Like a lot of people, you may be watching the price at the pump soar and wondering whether it’s time to dump your current, less-than-efficient SUV, truck or car.

It’s tempting to simply haul your 15 miles-per-gallon vehicle down to the dealership and drive out in something that gets 30 mpg or more. But that may not be smart, at least from a financial point of view.

People thinking of going this route need to take several factors into account.

For starters, your gas guzzler is worth considerably less as a trade-in than it was even six months ago. By some estimates, the value of used sport utility vehicles has dropped more than 20 percent since January.

Even if your current car is paid for, you’re likely to incur new monthly payments on that fuel-efficient replacement.

Finally, it could take years to realize actual savings at the pump when other factors are taken into consideration.

Here’s an example:

Suppose you have a two-wheel-drive 2001 Ford Expedition XLT. According to

Edmunds.com, it is worth about $5,700 as a trade-in and gets about 16 mpg in city driving, although most owners of that model know real-world mileage is less than that.

At $3.70 a gallon for regular fuel, it costs about $97 to fill the Expedition’s 26-gallon tank.

To cut that bill, the Expedition owner is looking at a two-wheel-drive 2008 Ford Escape Hybrid, which can likely be bought (assuming reasonable options on board) for about $28,000, plus taxes, title fees, etc.

The Escape Hybrid promises to deliver about 32 mpg in normal driving, double what the 2001 Expedition delivers. A fill-up of the Escape’s 15-gallon tank at $3.70 a gallon would cost about $55.

But what are the real savings?

Assuming you own the Expedition free and clear and use the trade-in value as your down payment — and cover the sales taxes and other fees in cash — the Escape will come with a loan for about $22,300. At current rates, financing for 60 months means a monthly payment of about $439.

Calculate your monthly auto loan payment
Enter the requested information, and click “next” to calculate your payment.
Find the

best interest rates in your area.
Auto loan amount: $
Loan term:  



years
Interest rate:  

% per year
   

So let’s add up the costs for a year:

If you stick with the Expedition and drive 15,000 miles a year, it will cost you about $3,500 to keep it filled with gasoline, assuming prices stay at about $3.70. If they go to $4 a gallon, the bill will be about $3,750.

In the new Escape, your annual fuel bill, assuming the same mileage and $3.70 a gallon, would be about $1,730, a savings of about $1,770 a year.

But the new Escape will cost you $5,268 in payments, not counting out-of-pocket fees and the value of the Expedition used at trade-in.

Even after factoring in the one-time federal tax credit that comes with an Escape Hybrid, swapping a serviceable gas-guzzler for a more fuel-efficient new vehicle is unlikely to provide a financial benefit for five years, when the new vehicle is paid off.

Of course, there are reasons to get a more fuel-efficient vehicle the go beyond bottom-line economics. They include concern for the environment and helping to reduce our oil imports.

And if it’s simply just time for a new vehicle — the old one is worn out, or you’ve budgeted to trade vehicles at this time anyway — then by all means it would be foolish to not consider something that gets considerably better fuel mileage.

But if your prime motivator is the sticker shock at the gas pump, act with caution. While a new vehicle may help you save at the pump, it can significantly increase your overall costs.

Here are this week’s reader questions:
Trading in gas guzzler may cost you
Should I take out a loan for my fiance?
Can a lender pursue payment after a repo?
Will a “voluntary repo” trash my credit?

If you have a question for Terry, e-mail him at

Driving for Dollars. Save money on your car — sign up for Bankrate’s new weekend

Car & Money newsletter.

Promoted Stories