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Gas Prices Have People Not Thinking Clearly
By JLP | May 14, 2008
This morning as I was dropping my daughter off at daycare, a lady pulled up in a new Honda Accord. As she was walking into the building I asked her if she got rid of her Lincoln Aviator. She said something like, “Yes. I got rid of the gas guzzler and I’m lovin’ it.”
As I was leaving daycare I got to thinking about this lady’s decision to trade in her Aviator for the Accord. Did she make a wise decision? Well, that’s not for me to say, but I can tell you what the numbers say.
I noticed that she was driving a Honda Accord with a V-6 but I didn’t notice the exact model. So, I’ll assume she went with the EX V-6, which Edmunds.com says retails for just under $26,000 (there are more expensive Accords, but this model will suffice). Using Edmunds.com, I estimated that her Aviator had a trade-in value of just under $11,000. I have no idea what year her Aviator was, so I’m going to assume it was 2003, which was the first year for that model.
Since gas was the first thing she mentioned, I thought it would be a good idea to estimate how much she is going to save on gas now that she is driving the Accord. According to the FuelEconomy.gov, the 2008 Accord V-6 gets between 19 and 29 miles per gallon. The average Honda Accord driver will spend around $2,261 on gas each year while the Navigator driver will spend $3,676 (assuming an average price per gallon of $3.39 and 15,000 miles driven per year split 55% city driving and 45% highway driving). So, she will save roughly $1,400 per year on gas. Unfortunately, that’s just PART of the equation.
Unless she paid cash for the Honda, she probably has a new car note. American Honda Finance is currently running a promotion of .9% financing for 24-36 months. Assuming she financed $15,000 (the difference between the sales price of $26,000 and the trade-in value of $11,000 for the Aviator) for 36 months, her payment would be $422.47 per month or $5,070 per year.
Bottom Line
Not factoring in maintenance costs, this lady is spending $5,070 per year for 3 years to save $1,400 per year, a difference of $3,670 per year. Granted she does have a new car and her savings will increase as gas prices increase. But, she traded in a car that was still in very nice condition and was most likely paid off for a brand new car that will depreciate in value. All else being equal, gas prices would have to go to over $12 per gallon before she broke even.
I suppose there are environmental considerations but I think those are negated by the fact that someone will be driving the Aviator.
I’m all for saving money but I think lots of people are making decisions based on emotion rather than on clear thought.
What do you think? Did I mess up on my math somewhere?
May 14th, 2008 at 10:58 am
Of course she could have bought a used car for approx. the same cost as her old car. That would have been the better choice.
May 14th, 2008 at 11:04 am
Andy,
That’s a good point. I was so into analyzing her decision that I didn’t think about buying a used car.
I think she used gas prices as an excuse to get something new.
May 14th, 2008 at 11:20 am
Your math seems correct.
Some more food for thought… with that $26K she spent on a V-6 Accord, she could have purchased a Toyota Camry Hybrid. Those start at $26K for a well loaded model and gets 33/34 mpg. Same goes for a Nissan Altima hybrid: $26K starting, 35/33 mpg. On both you’d be saving roughly $2000 a year on gas. I’m all for downsizing, and buying fuel efficient vehicles, even if you’re not paying cash, but an Accord V-6 is not downsizing.
May 14th, 2008 at 11:24 am
I think your math makes total sense. Unfortunately it’s not the math that takes precedence here. Bottom line is she wanted to spend less money on gas. Taking in a new car note is just the by product, her emotion. If it was me, I would get 1997 Honda Accord and use the extra money from the Aviator sale to use for gas money and maintenance. Now that’s my type of math.
May 14th, 2008 at 11:24 am
I recently did a similar thing (last Novemeber). I swapped out my F350 for a Camry… big time difference in fuel cost as the F350 was a diesel and the Camry is a 4 cyl.
The thing is… my F350 was paid for and I bought a used Camry and paid cash. I acutally made money as I sold the F350 for more than I paid for the Camry.
I agree, I think lots of people are using gas prices to justify bad descisions.
May 14th, 2008 at 11:33 am
I think you’re being way too conservative in your estimates. Perhaps your estimate of $3.39/gallon is accurate today where you live, but where I lived we haven’t seen prices that low for several months now. Gas is going to keep going up and it’s going to go up fast. We’ll be at $5/gallon very soon. And I’d be amazed if her Honda only got 19-29 mpg. Even my 1986 Honda Accord got more than that and I drove it for 14 years and more than 100K miles. And let’s be honest, Hondas are just better-built cars. I think this woman made a smart decision, but hopefully she’ll pay off the car loan as quickly as possible.
May 14th, 2008 at 11:45 am
Don’t forget sales tax. I don’t know what Texas has for sales tax, but around here, a 26k car will cost you another $1,500 or so for taxes.
May 14th, 2008 at 11:45 am
The great financing is a key issue because any money you have in accoutns earning greater than the 0.9% are actually paying your loan for you as it still makes you money. So it’s actually to your advantage, even if you have the money, it is wise with careful planning to stretch out those payments as much as possible, as long as you have it in a high interest account like INGdirect.com where it’s paying for your car while still making you money….as soon as the rate changes then you pay it off, but you can have your money in dividend paying accounts earning more than an INGdirect account…just some thoughts
May 14th, 2008 at 11:58 am
quick calculator: http://politicalcalculations.blogspot.com/2006/04/should-you-trade-in-your-gas-guzzler.html
May 14th, 2008 at 12:28 pm
You are spot on. I’ve done the same calculations here.
http://www.caroftheday.org/2008/05/13/the-73-tank-of-gas/
The only way she is saving money now is that her Aviator was a lease with simalar payments as her new Honda. Normally, it comes down the gas prices just being an excuse to get a new car.
May 14th, 2008 at 12:57 pm
People want to feel good. The easiest way to feel good it to throw money at a problem (that’s how congressmen get re-elected.) This women felt like she was part of the problem (driving an evil SUV) so she threw some money around, got a sedan, and now feels really good about herself. In her mind, she solved the problem.
May 14th, 2008 at 1:16 pm
I’m so glad to see this discussion! We have a Prius and love it. Luckily we bought used, just before prices started going through the ceiling, so got a great deal. WE *love* the car. However, I would NEVER recommend someone ditch a car they’ve paid for, are upside down in their loan, that hasn’t started costing a fortune in repairs, etc. in order to buy a hybrid, much less for a more fuel efficient model! Hybrids are expensive! Maintainance is expensive! Too many people see this as a black and white issue, much like the idea of getting rid of your car+note as a DRamsey budgeting gesture. Sometimes you do better to ride out (oops) the storm by being more economical in other ways.
I’m currently working on our college-aged kid regarding whether to sell his Jeep for a fuel efficient oldie or just take our slightly less efficient Honda, and leave the Jeep for my DH’s once/twice a week drive to work. Running the numbers, etc, it seems more sensible to not spend ANY money on buying a car right now, even should we get a good price on the Jeep. ‘Course “sensible” and “college-aged” may be mutually exclusive!
Thanks for bringing this up!
May 14th, 2008 at 1:19 pm
I agree she might have better choices if she decide to buy low gas eating car for example, a hybrid or second hand. But think about if she opt to keep the Accord longer after she paid it off, accord depreciate slower after first few years and cheaper to maintain than an aviator. It’s not that bad of a choice.
May 14th, 2008 at 1:34 pm
i think you’re spot on… most people really don’t do the math and don’t know when their hybrid/gas-efficient car will start saving them money in the long run.
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May 14th, 2008 at 2:03 pm
There may have been other issues, like the fact that an Aviator is a piece of crap.
May 14th, 2008 at 2:29 pm
My attitude about cars is similar to computers and electronics: we’re in the midst of the biggest change in powertrain technology since the days of the Wright Brothers. The longer you wait, the better car you’ll get. If you can hold out in buying a car until after 2010, you may well be able to buy a plug-in diesel-electric hybrid that effectively gets 100+ MPG and that may use no liquid fuel at all for typical commutes and grocery-store runs.
Until then, drive what you’ve got…
May 14th, 2008 at 2:35 pm
I agree with Chen.
Japanese cars retain their values better and are more reliable. Not to mention that they have a very long life.
Perhaps, she no longer wants to be yelled at for driving a SUV.
May 14th, 2008 at 2:55 pm
You are so right! I drive an Acura TL - not exactly the best mileage, especially in the city which is where I drive. And it takes premium fuel. But you know what - its paid for and it has been since August of 05 (when I bought it used). I don’t drive that much and I could easily cut back, but the way I see it…this car is money in the bank regardless of gas prices.
May 14th, 2008 at 3:55 pm
I agree with JLP. She’s just using gas prices as an excuse to buy a new car. I’ve known people that have done that. A lady at my work was all excited because she traded her SUV in for a Corolla and was making the same payments as before. OK, but how many more years of payments are you now making with the Corolla when your SUV would have been paid off?
May 14th, 2008 at 4:20 pm
KC,
I have an Acura TL too (2002). And I haven’t given it premium fuel since 2003. I’ve noticed no ill effect.
May 14th, 2008 at 4:38 pm
$3.39 a gallon?! Where in the country can you still buy gas for $3.30 a gallon (we’re over $4.00 here in Southern California).
May 14th, 2008 at 5:12 pm
Craig,
I used that number because that’s what number FuelEconomy.com used. Higher gas prices will change the outcome some but won’t really affect it until they get MUCH higher.
May 14th, 2008 at 6:14 pm
I think you are exactly right. While I’ve never analyzed any individual case, my general thought is that if you have a good car, buying a different/new/electric car because of gas prices is unlikely to be a wise decision. I don’t see gas prices as a reason to get rid of a perfectly good car. If one is in the position that he must get a different car, that is the time to do so. Even then, I think it is more important to like your car than to buy an economical one that you don’t like. Spending money is not a solution to being squeezed. Reducing spending is the road to a solution.
The way I’ve recently applied this concept in my own life is realizing that moving to a less expensive city would likely give me minimal, if any savings in the long run. Moving is expensive. It could only work for this household if we were positive that we could commit to living in the other city permanently. We can’t do that, because there is a reason that the cost of living is less there. It is a far less desirable place to live. I’m convinced that we now live as inexpensively as possible right where we are, and it would likely take me time to “learn the ropes” in a different location.
May 14th, 2008 at 7:29 pm
Gas here in Chicago is $4.25/gal by me. Goes up about .05-.10 a week now. I have heard prices as high as $4.35/gal from friends in other areas of the city. I know I would buy whatever gets the best mileage because it will eventually pay for itself in gas savings.
Also on a side note I work in the financial industry and according to most people I talk to who are knowledgeable about the subject $5/gal will be cheap a year from now. Even heard a $7/gal estimate on CNBC the other day.
So brace yourselfs.
May 14th, 2008 at 11:57 pm
Folks, keep those paid-off gas guzzlers. Do the math. Gas goes from $4/gal to $5/gal. Your guzzler gets 20 miles to the gallon. For each 20 miles you drive it costs, yup, a dollar more on the margin. Assuming an average commute or “other” driving of 40 miles per day, that’s another two bucks, TWO BUCKS, a day. Let’s see now 365 X 2 = $730/year.
My own self, I drive a 1994 Buick Regal. Needless to say, I have no car payment. When it dies, I will donate it to the local high school, who perform “major substantive repairs”, thus enabling me to take the fair market value as a tax deduction. I will then buy another clunker, for cash, to drive my obligatory 10 or 20 miles per week (as I am a hermit . . . no, just retired).
Gas is not a major budget item here. Thank goodness.
Yours,
Bozo
May 15th, 2008 at 12:40 am
Wow. I’m so glad to read confirmation of my decision to not trade in my vehicle. I was pretty sure I had it figured correctly, and when I ran it past my S/O (she’s quite a bit more mathematically inclined than I) she could find no fault in my reasoning. I’ve been hoping I hadn’t missed any of the pertinent factors. Thank you!
May 15th, 2008 at 6:14 am
You didn’t take into account that after the three years she will have a three year old car, which should last her at least another three years. Whereas if she’d kept the Aviator for another three years it would be six years old and probably need replacing. If you assume she THEN bought a new car (to keep the comparison as similar as possible) you’d have the same three year financing costs happening, just three years down the track.
So over the six year time frame the difference due to financing would disappear, leaving you with just the benefit of driving a more fuel efficient car for the first three years.
Of course better than either of these two options would have been to trade in the used Liberty for a used Accord of similar age and condition, in order to get the fuel savings benefit. The extra paid for upgrading from a 2003 car to a new vehicle is for “new car smell”, not for fuel efficiency.
May 15th, 2008 at 2:56 pm
It’s not a decision I would have made. But frankly I like the signal it sends to the auto manufacturers. That even if it makes financial sense to keep an SUV, people are still moving toward more environmentally friendly vehicles. I think Detroit has been staving off evolution in automobile technology by claiming there is no demand for more efficient vehicles. This type of behavior puts the lie to this claim.
The more people that behave in this “irrational” fashion, the more likely I will be able to buy a more efficient vehicle when the manufacturers react to this behavior by increasing supply and thereby bringing down the price.
May 15th, 2008 at 3:19 pm
That’s a lot of assumptions.
One thing that troubles me is: “Not factoring maintenance”….
That’s usually where the bigger savings comes in with a new car.
Now adding another assumption, let’s say she bought the truck new in 03, which means she kept it for 5 years. So, you’d have to extend your test period to at least that much to be fair. So that’s 2 extra years of +1,400 for gas and no car note.
Don’t get me wrong…If I were here, I’d do a few things differently:
1. Used instead of new.
2. Screw a V6.
May 15th, 2008 at 4:30 pm
This is my arguement I use with people all the time!! It’s only when your car breaks down and you need a new car is a time to buy a more fuel-efficient model.
May 15th, 2008 at 4:31 pm
Without going into the merits/demerits of buying a new car, from a pure cost saving math perspective, i think there is something wrong here. Instead of calculating total monthly payments, you should consider annual depreciation+interest on the financing as the cost of ownership(lets leave out maintenance for simplicity).
For e.g if accord depreciates @ $2600 the first year, with interest @ $260 and if Aviator would have depreciated by $1100 this year, then the cost of owning Accord is $2860-$1100-$1400(gas savings) = $360. With these numbers, accord does seem more expensive, but over next couple of years, accord will depreciate much lesser than aviator, hence provide more savings.
Of course, buying used would have brought those savings on depreciation much sooner!
let me know, if there is some catch in this calculation
Regards
Rakesh
May 15th, 2008 at 10:45 pm
Bottom line: there is little economic justification for buying a new car every two or three years, especially on credit. Now, I have nothing against folks who are “bucks up” and seek to improve their perceived status by doing so (that was a tad of sarcasm), but I find that crowds seldom gather around new cars in the supermarket parking lot.
For your laugh of the day: the driver-side door latch on my Buick Regal (1994) broke a month ago. I literally had to hold the door while I drove it to the local Buick dealer to be fixed. The CSR said it was probably the oldest Buick she had seen in for repairs all year. Luckily, they found the part to fix it, in Reno of all places.
Bit-by-bit, the old Buick is dying.
Yours,
Bozo
May 16th, 2008 at 10:14 am
I think what is missing is the fact this person was willing to spend the money to buy a Lincoln Aviator to begin with. Then they complain about the price of a fill-up? And then they spend more money on another car?
The innumeracy that exists is horrendous.
May 16th, 2008 at 3:42 pm
I think you’re right on with your analysis. Up until about a year ago, I drove a 10-year-old truck with 250,000 miles on it that got around 18 miles per gallon. I didn’t like the low gas mileage, but when I looked at the math (like you did in your post), it just didn’t make sense to trade vehicles.
But now I have 2 kids and I’m driving a paid for car that gets 25 mpg.
I like your site a lot…I’ve added it to my blogroll.
May 17th, 2008 at 10:21 am
Perhaps I missed it, but I believe there is at least one further variable to consider… If she does NOT buy a new car, in three years her Navigator will have minimal value - lets just say $5000? About right I think… The Honda, in three years, will probably be worth about $15,000 dollars. So, I believe to properly analyze the value of the transaction, you would have to add in the fact that three years from now she would have at least 10,000 dollars more equity in her vehicle, which I believe would make this a reasonable transaction. Naturally, buying a high mileage high quality used vehicle would be an even more attractive option from a $ point of view. YMMV ;0 Pardon me if I overlooked an important detail.
May 17th, 2008 at 2:06 pm
We bought a new car because of gas milage 2 summers ago when prices hit 3.00. We bought a cheap Mazda3 and paid 16,200 after taxes. We still have the Dodge truck my husband was driving. It is parked in the garage and we only use it occasionaly. He uses the Mazda to commute to work which is 66 miles round trip. The truck gets 12 miles to the gallon the Mazda 36. I figured for every 10,000 miles he drove it we would save 1,666 in gas at 3.00 a gallon. If he drove the car for 100,000 we would break even. The extra insurance amounts to about 40.00. I figured that was worth it to save wear on a very expensive vehicle. No huge money savings at 3.00 a gallon but I would much rather use my money to buy a car than fill up a tank. Plus it is supposed to work that if demand drops so will prices but the oil companies beat us on that one. I dont know what this woman was thinking who totally replaced her vehicle. If her justification was milage she could have done alot better.
May 19th, 2008 at 7:38 am
As current owners of a paid off 1998 Honda Accord EX-V6 (I believe we paid 22K for it at the time) as this was the top-of-the-line model back then, I can tell you the fill-up price - now at a full $60 - is enough to make me sick.
Just for kicks, my husband and I went to look at a 2008 Accord EX-V6 (with navigation, etc.) knowing that my next vehicle would either be that car or, we would make the jump to the Acura. The sticker price for the Honda was $30K. Needless to say, we quickly looked at ourselves and said in unison, “Let’s hold onto it (the 98′) for a another year or so.” Point of note … we JUST turned over 100K miles last week and several of the techs at the local dealership who service the car are always trying to buy it off of us. We’ll wait.
May 21st, 2008 at 7:30 am
IMHO jcw has a good point: if you have a larger vehicle, maybe you should dump it now while you can still get something like the Blue Book price (if you can!), since as gas continues to skyrocket the vans and SUVs are going to plummet in value.
I’ve thought about the same thing you’ve pointed out. The numbers on my 2000 Toyota Sienna are about the same, except that gas here is around $3.50 and rising. It now costs $8 a day just to drive to work. The car is paid for, and I do have enough cash in my car savings account to pony up $15,000 in cash, so financing would not be an issue.
However, a) I generally plan to keep a vehicle at least 10 years (OK, a foolish consistency etc. etc.!); b) the car is in good condition, runs well, and is virtually trouble-free; c) newer-model cars are stupidly expensive to register in this state; d) sometimes I do carry cargo that will not fit in a smaller vehicle; and e) I have a nagging feeling that I haven’t calculated all the factors into my formula.
With financing NOT an issue, buying a newer-model car won’t cost me as much. But the car still would take several years to pay for itself in gas savings.
As a lone woman, I find it difficult to get a fair deal from the loathesome car dealerships, and so I buy through an automobile broker. He doesn’t do used cars. This leaves me without a male voice to do battle with Toyota or Honda for me. The prospect of trying to do business with some used-car salesman is pretty daunting.
And if I keep the Sienna for two to five more years and then buy a car just as I’m going in to retirement, my $15,000 of car savings will probably buy me a car that will last until I have to stop driving. If I use up my 15 grand now, then I won’t have enough to get another car if the next car doesn’t last the rest of my functional life. And in retirement, I’ve got about a snowball’s chance of saving another 15 or 20 grand.
On the other hand, the Sienna won’t be worth $11,000 in two to five years, and so my $15,000 probably won’t buy me a car that will last another ten to fifteen years.
The issues are so complicated, it’s very difficult to make an effective decision!
May 21st, 2008 at 12:08 pm
I bought my first new car in 2004. My old car was becoming a nightmare to maintain, and, I’d had a string of losers when it came to used cars.
Back *then* I bought the most fuel efficient car I could afford that would meet my needs. What was that car? A 2004 Honda *Civic* that gets 34-35 MPG.
I have a hard time understanding why anyone gets sedan-sized cars. I’ve got a four door with plenty of room that gets great gas mileage. I’ve camped with that car. I’ve *slept* in that car. It has enough pick-up that it doesn’t drag on hills or have trouble getting up to highway speeds. About the only problem with it is wind. On a windy day, you *will* feel yourself getting pushed a bit if you’re going 65 MPH. (Sometimes even 55.)
If I was carrying more stuff or towing, a station wagon might be nice. But… in-between sizes? They just seem like a waste to me.
May 21st, 2008 at 1:53 pm
I agree with Baz, you *have* to factor in the maintenance, and whether the either or both car was a) leased, b) financed or c) paid off.
May 21st, 2008 at 8:08 pm
the only thing you have not taken into consider is that in reality NO ONE is getting the trade in values listed in KKB, Edmunds, or NADA books for any type of SUV. The SUV and big pick-up truck market is depreciating weekly in our area. So it isn’t so much the gas mileage, but the extreme depreciation if you factor that in, and face it things aren’t going to get better.
May 21st, 2008 at 10:01 pm
I love my $1000 ‘86 mr2; I get 29mpg on regular unleaded, while all of my co-workers drive their toy-hauling deisels on 25+ mile commutes. Diesel is a dollar more than gas here, and I get twice the mileage. The price I pay- I drive a car with fading paint and a dinged fender. I smile and put my $52 per week in the bank. Maybe I’m out of the norm in that I don’t tie my self-image to what I drive.
May 21st, 2008 at 10:32 pm
Hi
GAS Saving Tips
1- Keep Your Car Well Tuned
2- Keep Tires Properly Inflated
3- Plan Your Trip Ahead of Time
As much as people grumble about gas prices, they have not changed their driving habits.
Dzo
May 22nd, 2008 at 6:04 pm
This is actually how I feel about most big ticket items. My brother and his wife tore out their carpeting to replace it with something green (bamboo). What happened to the old carpet? The landfill. So, not only did they spend a lot of money replacing good carpet, they created more waste in the process.
May 23rd, 2008 at 1:57 pm
Your math is incomplete. First of all, as other readers have pointed out gas is steadily increasing and will continue to increase, making the Accord a better and better option. Second of all, you are missing several important numbers: depreciation, insurance, maintenance/repairs. Since I am too lazy to run the numbers, I will also use edmunds.com, specifically their TCO (True Cost to Own, http://www.edmunds.com/apps/cto/CTOintroController) using my zip code (yours may vary) for the next 5 years.
Since her Aviator is paid for, I will subtract the financing. If she buys the Accord, she has $11,000 for the Aviator, lowering her financing. Since edmunds doesn’t take that into account, let’s just assume she puts it into a high yield savings (money market) account at 3% (ING, etc.) and converts it to $12,380. I am also guessing edmunds’ financing numbers are higher than the 0.9% promotion, but it’s for 24-36 months, so we’ll ignore this. According to edmunds then, here is how both scenarios would play out:
2003 Aviator Luxury Rwd 4dr SUV:
-Begins with $11,000 vehicle
-Spends $50,112 the next 5 years on gas, maintenance, etc.
-Ends with $4,316 vehicle
-Total cost: 50,112 - 4,316 = $45,796
2008 Honda Accord EX V-6 Sedan:
-Sells Aviator for $11,000
-Buys $26,180 vehicle
-Spends $45,294 the next 5 years on financing, gas, maintenance, etc.
-Ends with $13,000 vehicle plus $12,380 cash.
-Total cost: 45,294 - 13,000 - 12,380 = $19,914
So the Accord ends up costing $25,882 less over 5 years, or $431 per month. Ignoring inflation & price fluctuations, with this money she can now buy a brand new Accord with no financing. If she doesn’t sell, she now has a 5 year old reliable car instead of a 10 year old unreliable car and will continue saving.
* I wrote this quickly, so there might be errors, but you get the point.
May 24th, 2008 at 9:14 pm
Or, she could have done as I did and buy a new MINI Cooper ($19K) which gets 35/40 MPG (I’m averaging about 36.3 right now.)
Of course, I only bought new car because my 92 Ford Taurus finally died (i.e.: needed almost $5k in repairs just to run) and was getting about 19 MPG.
I still do miss that car, though, but my car payment per year is about what I was paying per year to keep my old Ford running.
May 25th, 2008 at 8:05 am
You have a common sense approach about trading cars. It is hard to give away an SUV right now. Just ask a car dealer. They simply don’t want them. Those they do trade for have lost much of their value.
We Americans tend to over react at times. I am for waiting it out to see if the current gas situation blows over. It always has in the past. If it doesn’t, to put it mildly, our country and it’s economy will be in desperate shape.
I drive a 2001 Crown Vic 24 hwy 16 city, its paid for and in great condition. If I trade it I won’t get fair market price right now.
One thing you did not factor in is that as gas rises people cut back more which will hopefully stabilize gas prices.
Another factor is people are fed up with being cheated at the pump and will retaliate in some way especially at election time. Our politicians are slowly becoming aware of this. Like many of us, I do not plan to vote for any incumbant.
Lets see what happens.
J.
May 25th, 2008 at 6:55 pm
It was mentioned above but no one commented on it yet… people have NOT changed their driving habits. I have a 21 year old smallish car, V6 (with only 100K on it - a modest amount for something well taken care of). I get right around 25 mpg highway, driving 55. Yup, 55. Why should I drive 75-80, do jack rabbit starts, and drive aggressively, at $4.10 a gallon here (regular). And, although I do not LIKE it as much as driving myself, I take the train (public transit) for my daily commute, walking the 1/2 mile each way on the other end. (I have to drive to the station from home - which accounts for most of weekday driving). I even plan my errands on the weekend, so one trip out, EARLY in the morning (or late at night), so I’m not struggling with heavy traffic (idling away). Small changes that have already cut the gallons I’m using by 2/3 (the train did most of it - and I pay less to take it than I did just to park at work before).
People zoom around me on the freeway - I’ll swear most of them are doing 80. Yes, I love speed myself. But a little planning ahead (so I’m not running late), and trying to take care of the environment (fewer emissions for one) make sense to me.
Also - the other point people didn’t mention was that the .9% financing is paid for in OTHER ways. (I used to do financial calculations for multi-million dollar deals - interest free just meant the price is higher, frankly). There is nothing free - you just can’t see how you are paying for it if the APR is .9%.
June 4th, 2008 at 8:44 pm
YES! I have seen sooo many new cars on the road lately. Car industry is booming.
June 25th, 2008 at 11:57 pm
As stated by others, your math could be incorrect for several reasons, including the assumptions made about her buying habits. For example, she may be a person who buys a new car every three years anyway. So she doesn’t care about depreciation, sales tax, etc., because she was going to spend that money anyway. And she didn’t buy a high mileage car so who is she trying to fool?
We have a 2004 V-6 Accord. It’s a rocket and 20 mpg is the maximum fuel efficiency for mixed driving, even when you drive like you have an egg under your right foot. 260 horses under that hood!
One easy way to analyze such a purchase for others who might be thinking of doing this is to purchase a more fuel efficient car of the same value and model year. That takes the depreciation, sale tax, maintenance, etc., out of the equation and you can see what the real savings might be.