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10 September 2005 @ 12:29 pm
Contemplating the cost-effectiveness of a new car  
I recently tested the Efficiency (MPG) of my car, and pegged it at 24 MPG. Considering that I seem to be averaging 1250 miles per month since I bought this car, that works out to 52 gallons a month, which is starting to make me wonder, with the climbing proce of gas, when will it be cost effective for me to get a more fuel-efficient car? Variables:
  • C: Total monthly cost of car
  • P: Monthly loan/lease payments
  • E: Efficiency (in miles/gallon)
  • I: Monthly insurance costs
  • R: Monthly average repair/maintenance costs
  • G: Cost of gas
  • M: Miles driven

The total monthly cost of a car can be expressed as C = P + I + R + G(M/E). I want to find the situation where Cnew is less than Cold, meaning
Pnew + Inew + Rnew + G(M/Enew) < Pold + Iold + Rold + G(M/Eold)
Assuming I and R are constant, this simplifies to:
Pnew + G(M/Enew) < Pold + G(M/Eold)

In my case my car is paid off, so Pold is 0. I can probably trade it in for a downpayment (Blue Book value is currently 5.7K), leaving that out of the equation. Eold is 24, and M is 1250. Plugging those values in, we get:
Pnew + G(1250/Enew) < G(1250/24)
Pnew + G(1250/Enew) < G(52)
Pnew < G(52 - 1250/Enew)
In other words, even a free car isn't cost effective if it gets less than 24 miles to the gallon. Using this formula, I can find the maximum cost-effective price point for a given efficiency and gas price.


In other words, it would be cost effective for me to get a Honda Insight right now if the monthly payments would be less than $94. If the gas prices were to stabalize at $5/gallon next year, it would be wise for me to spend up to $156/month on a car that gets 60 miles/gallon. Similarly, one of the New Beetles would be cost effective right now at $62 a month or less.

Next step: find what fuel efficencies are out there, and estimate what P would be for various models of car. FuelEconomy.gov seems like a good reference.

Coffee Shop Whoreskidspoppe on September 10th, 2005 08:53 pm (UTC)
Wow! That's impressive.
Sordidatussordidatus on September 10th, 2005 09:15 pm (UTC)
If you can score a fuel effeicient car or a hybrid then you should do it. Not only would you be helping out your personal economy but the environment. And you would be screwing over the oil companies. If you have the dollars to vote then by all means vote with your dollars.

Besides your math all adds up. Good luck getting a monthly payment of $94 or less on a new car. But if you can do it then you should.
Jimwarpdragon on September 10th, 2005 09:56 pm (UTC)
If your current car is paid off, then you may not have the same level of full coverage that would be required if you had payments. Therefore, assuming I is constant may be erroneous.
Ryansynx on September 11th, 2005 09:05 am (UTC)
Assumption: The Honda Civic hybrid gets 60mpg. The EPA tests for MPG aren't suitable for hybrids since it assumes a continuously running engine and measures exhaust. Civic hybrid drivers have noted they get significantly less MPG than the rated values.

Also, why would you go with an Insight vs the more useful Civic?
Carol Magallanessilentpartner10 on September 11th, 2005 02:29 pm (UTC)
probably insignificant, but
Dont you get some sort of rebate or tax incentive for getting a hybrid/highly feul efficient car?
Mahh p'tchaaprincessgeek on September 11th, 2005 06:14 pm (UTC)
Re: probably insignificant, but
There is a tax credit (I think $2500) for a hybrid but it doesn't go into effect until Jan 2006. Right now there is a tax deduction but a credit's better. :D Love, Me.
Wendyalgol on September 11th, 2005 03:53 pm (UTC)
Hybrids are good cars but reports say that it is more like 45 MPG than 60. Also hybrids have bad acceleration pickup which may or may not be a factor for you. There's a lot of quirks to be fixed on the cars but overall they are spiffy. There is also a tax rebate on them for this year only so if you get one, get it before the year is out.
Mahh p'tchaaprincessgeek on September 11th, 2005 06:15 pm (UTC)
Actually I believe there is a tax credit starting January 2006. I have a friend that has already ordered hers to be delivered on January 2nd for that very reason.
Wendyalgol on September 11th, 2005 09:39 pm (UTC)
NPR stated this year but also stated the tax credit would be for the first couple hundred thousand and then cut off. The beginning of Jan. makes more sense on estimating the amount of cars though.