I feel like my whip is dying. My sled. My wheels. Fine, my soccer mom car. It has over 160,000 on it. I don’t really want to buy a new (to me) car, but my current car isn’t acting completely right. Yesterday when I was driving, I started trying to think of reasons why this might be a good thing. You know, because I’m in denial. My dinosaur brain ran across an idea to justify my future purchase via the gas mileage trade-off. Is this a real reason to make a car change? Or is it something that desperate, stupid people like me grasp onto in order to feel better?
Let’s use mathematics!
There are a few factors in this equation. The price of gas certainly matters. My current gas mileage is worth knowing, as is the prospective new car’s gas mileage. That’s about it. Oh, and some hypothetical average annual mileage.
Let’s start this conversation at $3.25/gallon
My current car gets about 21 mpg on the highway. That means it costs me $3.25 to go 21 miles. Or, 15.47 cents per mile. If I were to increase my gas mileage to 31 mpg, then it would cost me 10.48 cents per mile. If I drive 20,000 miles per year, then I’ve saved $998 ($83.16/month) in fuel costs, by switching to a car that gets 31 mpg.
How about gas at $3.75/gallon
Same math, different numbers. My current 21 mpg car costs me 17.86 cents per mile, at $3.75/gallon. If I switch to a shiny new that gets 31 mpg, then it will cost me 12.09 cents per gallon. Switching cars when gas is $3.75 would save me $1,154 in fuel costs, if I were to drive 20,000 per year.
How about increased mileage
Simply put, the more you drive, the more money you will save on fuel by switching cars. The less you drive, the less it matters.
So will the increase in MPG pay for the price of the new car? Um, no. However, I do drive cars for a long time. So after seven years, I would have saved somewhere in the range of $7,000 on fuel by switching. If I somehow paid $7,000 for a car that gets 31 mpg, then after seven years I’d pay break even.
Are there more factors? Probably. Things like increased maintenance costs certainly come into play.
There it is. I can save about $1,000 per year in fuel costs if I switched to a car that gets 10 mpg better than what I’m currently driving. Is it a reason to switch cars? Not really. I still have to use my money to purchase a new car. But I do admit it makes me fell a little bit better about a change that I don’t want to make.
Enough about my helpless situation
All of this being said, things get a little nutty when we look at someone else’s hypothetical situation. Let’s say you are getting 15 mpg, and you are switching to a car that gets 45 mpg. And on top of that, let’s say you are driving 25,000 miles per year. If gas were $3.75/gallon, then you would save $4,167.50 annually!!! This works out to $347/month. If you were to trade in your crappy gas mileage car for a more fuel efficient car, then you can more or less drive this newer car for free. Math!
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.