Should I Switch To A Vehicle With Better Gas Mileage?

TUSCALOOSA, Ala. - Feb. 21, 2014 - PRLog -- Fuel economy standards are rising and you are contemplating cashing in via a more fuel efficient ride. It’s a great idea to lose the gas guzzler and slide into a hybrid especially if you drive a lot. You are turning into quite an environmentalist but before you approach Al Gore for a job, lets run some numbers and see if the fuel savings will warrant a switch.

THE VARIABLES
So the question is not “How much money can I save if I switch to a vehicle with better MPG”, the question is “should you switch“.

To properly answer this question you must consider a few variables will inevitably affect your decision.

How many miles do you drive each year?
What type of vehicle will you be selling?
What type of vehicle will you buy?
Do you finance or own your current vehicle?
Will you finance or pay cash for your next vehicle?

The average American drives 16k miles/year. The fewer miles you drive, the less profound the monetary effect of switching vehicles. The more miles you put on the odometer the heavier the windfall of savings.

It may be cost prohibitive if you are merely switching to a more fuel economic truck if you only drive 10k miles/year. Below is a graph that shows how accelerated the savings become when mileage is increased.

COST SAVINGS SCENARIOS FOR CARS, TRUCKS AND SUV’S

Ford ExplorerMazda CX-5Yearly Savings


THE “TYPE” OF VEHICLE
You might have noticed the difference in savings between gas-guzzling trucks and petrol-sipping cars. So not only does mileage affect your decision whether to switch vehicles, but also the type of vehicle you are selling and buying.

Can you imagine the piles of greenbacks you would save if you switched from a full-size truck to a Toyota Prius? I know that might not be feasible given the reasons for buying the truck in the first place but it’s fun to entertain the notion.

THE FINANCING VS. OWNING VARIABLE
There are a myriad of combinations where you might find yourself financially as you exit your vehicle and enter the new vehicle. This carries weight in your decision process. Think about the disparity between some of these positions:

Own current car > Sell car > Finance new car
Own current car > Sell car > Pay cash for new car
Own current car > Trade
Finance current car > Sell car > Finance new car
Finance current car > Sell car > Pay cash for new car
Finance> Trade-in
Leases etc.

You can begin to see the discrepancy between option two and option five. That discrepancy could be as much as $15,000! Let’s say you are in situation one above and you are selling the Ford Explorer you own and financing the remaining balance on a Mazda CX-5. You grab $9,000 for the Explorer and the purchase price is $19,900 for the CX-5. Based on a 2% interest rate for 5 years, you will finance a total of $11,040.

If you drive 15k miles/year, it will take you six years to recoup the cost of changing vehicles. Under the same 25k miles/year, it will only take 3.5 years to recoup the cost. That’s a slam dunk.

RUN YOUR NUMBERS
Open Microsoft Excel right now and input your mileage traveled, the amount you could receive from selling your car, the price of the new vehicle, and run the numbers. How much will you save each year? How long will it take you to recoup the cost of switching?

Everyone wants to save money but you must perform due diligence to ensure your situation warrants a switch.