Gas Cost & Fuel Efficiency

Mar 30, 2012 by

According to GasBuddy, today’s national average gasoline price is $3.89 per gallon in the U.S. and $4.97 in Canada. In the U.S., this compares to $3.58 one year ago, a 9% increase. Many car owners are beginning to wonder: When does it pay to buy a hybrid or other ultra fuel efficient vehicle?

The answer depends on many factors—some of which are highly unpredictable, like future gas prices—and your individual situation. But to help give you a quick feel for the impact on your annual gasoline expense, I put together the four graphs below. (You know how I like graphs!)

These are easy to use. Find the line that most closely matches the number of miles you drive annually. I’ve done the math for 5,000, 10,000, 15,000, 20,000, and 25,000 miles per year. Then choose your vehicle’s fuel efficiency from the horizontal axis at the bottom.

To give you an example, I’ve labeled one data point on the first graph. This shows that if you drive 25,000 miles per year and your vehicle gets 15 miles per gallon, you spend $5,000 per year on gasoline if the average gas price over the course of the year is $3 per gallon.

The four graphs reflect four different gasoline price scenarios: $3, $4, $5, and $6 per gallon. Other than that, the graphs are identical.

I’ve kept the scale on the vertical axis constant: It runs from $0 to $10,000 in each graph. This makes it easy quickly to get a feel for the rather dramatic impact of gasoline prices on the savings from a gain in fuel efficiency. Notice how the lines separate and become a lot steeper as gas prices rise as you scan down the four graphs. The more you drive and the lower your car’s fuel efficiency, the more you’re going to get whacked by rising gasoline prices. A specific example makes the point:

If you drive a 40 mpg car 10,000 miles per year, you’ll spend an extra $500 per year on gas if prices rise from $4 to $6 per gallon.

But if you drive a 15 mpg car 25,000 miles per year, the same price change will zap your pocketbook by $3,333 per year.

What about investing in a hybrid or ultra fuel efficient conventional vehicle? One example:

If you drive 15,000 miles per year, the annual savings from moving to a 50 mpg vehicle from a 15 mpg vehicle is $2,100 if gas costs $3 per gallon.

But your savings for making the same move would jump to $4,200 per year if gas costs $6 per gallon.

If you were to own the 50-mpg car five years, you’d save $21,000 at $6 gas. That buys a lot of hybrid.

Gas Price = $3 per gallon

Gas Price = $4 per gallon

Gas Price = $5 per gallon

Gas Price = $6 per gallon

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