The Popular Myth of Saving Gas And Saving Money

    As we go about our daily lives, we rarely have the opportunity to step back and observe where our attitudes originate from. Cars sold in America over the past several decades have been a reflection of the massive land area which the country spans and the desires of consumers. These desires come in part from advertising, which seeks to insert the message that anytime is the right time to buy a new car. In the previous decade, the popular rage was the SUV. These gas-guzzling monsters boasted huge cargo space, factory-installed home theater systems, a tendency to be the victor in accidents, massive engines, massive emissions, and poor fuel economy. The instant that gas rose above four dollars a gallon in many parts of the country, consumers began feeling the pinch in their wallets and screaming for hyper-efficient cars. That pinch was temporary enough. But, the important thing to realize is that, if saving money is your immediate goal, then buying a new car should not be.

There is no perfect formula for deciding whether it is time to move on from your adored first car. After all, the number of variables for both the car you have and the car you want can be overwhelming: buying costs, insurance costs, maintenance costs, and operating costs are the major ones. The key is to sit down and write out just how much you anticipate your current vehicle to cost driving and how much the one you desire will cost.

Here is an example of how to plot the comparative costs of a vehicle. Let’s say you had a 1998 Ford Taurus (a large car, but an average-sized vehicle) and you wanted to buy a new Honda Civic or maybe a Toyota Prius for its fuel economy. Here is a side-by-side comparison of the vehicles, with.

Vehicle                    1998 Ford Taurus          2010 Honda Civic          2010 Toyota Prius

Trim/Engine             V6 3.0L Auto                  4cyl 1.8L Auto               4cyl 1.8L Auto

City MPG                 17                                   25                                 51

Highway MPG          23                                   36                                 48

Combined MPG       19                                   29                                 50

Ok, so we have now gone to the dealer and decided what we want to buy. Here is the math portion of the vehicle comparison. First, you already own the Taurus, so that vehicle is considered a sunk cost. The Civic DX trim starts at $15,655. The starting trim of the Toyota Prius costs $22,800. Let’s say you plan on using the vehicles for ten years. Assuming you drive about 15,000 miles a year and gas remains at about $2.50 a gallon, you will spend $19,736 in fuel in your old Taurus, $12,931 in your new Civic, or $7,500 in your new Prius. So, your total vehicle cost for purchase and fuel after ten years reaches $19,736 for the Taurus, $28,586 for the Civic, and $30,300 for the Prius. After twenty years, the Taurus has cost you $39,472, the Civic $41,517, and the Prius $37,800. Using this example, the vehicles have roughly equivalent fuel and purchase costs after 18 or 19 years.

There are obviously other considerations to cost than fuel and initial purchase price. These include insurance costs, repair costs, and other variables such as replacement of electronic drive train items in the Prius (which are extremely expensive and may wear out after ten years or more). The difficulty with these numbers is that they depend upon the driver’s habits and maintenance, but there are a few generalizations that can be made. An older vehicle costs less than a newer vehicle to insure, but will likely have higher repair costs. Also not included in the above cost is the cost of financing the new vehicles if they are not purchased for cash. Each of these costs can be best estimated by the potential owner of the vehicles.

Obviously, the Taurus-Civic-Prius example is a simplified one, but important information can be gleaned from it. The first is that if saving the most money possible is your priority, then it is most financially viable to take the car that you own to the end of its useful life (before purchasing major rebuilds and repairs) before buying a new vehicle. The logical extension of this is that the natural depreciation of vehicles makes it infinitely worth your while to buy quality used cars. Also important is that there are many other costs associated with a vehicle other than fuel, and not every American is a travelling salesman. In the end, if you put a little extra care into driving, maintaining, and buying your vehicles, you can save thousands or even tens of thousands of dollars over the vehicle’s lifetime.