How High Do Gas Prices Have to go to Justify Getting a New Car?

Site Sponsors

Topics

Subscribe to AFM

Site Sponsors

Some of my Friends are Authors

AFM in the Media

Blog Stats

Search

« What’s Your Opinion of Gen Y? | Main | Jonathan Clements on Mortgages »

How High Do Gas Prices Have to go to Justify Getting a New Car?

By JLP | May 22, 2007

As gas prices rise, I’m sure there are lots of people thinking about trading in their gas-guzzling vehicle for a more fuel-efficient car. However, is that a good idea? Aside from environmental issues, if your current vehicle is paid off, does it make sense to purchase a new car just to save money on gas? If it doesn’t make sense at current gas prices, at what point will it make sense?

Hmmm… it’s quite the conundrum isn’t it?

I’m going to attempt to answer this question by conducting a little analysis. First we need some assumptions:

Let’s say you have a paid-off truck that gets 17 miles per gallon. You drive 15,000 miles per year. At $3.19 per gallon, you’re tired of spending $235 per month on gas (73.5 gallons per month × $3.19 = $234.56). Your friend tells you about how his Honda Civic is getting 38 miles per gallon and that although he drives the same distance as you do, he only spends $105 per month gas (32.9 gallons per month × $3.19 = $104.93) or $130 less per month than you spend. You start thinking to yourself that maybe it’s time to dump the truck and get yourself a Civic.

Let’s say your truck is worth $10,000 trade-in and a brand new Civic LX is around $20,000 including tags, title, and license, leaving $10,000 that will need to be financed. Payments on a 36 month loan at 6.5%, will run $306.49 per month. So, with gas at $3.19 per gallon, the net monthly cost of the Civic is $176.87 ($306.49 monthly payment - $129.62 gas savings = $176.87). The higher gas prices go, the more advantageous it is to buy the Civic. Of course, if gas prices fall, the opposite is true and the less attractive the Civic becomes.

Now, how high would gas prices have to go in order to fund the entire Honda Civic payment with the difference in fuel cost? Since we know that the Honda payment is going to be $306.49 per month and we know how many gallons of gas we consume each month, we can set up an equation to solve for the gas price:

(# Gallons T × PPG) - (# Gallons C × PPG) = $306.49

Where:

T = Truck
C = Civic
PPG = Price Per Gallon

(73.5 × PPG) - (32.9 × PPG) = $306.49

Setting it up algebraically, the equation becomes:

73.5PPG - 32.9PPG = $306.49

40.6PPG = $306.49

PPG = $306.49 ÷ 40.6

PPG = $7.55

At $7.55 per gallon, you would be spending $554.60 per month on gas for the truck, while gas for the Civic would cost $248.11 per month for a difference of $306.49, which is equal to the Honda payment (all else being equal).

Like I said earlier, this does not take into account the environmental side of the equation which is hard to quantify. It also compares a Honda Civic with a full-size truck. There’s lots of people who drive trucks because they have to and a Civic just wouldn’t work for them. Still, there will always be people who will make the switch to a more fuel efficient car if gas prices get high enough.

Topics: Budgeting, Cars, Financial Math Basics |

Comments to “How High Do Gas Prices Have to go to Justify Getting a New Car?”

Tyler Says:
May 22nd, 2007 at 1:05 pm

Why does everything have to revolve around math?? What about saving money in the long term? Environmental impacts, etc. Don’t be a calculator and think logically.

JLP Says:
May 22nd, 2007 at 1:08 pm

Tyler,

Welcome to the real world. The math is important.

EA Says:
May 22nd, 2007 at 1:11 pm

You’re also leaving out the longevity of the two vehicles. If the truck is paid off and worth only 10k, it’s probably 3-6 years old. How much longer will it be reliable vs a new Civic? I’d guess the Civic (being 3-6 years newer) would last 3-6 years longer than the truck.

Also there are environmental costs to buying a new vehicle (all that metal and plastic has to come from somewhere and get heated/shaped/etc) though that’s probably mitigated if you sell your truck vs junking it.

Henry Phish Says:
May 22nd, 2007 at 1:27 pm

The only part of the transaction that could be taken into account is the difference between the value of the old car and the trade in value. The new car is worth what it costs and should not be part of the gas calculation. The only cost is trading in the old car ahead of schedule.

Plus why are you assuming a car loan in the first place? Your whole calculation goes out the window if they buy the new car with cash?

Kimberly Says:
May 22nd, 2007 at 1:28 pm

I’d sell the $10,000 truck and buy a used 5 or 6 year old Civic for the cash. Or probably a Corolla, because it would be a little newer at that price.

Bill Says:
May 22nd, 2007 at 1:33 pm

How about just buying a used Honda Civic for commuting and keeping your truck for when you need a truck? That way your truck keeps its value and the big miles are accomplished in a more suitable vehicle. Your insurance costs are lowered and you won’t have any monthly payments.

I don’t know the ecological math on it, but keeping a used Honda on the road versus building a new one with fancy batteries just seems to make more sense. I commute 70 miles round trip per day and my $2000 honda has been doing the trip for three years and has plenty more in er. It gets 40 miles per gallon and I have saved a lot of money… enough that I could afford to buy a nice Mercedes for days I want to be a bit more dressy.

As for the trucking power of the Honda civic… I have hauled a lot more than most SUV’s and pickups: straw, feed, dogs, chickens, even a few calfs!

JLP Says:
May 22nd, 2007 at 1:43 pm

Henry,

Welcome back! You haven’t commented in quite a while.

The WHOLE purpose of this post was to do a “what if” to see at what point the gas price difference between the two vehicles would make a car payment.

Clever Dude Says:
May 22nd, 2007 at 3:08 pm

As much as I still fear buying used, I agree with Bill that keeping the truck and buying a used “git-around” car is probably more practical.

However, in my case, I have a 2006 Honda Ridgeline worth about $24,500. I owe about $22,000 on the truck, but realize I rarely use the truck as a truck. I mostly haul people, or just myself, and I can accomplish that with a mid-size car instead and just rent a truck when I need one.

I’m definitely considering selling the truck and just not buying anything else since we have 2 cars right now.

Shane Says:
May 22nd, 2007 at 4:15 pm

Don’t you also have to factor in the depreciation of the Civic. If the car is depreciating faster than you’re paying it off, then you’re only building negative equity.

Of course that only dirties the math.

Customers Revenge Says:
May 22nd, 2007 at 4:36 pm

For purchases like this you would have to model the entire cash flow out for a reasonable horizon. I would be very surprised if gas mileage funds a decision with a 3 yr horizon. Extend it out to the life of the Civic, so maybe 7 or 10 years from now. By then you may have to get rid of your truck anyway due to it’s age at which point the problem becomes: Do you sell the truck before it dies or just when it dies?

In companies with fleets there is a specific age of vehicle when it becomes more economical to replace. Similarly, when new technology comes out it is often worth it to replace based on fuel economy or other costs of owning the vehicle.

Foobarista Says:
May 22nd, 2007 at 5:00 pm

Another factor (among the zillions that could affect the math) is technological change. Maybe a hybrid pickup comes out in two years that gets 28MPG and is otherwise as capable as your current truck?

Car tech is moving very fast now and is definitely beginning to move along a “Moore’s Law” curve, so the longer you wait, the better the car that will be available, both new and used.

Chris Says:
May 22nd, 2007 at 6:11 pm

Or you could buy a 20 year old hatchback (as a commuter) that gets better gas mileage than just about any car on the road today. And parts would be cheap.

Technology may be improving, but costs are also going up. You probably won’t save any money by waiting for a hybrid truck.

ThickenMyWallet Says:
May 22nd, 2007 at 6:38 pm

Great analysis. Unfortunately, many people pick cars based on vanity and not math.

Tyler Says:
May 23rd, 2007 at 9:02 am

JLP, I AM in the real world. Not everything revolves around math.

JLP Says:
May 23rd, 2007 at 9:25 am

Tyler,

This is a blog about personal finance and is therefore heavily in the math. Go back and read the post. I make mention of environmental issues but they aren’t quantitative.

My job is to try to throw the numbers out there and let each person decide for themselves.

New Vehicle Reality Check! - Page 2 - Nissan Titan Forums Says:
May 23rd, 2007 at 9:33 am

[...] Found this today AllFinancialMatters � Blog Archive � How High Do Gas Prices Have to go to Justify Getting a New Car? __________________ 05 KC SE Smoke 01 Suzuki 600 GSF 88 Fiero 2M4 [...]

Charles Duffy Says:
May 23rd, 2007 at 10:05 am

Tyler,

The environmental impacts are (very) roughly modeled by the math.

The dollars spent on a new car represent (among other things) oil being taken out of the ground and burned to create that new car and carry it to you. The dollars spent in extra fuel for the old car represent the environmental impact of that operating that older vehicle.

There’s a point at which getting a more efficient vehicle doesn’t even make environmental sense, because the impact of producing that new vehicle and getting it to you is greater than the impact of operating the old one. (The argument that you’d buy a replacement eventually anyhow doesn’t necessarily hold water — you only have so many years during which you’re going to be driving, so by increasing time between replacement vehicles you’re decreasing the number of vehicles you’re likely to buy during your lifetime, and thus decreasing the environmental impact of producing the new cars you purchase).

To be sure, environmental impact is largely externalized — but not by any means completely so, and thus financial impacts can be used to roughly model it.

I find it odd that you encourage people to “[not] be a calculator and think logically”, whereas in fact you’re promoting emotion-based decision-making. Come up with a more effective model for making this decision that effectively models environmental externalities, and then we’ll be in a position to talk.

Mike Says:
May 23rd, 2007 at 10:09 am

I think the insurance difference between the truck and civic would also be of note. The insurance on the truck is going to be more expensive and the civic (even with the age difference). Unless, of course, the truck is not covered under comprehensive insurance. The new civic would (most likely) have be under comprehensive because it was purchased through a loan.

Also, the expense of the added insurance would have to be taken into account when considering keeping the truck as well as purchasing a used commuter vehicle. I’m not sure how this would all be used in the equations, but it does seem important. It all should be taken into account for the full cost of ownership.

virgil Says:
May 23rd, 2007 at 11:12 am

Why is the environmental cost “hard to quantify” ? It’s actually rather simple - we continue cranking out CO2 and the planet heats up and we all die. The “environmental cost” is death itself.

JLP Says:
May 23rd, 2007 at 11:20 am

Virgil,

Your statement still doesn’t quantify the environmental issues. Rather, your statement is a statement of emotion.

jeff Says:
May 23rd, 2007 at 11:38 am

I am so tired of people trying to force the environmental nonsense on everyone else.
Guess what, greenies, you ain’t so green yourselves.
As scientists, make that extremely reputable scientists, continue to distance themselves from the idea of ‘global warming’ (and many are now changing their opinion from support to ‘does not support’), I am shocked at how many people truly choose ignorance and Al Gore’s documentary as their sources of knowledge.
Increased solar activity is the primary contributer to global warming.
At least that’s the best explanation we can figure out without relying on computer modeling and guesswork combined with force feedings from Gore.
But hey, let’s examine the OTHER side of the coin. You know, the measurable environmental impact of buying a hybrid.
So how do they make them?
Well, the batteries are mined in canada from a nickel mine. For miles around the mine, there is a dead zone where no animal or plant life exists. Nickel is toxic and the mine has destroyed all life for miles. But that’s not all…
The nickel is then shipped via boat (burning thousands and thousands of gallons of gasoline and dumping gobs of toxic chemicals both into the ocean and the air) to China, where the mined nickel is refined and built into the batteries for the prius. From there, the batteries are shipped to Japan via boat (again, spewing toxins and burning tons of gasoline) where they are installed into the prius. Then, mostly completed Prius’ are shipped via boat (spewing pollutants again) to the US, where final assembly is made. Then those Prius’ are shipped via truck (spewing toxins) across the country for delivery to dealerships.
Awesome!
And what happens when those batteries are no good anymore? we don’t really know, but nickel is toxic and needs to be disposed of properly - we don’t know how and no one monitors this, but hey you can sure feel good about how great your car is for the environment.
The fact is that a brand new Hummer lasts longer and contributes less to the net effect of pollution over the course of it’s life. Not to mention it is cheaper to operate, repair, and maintain.
But hey, go ahead and buy the Prius if it makes you feel good. Who cares about the massive amount of damage manufacturing it does, forget the fact that repairing one is expensive, and ignore the fact that we are going to have an environmental nightmare on our hands when we retire the cars.
Also, ignore the fact that all the hype is about a 1 degree shift in temperature that correlates precisely to increased solar activity.
Oh yeah, and the fact that less than 3% of the worlds ‘greenhouse gasses’ are contributed to mankind.
Or the fact that kyoto treaty countries have fared worse environmentally.
How is it you people are able to ignore scientific consensus failure time and time again?
How is it that you are willing to accept a ‘consensus’ argument when it goes against the very nature of science?
Please.
Good article. The math makes sense and the argument is sound.

Patrick Says:
May 23rd, 2007 at 12:34 pm

Based on pure math, your article is correct. But how many people actually purchase a car on math alone? Very few! I think most people buy a car based on a combination of need and emotion. (some peole mor eemotion than others!)

I know a lot of people who will only drive a truck (even though they rarely put any cargo in the bed), and I have known quite a few people who will only drive a Chevy or a Ford.

I think the most important things to consider when buying a car are needs (truck, van, SUV, passenger car, etc.), budget, and other factors such as some of those previously mentioned: insurance, environmental impact, or even color and accessories.

keane Says:
May 23rd, 2007 at 1:41 pm

Jeff, I live in the City in Canada where they mine the nickel! There is no longer and dead space. Otherwise, very good rebuttal. I agree with all of it!

KJB Says:
May 23rd, 2007 at 2:22 pm

I don’t think that purchasing a car on “math alone” is the point of this article. This article highlights that math is the context needed in order for financially-informed decisions to be made. Things like brand loyalty and consumer preferences are all factors that also have be considered, but those are also factors that have their own budgets and financial variables. For example, if someone chooses to pay $500 more for a red version of the identical car in black, then that customer is assigning at least a $500 value to the trade-off of red versus black — a value which may be unique to that specific customer.

What is interesting about this article is that it addresses some key areas in which a consumer can use math to make a financially informed decision. The article identifies a variety of variables that must be considered for this particular trade-off to be financially viable:

p - price per gallon of gasoline
m - miles driven per year
x1 - mpg of the old car
x2 - mpg of the new car
c - cost of the new car (after trade in)
I - interest rate for the car loan
t - number of months for the car loan

In order to compare apples to apples, the author relies on some assumptions about the trade-off: the average driver will drive 15,000 miles per year and a new car will be fully financed over 36 months at 6.5%.

But a better question than “how high would gas prices have to go?” would be: at what levels of the different variables would this be a financially prudent trade-off? Here are some of the types of questions that this type of analysis can answer:

- How many miles would I have to drive per year for this trade to be worth it?
At current gas prices, trading $10,000 (at 6.5% for 36 months) and a car that gets 17mpg for one that gets 38mpg would be financially prudent if you drive more that 32,300 miles per year.

- What would this trade be worth if it’s not worth $10,000?
If your trade-in car is worth more, or if the new car cost enough less that you only had to finance $4,600 of it yourself, then this would be a good trade.

- I don’t have an old car that gets 17mpg, but I’m looking at buying one that gets 24mpg; how much would it be worth to get one that gets better gas mileage? If you drive 15,000 miles per year and gas prices remain at current levels, it would make sense to pay about $1000 more for a car that gets 29mpg instead of 24mpg. But if you’re looking at a car that gets 40mpg, it’s only worth about $2000 more than the car that gets 24mpg.

- How bad does my current mpg have to be in order for it to make sense to spend $10,000 on a car that gets 40mpg? If you’re getting 9mpg or less, go for it. But if you’re even getting 10mpg, you need to look for other reasons to justify buying a new car. The good news is that if you’re only getting 10mpg, chances are that you won’t have to look far for other reasons to upgrade.

Naturally, these are all questions that should be considered IN ADDITION to any other reasons you have for buying a new car. But yes, they are based on math, and it is very important to think about financial decisions in terms of math.

fivecentnickel.com Says:
May 23rd, 2007 at 2:24 pm

I don’t understand why you are comparing a used truck against a brand new Civic. The thing you’re not factoring in in this case is the fact that you’ve traded up to a vehicle with zero miles on it from one that probably has a good many, so you’re confounding the cost of buying better gas mileage with the cost of buying a lower mileage (brand new!) vehicle.

A more realistic scenario would be to pick a truck of a certain age, check it’s blue book value, then check the blue book value of an equivalent (in terms of age and condition) and then do the math.

Regardless, this calculation does a good job of showing why it is that we just keep on keepin’ on rather than making dramatic lifestyle changes. Gas is still relatively cheap, even at three bucks a gallon.

fivecentnickel.com Says:
May 23rd, 2007 at 2:33 pm

Jeff, while you make a number of good points about the environmental impact of producing hybrids, your argument about scientists distancing themselves from global climate change couldn’t be further from the truth. In fact, even the head-in-the-sand politicos are are starting to sit up and pay attention to what’s going on.

As an aside, your arguments about the amount of fossil fuels being burned while shipping cars around the world for sale aren’t totally on target… If we assume that a person is going to buy a car, then much of what you lay at the feet of hybrids will still occur if they buy a non-hybrid. Moreover, you ignore the additional energy that must be expended producing the additional gas that a non-hybrid will burn and then hauling it halfway around the world. But your point that things are far more complex than they seem is well taken.

Foobarista Says:
May 23rd, 2007 at 3:08 pm

At the risk of “sounding political”, I’ll admit that I’m a “climate change skeptic” and can’t abide the Goracle’s Kool-aid. There _are_ many climate change scientists who dispute anthropogenic global warming (AGW). And those are the only scientists who “matter”, not philosophers, economists, political scientists, green activists, politicians, CEOs who see big bux in green marketing, bureaucrats and politicians who see vast opportunity in a green nanny-state, or Hollywood celebrities driving Priuses between their mansions and their private jets while buying indulgences, er, “carbon credits”. Many of these people doubtless “believe” in AGW and regard it as a piece of intellectual jewelry you have to wear to be a Certified Nice Person, and many others could care less but are in it for the buzz or the bux, but the whole thing sure sounds like any number of millennial causes that come and go every decade or so.

But I’m still waiting to be convinced that AGW is the cause of the bit of warming that’s happened in the past century and it isn’t due to us coming out of the Maunder Minimum and the Little Ice Age of the late 17th through mid 19th century. (Melting ice caps on Mars argue for the latter - not many Hummers there…)

That said, reducing oil consumption is still a very good thing, for numerous other reasons, chief among them being able to tell the Wahhabists, brigands, and tinpot dictators who control much of it what to go do with themselves. Reducing “real” pollution caused by cars is another.

OK - off my soapbox…

JLP Says:
May 23rd, 2007 at 3:11 pm

Nickel,

Maybe I didn’t do a good job of explaining what it was I was trying to accomplish in this post. The whole point of this post was to try to calculate at what point will the amount spent on gas driving a vehicle with low MPG be enough to basically fund a car payment on a car that gets better gas mileage. That’s it. Nothing more, nothing less.

I realize that a truck and a Civic are not the same thing and that some people can’t switch from a truck to a small car. However, there are probably lots of people who choose to drive a truck and could easily switch to a fuel-efficient car if they chose to.

Surely there’s a point where people will change their habits.

jeff Says:
May 23rd, 2007 at 3:53 pm

fivecentnickel-
“If we assume that a person is going to buy a car, then much of what you lay at the feet of hybrids will still occur if they buy a non-hybrid. ”

Not the mining (which causes envrio damage) the shipping to China (more damage) and the shipping to Japan.
For instance, I drive an 05 accord lx (four cylinder for efficiency). My car was assembled in the US using mostly parts sourced in the US or Canada. This, naturally, is friendlier to the environment than shipping materials all around the world for the sake of creating something that is intended to be more environmentally friendly.
And JLP, your article was excellent and made sense to me!
The way I see it, there is a dollar value on everything we do. For instance, people don’t know that it takes a while to drive enough to cover the premium paid for hybrid technology in terms of the MPG savings.
Interesting how this went from what you were trying to convey to a discussion about eco-friendliness….

fivecentnickel.com Says:
May 23rd, 2007 at 6:02 pm

Jeff, you’re absolutely right about the batteries, and I never took issue with that. But if you’re going to argue against statements that I made, please don’t take them out of context. Here is a more accurate synopsis of what I said:

“your arguments about the amount of fossil fuels being burned while shipping cars around the world for sale aren’t totally on target… If we assume that a person is going to buy a car, then much of what you lay at the feet of hybrids will still occur if they buy a non-hybrid.”

You chalked up the shipping of the car back here from overseas, distribution to the sales lots, etc. as an environmental cost of hybrids, but that’s not actually true. Rather, it’s an environmental cost of buying a car at all (and even if your car was assembled here, many of the Honda parts in fact come from Japan, so you can’t distance yourself from that leg of the journey entirely.

Enzo Says:
May 24th, 2007 at 10:04 pm

So, What do you do when you drive a hearse. I’m not kidding. I bought a 1984 hearse 3 yrs ago (still post 9/11, and with gas floating at $2.60/gallon in the northeast.) I’ve always loved big cars, wanted the capacity, and love the attention. Not mention how many people get out of your way.

The crux of the matter for us die-hard gas-guzzlers is what are you willing to sacrifice (in style) for the greater good? (mainly my marriage.) Our monthly budget is seriously hurting with $3 gas. But just where do you draw the line between paying at the pump and paying the bank. Most of Middle America doesn’t have the 10grand in their pocket to drop on a car. If I did, I wouldn’t be blinking an eye at $3 gas. A car payment is almost unavoidable.

At 60 to 65 dollars a week for my commute, I’m easily blowing $240/month. Add in the custom repairs for over-size parts (its in the limo class) and the Prius is looking pretty good (to my wallet.) Estimating mileage being 5 times better than the hearse, that 60$ week would turn into 60$ a month. But will it be as much fun?

I still get to laugh at the Hummers though. I didn’t have to spend 60 grand for attitude. As for holding out for more options in the Hybrid arena, I’ve heard the Chevy Malibu is coming up on a re-vamp. If they keep the Maxx option, I’d be more interested than I am in the Prius.

The downside for “holding out” is that George the 2nd still has till 1/20/09 before the eventual Democratic Backlash. And that change wont make Iraq go away. And if Exxon-Mobile likes their billion$ in profits, then what do you think they’ll do when Hybrids really catch on? I shudder to wonder if they’ll enter into battery production.

A commuter car is hole that you dump money into. You’re lucky to get back half of what you paid for it. Unless you’re a mechanic, you have little control over how expensive it is to keep a car on the road. But I love my hearse, with a demented love that borders on lunacy. I plan to spend the summer test driving as many efficient cars as possible and trying to capture the looks on the lots when I ask “So what’ll you give me for my trade-in?” The last ride is coming sooner than I hoped.

Free Money Finance Says:
May 25th, 2007 at 5:19 am

Star Money Articles for the Week of May 21

Here are interesting posts and news this week from the MoneyBlogNetwork and beyond: Blueprint for Financial Prosperity suggests we ignore the allure of new. Consumerism Commentary continues to tell us where to put $5,000. AllFinancialMatters asks how h…

fivecentnickel.com Says:
May 25th, 2007 at 12:04 pm

Weekly Roundup - 05/24/07

It’s been a busy week fraught with tax quandaries and boxes full of bricks. And now… Guess what? School’s out for summer ’round these parts as of today! In other words, we have a couple of ecstatic kids that are just days away f…

Personal Finance and Investing Blog » Blog Archive » Weekly Blog Roundup, Long Weekend Edition Says:
May 25th, 2007 at 3:31 pm

[...] How High Do Gas Prices Have to Go to Justify Getting a New Car? AllFinancialMatters crunches the numbers as usual. In order to convince JLP to buy a Honda Civic, gas would have to reach $7.55 a gallon. Now the gasoline companies have a price target. [...]

JEFF Says:
May 26th, 2007 at 11:32 pm

buy a new Infiniti G37…..Honda Civics are for HS girls…

Dan Says:
May 27th, 2007 at 12:10 am

I definitely agree that Global Warming has become much more of a political stance than a scientific one. But one thing that is usually universal is the price we pay for importing oil.

Some oil producing countries are hostile to the US and have caused the death of US servicemen.

Some of the oil we buy comes from these countries.

Some of that oil is used to make gas.

So in the end, every time I buy gas, some amount of money (perhaps a faction of a cent) makes it into the revenue stream of counties that use it to kill our troops.

I certainly don’t want some snippers ammo bought from my gas money… So to me, it ain’t about the environment, it’s about financing terrorism.

-Dan

mbhunter Says:
May 27th, 2007 at 12:22 am

A survey in the Washington Post said that the average American would change driving habits or buy a more fuel efficient car when gas gets to about $4.40 per gallon. Over $5 per gallon in the West.

Roundup for week of 20 May 2007 at Mighty Bargain Hunter Says:
May 27th, 2007 at 12:57 am

[...] All Financial Matters wonders how high gas prices have to go to justify getting a new car. [...]

dave Says:
May 30th, 2007 at 9:08 pm

It isnt necessarily practical to go out and by a new car . I think a more cost effective approach is to make the one you own more fuel efficient. A good resource is http://www.sonomabuzz.com I iproved my gas mileage by 30% with the tip and tricks .

Anonymous Says:
June 1st, 2007 at 10:15 am

Everything interesting happens in the margin. Economists talk about marginal demand, marginal supply, marginal propensity to save, etc. Basically, what they are talking about is the last dollar, or last unit of a resource dedicated to a particular use.

In the case of decisions on whether or not to replace a car with a more fuel efficient model, the issue is not going to be whether someone who bought a car 6 months ago is going to replace it. That’s going to be rare. The real question is how many people will decide to replace an older car earlier than they would have. Another question is what percentage of car buyers will replace their old cars with more fuel efficient models.

I was one of the people buying a more fuel efficient car last month. It was time to get rid of that 9-year-old minivan.

New vans girl Says:
July 3rd, 2007 at 6:18 am

It is worth considering selling the truck and buying a used 2-3 year old car where someone else has taken the sting for owning it from new. That changes the outcome of the equation considerably.

van sale Says:
June 19th, 2009 at 10:53 am

Great study. Thanks for putting in the effort

Comments

Name (required)

Mail (will not be published) (required)

Website

AllFinancialMatters

A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance.

Site Sponsors

Recent Posts

Archives

Topics

Subscribe to AFM

Site Sponsors

Some of my Friends are Authors

AFM in the Media

Blogroll (Daily Reads)

Blog Stats

Search

How High Do Gas Prices Have to go to Justify Getting a New Car?