At times of high gas prices, I get the question all the time: Should you dump your old car that gets bad fuel economy and get a new one with great economy fuel?
The short answer is that to do so is usually a false economy. Let me explain.
Every year, AAA releases its report on the cost to operate a car. The average car costs 61 cents per mile to put on the road. That’s what it would cost as a rough equivalent if you had a taxi meter running in your car everytime you drove it.
Consider this: I have hankering to get a bagel with a drink ($3 and change) most morning, but roundtrip it’s about a 9-mile drive. That puts the effective cost of travel alone at $4.55, which makes it a nearly $8 transaction overall!
We don’t often think about what it costs to put a car on the road in those terms. But back to the question I opened up with. Of that 61 cents, gas accounts for 14 cents and 47 cents are earmarked for other expenses per mile, including depreciation and insurance.
Depreciation is the loss in value a car has over time. With an older car, the depreciation cycle is basically over past around 6 years. So one of the largest expenses isn’t there anymore. Sure, the cost of repair goes up on an older vehicle, but not nearly enough to counteract that.
The one circumstance when it makes sense to dump your old gas guzzler is if you are an ultra-high mileage commuter. The average American drives 29 miles a day. So if you drive 50 miles a day, then buying a new fuel-efficient ride is smart.
Here’s how it really makes sense: When you have a 6-year-old gas guzzler that you get rid of and by a 4, 5 or 6-year-old fuel efficient vehicle. You’re far down the depreciation curve and the math works where you save money almost from the first mile.
But remember, as aggravated as we get at the gas pump, it’s only a small part of the cost of your car traveling every mile!