Tuesday, July 01, 2008

Gas prices - Should I trade for better mileage?

This is my second post on gas prices. In the first one, I asked if gas prices are really high. Before you laugh, read here and then you can comment in that post. This post intends to examine if I should trade my old truck for something more fuel efficient.

I drive a 2004 Dodge Dakota SLT. It's not a huge truck and the V8 actually gets a little bit better mileage than the V6 model. But when I drive to Columbia (about 100 miles) I only get about 18mpg. It's very hilly and I just can't do better. I've long said I wanted a Miata (see my mid-life crisis post here), but for fuel efficiency, I've been looking at the Chevy Cobalts. The four door Sport Sedan gets about 32mpg.

So, let's say I trade my truck in for a Cobalt. Makes sense, right? I'd be going from 18 mpg to 32mpg (hopefully). On a normal trip to Columbia, I'd be saving almost 5 gallons of gas every trip. At $4/gallon, that's $20 savings every single trip.

Of course, I couldn't trade even my truck for a Cobalt (and I'd miss my truck). KBB says that the Cobalt is going for $19,850, let's call it $20,000 (nice even number). KBB says it's worth about $8,000. That leaves $12,000 that I have to pay or finance.

Now by saving $20 per trip, it would only take me 600 trips to make this financially attractive. I probably average going about 3 times every two weeks, so the financial trade off is only about 7 years 8 months. MAKES GOOD SENSE, RIGHT?

Of course, one aspect I'm missing here is the fact that if I were going to get a new vehicle anyway, it would make more sense to buy something more fuel efficient. But wait a minute, fuel efficiency isn't the whole story. Clark Howard has an entry on his website (here) with the 10 cheapest cars. You may notice that there's only one hybrid on the list and it's ranked number 10.

So here's the net. The cheapest car to own is the one you already have. Don't trade just for fuel efficiency. When you do trade, look at fuel efficiency, but look at other things too.

Now a comment about comments. I LOVE comments. I'd appreciate reading yours. This topic has generated some off-the-wall sub-topics that I've promised to research. If you have a facet of gas prices you'd like me to look at, please look at my initial post and comment there. I promise, I'll look at it and comment back. Most likely, I'll blog about it later.

If you have a comment specific to this post, please post it here and I'll comment back. Thanks


David said...

My father, who drives an hour each way to work, bought an Aveo this spring. Since it's just a work car (he didn't trade in his truck), the only real add-on he got was an air conditioner. It cost him around $10,000 and he absolutely loves it.

Brian the Red said...

Keep the truck (sometimes it is raining when you have to carry big stuff) and buy a 2001-2002 Miata for $10-12k. Steady state 70MPH cruise on the interstate will return you over 30MPG. Drive it like a madman around town and you'll still get 27. Take it to the mountains and spend all day near redline in 2nd gear and mileage drops to 24ish. Of course the 2001+ Miatas require premium, so get a 1999-2000 for around $8k (uses regular fuel) reducing your break even point to around 5 years.

Life is too short to drive a boring car.

4simpsons said...

Good financial advice as usual, Randy. Some people are too quick to trade in and buy a higher mileage car, not considering that the transaction costs alone will take a long time to pay back.

I bought a Civic in 2006 and couldn't be happier. I figured I'd get 25+ MPG, but I've been getting 35 all the time. And it isn't a hybrid, which I think are overrated with respect to overall cost of ownership.

Randy said...

David, even at $10,000, if the only reason you're buying it is for gas savings, it probably doesn't make sense. If he had other reasons to buy it, then yes, by all means get a gas saver.

And if you can do like Brian says and get a gas saver and a sports car at the same time, well, hopefully my marriage is hearty enough to stand the test.

Neil, thanks for the compliment. I found it interesting that only one hybrid made Clark's list. And there are still plenty of unknowns about the batteries in the Prius. How long will they last? What happens afterwards, etc. Not reason to avoid them all together, just something to be examined.

Randy said...

Brian, I've redone the math with your numbers. From a purely financial viewpoint, it does come close.

I'm not sure my kids can stand to think of me running around in a sports car.

Chance said...

My family has an Xterra. Not great gas mileage, but we've had it for a year and a half. From a pure economic efficiency standpoint, it seems better to keep a vehicle until the repairs outweigh monthly payments. But like others have said, if you plan on getting a new vehicle anyway fuel efficiency is definitely a factor. One thing to keep in mind too is not what gas prices are today, but what they may be in 5 years.

On a related topic, I've done the calculation for certain road trips to see if it would actually cost less to rent a gas friendly car as opposed to driving my SUV. If you consider immediate costs it's cheaper not to rent, but overall it depends how you factor in the cost of putting a lot of miles on your car.

Randy said...

Good timing. I found this article today:

It allows you to put in your paramters and see if you'll come out ahead by trading. Give it a shot.