Tips When Looking for Car Loans

If you're stuck driving a gas-guzzling SUV, you may find yourself eyeing the fuel-efficient ToyotaTM Prius, or maybe the Mercedes-BenzDAI Smart Car.

You're not alone.

The price of oil has passed the $120 mark, and many industry analysts believe that consumers will soon be paying $4 a gallon for gas. Many Americans are considering shifting away from big gas-guzzlers to smaller cars that won't have as big an impact on their wallets.

The economic slowdown has hurt car sales, with sales of trucks and SUVs suffering much worse than sales of more efficient small cars. General MotorsGM reported in April that its first-quarter truck deliveries were down 15% in 2007 compared to a 6% drop in car deliveries.

Chrysler reported a similar trend in April, with a 22% decline in truck sales, year to date, although their car sales were up 6% over the same period.

Before you decide to swap your gas-guzzler for a small car to reduce your fuel bills, consider how the trade will affect your finances in other ways.

If you bought a new car just a few years ago, you may be stuck with an upside-down loan -- that is, you may owe more money than your car is worth in resale.

Also, consider how much you'll get for your old vehicle. Less fuel-efficient cars and trucks are commanding lower prices on the second-hand market than they did before gas prices soared.

"Year over year in April, there's been a 17.5% decline in the price for SUVs," says Tom Webb, chief economist for Manheim, an automotive auction company. "Compact cars, on the other hand, are up 2% -- this even though the overall market is down 5%."