AOL Money & Finance

Dumb Money Move No. 8: Sell your gas guzzler and buy a new hybrid

More

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)

Symbol Lookup
IndexesChangePrice
DJIA+17.4610,023.42
NASDAQ+7.122,112.44
S&P 500+2.671,069.30

Last updated: November 09, 2009: 01:04 AM

BloggingStocks Exclusives

Hot Stocks

DailyFinance Headlines

Latest from BloggingBuyouts

TheFlyOnTheWall.com Headlines

    BioHealth Investor Headlines

    WalletPop Headlines

    My Portfolios

    Track your stocks here!

    Find out why more people track their portfolios on AOL Money & Finance then anywhere else.

    BloggingStocks Partners

    More from AOL Money & Finance

    WalletPop Headlines