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Car Economics

I always get a chuckle when I see stories like this one.

Fuel Sippers Gaining on Heavyweights

Ever since gas prices started spiking last month, customers have been flocking to one side of Lustine Toyota/Dodge in Woodbridge and ignoring the other.

"The Dodge truck business is way down," General Manager Jim Giddings said, because of what he called "this gas thing." He's on track to sell just 36 Dodge trucks this month, compared with 68 during the same month last year.

Toyota sales, on the other hand, are up 38 percent so far in May. One of the big drivers is the Prius, the gas-electric hybrid that has become a phenomenon in the past year. Giddings said he has a waiting list of more than 50 customers.

Every time we get a gas price spike, we see these stories. It makes me wonder about the state of math education in this country. Switching from the Dodge brand to the Toyota brand, (in a near analogous vehicle) will likely cost you several thousand more dollars as the Toyota is a more premium product. Consumers routinely spend $3000 more for a car because it gets better mileage. So let's see how much they "save" by doing it...

Your average 60 month loan costs about $20 per thousand. That is, for every $1000 you borrow, your note is 20 bucks a month. So if someone pays 3000 bucks more for a car, they are spending about 60 bucks more per month on the note. (not to mention insurance on a more expensive car) But how much gas will they "save?"

false-econ.jpg

So they "save" 40 bucks a month while they spend 60 bucks more on the note. They'll lose 20 bucks a month given my above assumptions.

Granted 1500 miles a month is the national average and I'm assuming 8 MPG increase and static fuel costs... (Many other factors could make the deal more appealing.) But you get the point...

When you are spending tens of thousands of dollars on a vehicle, the mileage is a very, very small part of the overall cost. In the quest for the holy grail of higher mileage, many people will waste thousands of dollars, or worse, get a car they really don't like.

This is no more prevalent than in the hybrid market. (gas and electric) People are paying thousands of dollars more for hybrids hoping they save money on fuel. This is usually a losing bet even if the hybrids get the mileage they were supposed to which they often don't.

So if you are looking at new cars, go ahead and do the obligatory check of the EPA sticker but keep 2 things in mind.

The EPA estimates are near worthless (especially on hybrids)and spending more money chasing better mileage is often false economy anyway.

There are many functions that make up the cost of operating a vehicle. If you want to figure out your true cost, get a calculator and do it right. Simply looking at the mileage estimates and buying the one with the higher number might make you feel good, but economically, it is just pain silly.


Comments (15)

the prius is priced at 20 g... (Below threshold)
ben b:

the prius is priced at 20 g's, no doubt expensive, but check the price of a dodge ram: more expensive AND much worse gas mileage.

The one BIG advantage of th... (Below threshold)

The one BIG advantage of the hybrid car is that in many jurisdictions they are eligible to be driven in the HOV lanes with only one passenger.

When you do the math on saving an hour a day you come out a big winner in that case. Even if you value that hour at a lowly $5, the value of your saved time would be $200+ a month.

Ben- It is doubtful many pe... (Below threshold)
Paul:

Ben- It is doubtful many people go into a dealership wanting a Dodge Ram with the V12 engine but come out with a Prius. Life just does not work that way. More likely if someone wants the Ram, they'll end up on a Tacoma or something.

And Kev- I guess if you live in the NE "many jurisdictions" applies. However 99.9% of the country doesn't even have HOV lanes much less special rules for hybrids in them.

P

My father always said gas w... (Below threshold)
Jay Tea:

My father always said gas was the cheapest money you'll ever put into your car.

He also died back when it was around $1.19 9/10 a gallon, though.

J.

I love my Explorer! No Priu... (Below threshold)
Boyd:

I love my Explorer! No Prius could take its place. Nor would a hybrid Escape. When Ford comes out with a full-sized hybrid SUV, I'll have a look at it, but as Paul suggested, I'll have my calculator handy.

I don't mean to intentional... (Below threshold)
BoDiddly:

I don't mean to intentionally re-direct this discussion, but has anyone considered that many things the EPA has done in the name of "clean air" has had the effect of reducing fuel efficiency? Consider that the more restricted intake/exhaust system required by EPA regulations effectually restricts engine output, requiring more fuel input for the same power output, therefore burning more gas. One wonders if net pollution has really been changed significantly.

Now, spread over the top of this cake is the little-reported fact that the EPA is now set to force motorcycles to adopt generally the same emissions control devices as cars (including fuel injection, air injection, water cooling, and catalytic converters) within the next few years. Considering that most motorcycles get far better gas mileage than even the EPA's hybrid MPG ratings, one tends to wonder if the folks steering the EPA are more concerned with protecting the environment or protecting their own jobs.

I don't mean to intentio... (Below threshold)
Paul:

I don't mean to intentionally re-direct this discussion,

If it could not be re-directed then it wouldn't be a "discussion" now would it. ;-)

But yes, I wonder about all of the above on a continual basis. The EPA may have a noble cause but some of the things they do are just downright stupid. You make some good points.

Which is why I drive a Hyun... (Below threshold)

Which is why I drive a Hyundai. Beautiful wife now has complete possession of the mini van and I drive a Hyundai to and from work and we use it as the family car for most trips.

I never "got" the whole SUV/BIG TRUCK thing. Nothing makes me giggle more than seeing one little man or woamn driving a HUGE FREAKING TRUCK.

Me? I drive a Hyundai and get to laugh more when I see the more expensive "economy" cars. It's my second new Hyundai and I've never had problems with them, and I got this one fully loaded for the same price as I could have got a "starter" Toyota, Honda, or Subaru.

I know, you all figured I'd be a guy to buy American. And I would, if I didn't get more stuff in my Hyundai than I could get in a comparible American car. And most of my Chevy Van was manfactured elsewhere while Hyundai is planning to build two plants in the U.S..

Paul:Did you take ... (Below threshold)

Paul:

Did you take into account:

* The one-time tax break given to individuals who purchase a hybrid vehicle?

* The likely decrease in hybrids' average price as manufacturers bring more of these vehicles into the market to meet demand?

--|PW|--

Don't get me wrong- I'm not... (Below threshold)
Paul:

Don't get me wrong- I'm not dissing hybrids.

(In fact, I'm considering converting an old Mazda 626 I have to be an electric.)

I'm just saying that using the MPG estimations on the window sticker as a major reason you buy a car us fraught with peril. (ahem- or IMO downright stupid.)

Paul

DC's HOV exception for sing... (Below threshold)

DC's HOV exception for single occupancy hybrid vehicles expires at the end of 2005, so it wouldn't be much of a rationale for buying one here.

Paul:Thought I'd a... (Below threshold)

Paul:

Thought I'd add one more thing:
To be entirely accurate, a cost/benefits model on a hybrid electric should also take into account the savings created by decreased air pollution due to lessened exhaust.

--|PW|--

Hmmm...lessee...19... (Below threshold)
El Jefe:

Hmmm...lessee...

1995 Geo Metro. Cost $1995

1500 miles/49mpg = 30.6 gallons @ $1.85 = $56.63

Hot Damn! Thing nearly pays for itself!

Only drawback is the street-cred thing.

But then Pennywit you need ... (Below threshold)
Paul.:

But then Pennywit you need to factor in the increase pollution when you pitch all those lead acid batteries in the land fill.

Life ain't never that easy.

When doing the cost benefit... (Below threshold)

When doing the cost benefit don't forget care and maintenance, the Toyota and Honda both had numerous problems but they may have been corrected.

I was in Kansas City for the launch of the Ford Escape hybrid and out of the first four off the assembly line only 1 started. That's not the only problem with the vehicle; it's one I would definitely avoid for a couple of years.




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