Is Better Gas Mileage Worth the Price?
March 06, 2013Have you noticed your wallet getting a little bit lighter recently when you fill up at the gas tank? It seems the price of gas has gone up once again and depending on where you live, could be over $4 a gallon. It may cause some of you to consider purchasing a vehicle that gets better gas mileage but before you do, consider how many miles you may have to drive before you recoup the cost of buying that new vehicle.
This is the problem I decided to figure out recently as I dropped another $60 in the tank of my SUV that has been averaging only about 15 MPG lately. The SUV is running fine and other than routine maintenance, insurance, and a little TLC, I don’t really put that much money into it. But there are cars on the road today that are getting over 40 MPG, so at what point does it make more sense to fork out the money for a vehicle that gets better gas mileage? Well, if I didn’t have an answer for you then I probably wouldn’t be writing this blog post. Here is a simple two-step process for determining if, and when, better gas mileage is worth the price:
Step 1: Calculate the cost per mile of your current and prospective vehicle
To figure out the cost per mile of a vehicle, divide the price per gallon (PPG) of gas by the miles per gallon (MPG) of the vehicle. For example, my SUV averages about 15 MPG, and the price of gas this week in Hickory, NC is about $3.70 a gallon. If I divide $3.70 by 15 MPG, I get 24.67 cents per mile. According to the Department of Energy’s fuel economy website, a 2011 Honda Insight gets a combined 41 MPG, so if I divide $3.70 by 41 MPG, I get 9.02 cents per mile.
If you are not sure how many miles per gallon your vehicle is getting, visit https://www.fueleconomy.gov/mpg/MPG.do for a personal MPG tracker.
Step 2: Calculate how many miles you need to travel to recoup the cost of a newer vehicle
My local CarMax just happens to be selling a 2011 Honda Insight for $17,000, and my current vehicle has an estimated Kelley Blue Book trade-in value of about $5,000, so how many miles will I have to drive before I save $12,000? Start by subtracting the cost per mile of the newer vehicle from the cost per mile of the existing vehicle. This is how much I will save per mile. In my example, the difference in cost is 15.65 cents per mile. Now I just apply a little eighth-grade algebra to solve the equation. If I divide $12,000 by 15.65 cents per mile, this will tell me how many miles I’d have to drive: 76,677.
So, based on your driving habits, how long will it take to recoup the cost? If you are a road warrior traveling 30,000+ miles a year, you’ll break even in less than three years. If most of your driving is local, then the time to break even may be longer. As the price of gas goes up, the time it takes to break even goes down. I drive about 10,000 miles a year, so under the example above, it will take me over seven years before I break even. For me personally, I’d like to break even within the first five years, so based on the numbers above, I’ll probably stick with the vehicle I have while exploring other options.
This is a very simple way to evaluate the tradeoff of purchasing a vehicle with better gas mileage versus maintaining your current vehicle. It can even be used when comparing two new vehicles when one with better gas mileage is more expensive than the other. There are certainly other factors to consider, including the cost of maintenance, financing, taxes, and insurance (see http://www.edmunds.com/tco.html and http://money.cnn.com/2012/05/03/autos/cars-owner-costs.moneymag/index.htm), so be sure to consider all of these before purchasing your next vehicle.