 at 11:59 am
Instead of looking to the future, we could flip this question by looking into the recent past.
Say someone considered dumping their SUV when gas was at or near $3 / gallon, maybe not even the first time, maybe the 2nd or 3rd time. (first time: 9/2005, next time: 4/2006, then time: 5/2007)
For simplicity, let’s say they were only a few thousands dollars upside-down, and it was more a matter of principle than a question of financing. (Also assume an SUV was not needed for working, hauling or transporting a family > 4 or 5… i.e. can go from a Tahoo to an Accord.)
In the last few years, the value of an SUV would have gone dwon more rapidly than a gas-miser. Also, add the gas savings a smaller car would have enjoyed the last few years. Plus, if the SUV time-to-sale is longer now, people who were only delaying the inevitable must sell at a worse point in time.
So “dumping” earlier would have generated a small “loss” that in reality was an economic gain.
Of course, nobody knows if/when the market for larger vehicles rebounds, but it is good to weigh the sunk costs vs. economic reality, etc.
2 Jenna // Jul 15, 2008 at 11:00 am
Keeping it. Now, I’ll grant, we don’t use it on a daily basis (three years ago the husband and I bought 2 scooters that are our main trasport in good weather) and I’m far more likely to plan my routes on days I am driving then just dash out for a gallon of milk, but our Jeep is staying.
Why? Several reasons. First off - its paid off. No car payments and the ability to manage all but the most extreme repairs is pretty seductive.
2nd - its a fit for our lives. While we live in the city we heat with out woodburner (wood supplied by family land) which means we need massive haulage ability. I sometimes work conventions and faires - schmeck carrying a must (and frankly in bad weather I’ve been know to skip the tent and sleep in the Jeep.) Some jobs we both do require a bit of offroading and a tiny city car just won’t cut it.
Lastly, living in Northern Ohio where icestorms and bad roads are a daily staple of winter life - means four wheel drive and the ability to tote around a hundred pounds+ of sand or rock salt isn’t a good idea, its a necessity.
So we’ll keep the SUV and just be a bit more careful about how and when we drive it. Now, I’ll grant you, we ARE looking for a cheap little economy car to drive when the weather is too bad for the bikes but not bad enough to need the jeep. If we can find something cheap enough to pay cash for, we’ll do it. But until then? The jeep is fine with us.
3 Livingalmostlarge // Jul 15, 2008 at 6:36 pm
I think now is the time to buy a SUV if anything honestly.
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