This post is part of a series where personal finance expert Dan Solin looks at money moves that may seem smart in tough economic times, but are actually quite dumb. See all 12.I know it is tempting. With gas at $4 a gallon and your SUV making frequent stops to fill up, the cost seems overwhelming. But does it really make sense to sell your gas guzzler and buy a new hybrid?
We have been led to believe that the greater the miles per gallon (MPG) of a car, the more we will save on gas.
However, a recent study by two professors at Duke University concludes that measuring fuel efficiency solely by MPG is misleading and inaccurate.
Look at these two examples. Which do you think will reduce energy costs and emissions the most:
1. You replace a car that gets 16 MPG with one than gets 20 MPG; or
2. You replace a car that gets 34 MPG with a hybrid that gets 50 MPG?
If the both cars are driven 10,000 miles a year, the authors conclude that option #1 will save 31 gallons of gas over option #2.
The reduction in the amount of gas consumed in option #1 is 125 gallons. The same reduction in option #2 is only 94 gallons.
Even if hybrids do save you money on gas, it still may not make economic sense to buy one. You need to consider the higher cost of hybrids and the rate at which they depreciate. By some estimates, many hybrids will depreciate by 2%-3% more in value over five years than comparable non-hybrids.
Given these factors, the more prudent course might be to consider replacing your gas guzzler with a non-hybrid that has greater fuel efficiency.
Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books, 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, 2008).











Reader Comments (Page 1 of 1)
8-06-2008 @ 8:42AM
yogabear23 said...
Is this author being paid off by American gass-guzzler manufacturers? Has he noticed that the planet has a global warming problem?
Buy a hybrid. Save money on inflated gas prices. Help wean America from its oil addiction. Help save the environment that supports your life and livelihood.
8-06-2008 @ 10:04AM
dg73030 said...
Where do they get the estimate on Hybrids depreciating? My 2004 Prius is worth more with 100,000 miles than I paid for it new. It also cost less than the non-hybrid I was looking at the regular Camry.
I agree that going from 16 mpg to 20 mpg saves more than going from 35 mpg to 40, but why not go from 16 mpg to 45?
8-06-2008 @ 10:41AM
Tom said...
Don't neglect the much higher cost of maintenance. Just an oil change on a hybrid Civic is $50 up.
8-06-2008 @ 11:16AM
steve said...
I work in the car industry. I agree with not buying a hybrid, bought a new civic that gets 37mpg. Hybrid was roughly another 6k. I can buy a lot of gas for that. Also the battery packs wear out with age. If you already have 100k on a hybrid its getting close to needing a new pack. Oh and have your priced those packs? 3 grand. Very expensive. As far as saving energy , it takes a lot more energy , waist, etc to produce a hybrid. It has 2 engines. Not worth it
8-06-2008 @ 5:46PM
Travis said...
the Author missed a more important point. Consider the cost of Hybrid cars. A Prius costs $25K and gets 50MPG. Average mid-size car costs $15K and gets 30 MPG. Now do the math on how much money the extra MPG saves you. How long would it take to regain that $10K extra you paid for the Prius?
Well let's pretend that gas remained static at $5 a gallon and you drive 20K miles a year. It would take 7.5 years to recoup the extra $10K. Even worse if you only drive 10K miles a year it would take 15 years to break even!
Plus to all those who fear carbon emmisions, I hate to break the news but Hybrids let out CO2 as well and 10 million hybrids on the road is only slightly better than 10 Million 30MPG cars.
8-07-2008 @ 2:00PM
Kyra said...
I can't speak to other hybrids, but I know that the Prius does put out significantly less emissions. So much so that you can drive in many states in the HOV lane with only 1 person in it. I don't personally do it.
When I researched hybrids, it seemed that at least some of them are green washed and others get only reasonably good gas mileage, but don't address the emissions issue. Both times I was looking, Toyota was the best for emissions and in the top few for gas mileage based on a number of reports (one of which was Consumer Reports).
And I have not found that my Prius has decreased in value. When I went to purchase another one, they tried to buy my older one from me at a very good price. A number of people were looking for one used.
And I take my Prius to the local lube place. It's not necessary to take it to the dealer for an oil change. Plus more and more mechanics are starting to fix them when they do have issues, so no dealership once again. Fortunately I've had only 1-2 minor issues with either of my prius'.
And while eventually I will need another battery pack, you only have to replace the cells that have gone bad and the warrenty is 10 years. Everyone gets so nervous about the price of the battery pack, mostly because it is assumed that you need to do it all at once.
Personally, I'd prefer to drive a vehicle that has less emissions, better gas mileage, and a long battery life, even if it is a bit more expensive. The Prius is about 5K more and should be driven into the ground before purchasing another one. If you do that, most likely you will have gotten at least that 5K back.
IMHO you don't buy it to save money so much as to have a smaller carbon footprint on this planet that we all share.
And getting 50 MPG is a nice bonus. And yes, I do keep track.
8-07-2008 @ 2:40PM
Mel said...
I agree with commenter dg73030. The two examples are nice, but in the real world a person with a 16 mpg guzzler is not likely to say, Hm, if I get a 20 mpg vehicle will I be saving more gas than my neighbor who now has a 34 mpg vehicle and is thinking about getting a 50mpg vehicle? No, they will likely consider whether they will save more (for themselves, not their neighbor) at 20mpg, 34mpg, or 50mpg considering all variables, including sticker price, maintenance, and insurance costs.
8-08-2008 @ 2:05PM
alex said...
jeez, this article (and subsequent commenters) hit on every single disproved stereotype there is for hybrids. way to go repeating the same junk over and over.
8-08-2008 @ 2:06PM
Nugent said...
This is a dumb comparison. Its only relevant for the person who owns both a 16 mpg car and a 34 mpg car and is trying to decide which one to replace. There is a reduction in gas usage in both cases, not to mention that the 50 mpg car only uses 200 gallons for that 10k miles, as opposed to 500 gallons for the 20 mpg car. So the overall fuel consumption is still less, even though the relative reduction is not as big.
8-08-2008 @ 2:26PM
Bill McHale said...
Wow! Talk about using statistics to lie. My 4 year old Toyota Prius has kept almost 80% of its value and I have 90,000 miles on it. What hybrids is he looking at? What is a comparable non-hybrid to the Prius? Right now cars that get under 20 miles per gallon are very difficult to sell so his historic resale value numbers are not relevent in today's market.
That doesn't mean that everyone should sell there car and buy a hybrid or a super small car. They should buy a car with better gas mileage when they buy their next car. The day of the huge SUVs is finally over. Maybe the air polution in LA will decrease again once those huge SUVs are replaced with more reasonable vehicles.
8-08-2008 @ 4:11PM
al coholic said...
I looked at the Prius when I was in the market for better economy last year. At that time there was a premium of about $6000 or more for the Prius over the Corolla. Unlike a lot of EPA estimates, the Corolla actually gets over 30mpg city and around 37-39 highway depending on driving speed. All in all a no brainer. The Corolla is economically a far better deal.
Though the Prius gets better mileage the Corolla has what I would call more traditional styling. In addition in spite of the comments above, the Corolla has a track record of lasting for well over 100,000 miles. That's an unknown for the Prius. I'm not saying it wouldn't be worth much at 100,000 miles. I just wouldn't want to be the guinea pig.
8-09-2008 @ 10:34AM
argoknott said...
hybrids blow tube
8-09-2008 @ 11:25AM
Dave said...
Looking at only costs does not provide the entire picture. If you want to support terrorist states keep driving your gas guzzler. Owe communist states like China vast sums so you can buy oil. Deficits, exporting jobs, trade imbalances, etc... the list goes on.
If you want to continue to fight wars and either have your neighbor or loved ones die for oil continue to drive your gas guzzler.
8-17-2008 @ 8:33PM
dennisb said...
"That's all I'm sayin"