Is it Time to Buy a New Car That Gets Better MPG?
Posted May 22, 2013
Updated May 23, 2013
WRAL Reader Question
I've got a 2004 car that is still in great shape and paid off. It gets 32.5 mpg, and my daily commute is 66 miles. It is about to hit 160k.
We're trying to decide whether we should start shopping for a new, higher mileage car, and how many "extra" mpg's would make it financially worthwhile to take on a new car loan.
Confused About Cars
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Dear Confused About Cars,
Excellent question. Thank you so much for sending it in.
Cars today are generally better constructed and with proper care and maintenance they will last for many miles.
Despite the best attention and loving care, cars seem to reach their end of useful life at some point and enter what I like to call the repair of the month club. Every month is some new investment to make in keeping your car on the road.
Your old car seems to be doing a great job for you and you owe nothing on it. The insurance is probably a lot lower on it than a new car would be. And the fuel milage you are getting is not as good as some but it's still a lot better than most.
You have not told me anything that would make it a necessity to buy a new car at this point. What I would suggest you do is keep driving it but start making what would be your new car payment and save it in a savings account you setup just for a future new car.
As each month passes your balance will grow and grow. By the time your current transportation finally dies you will have a significant amount saved towards buying a new car or a three year old used car.
The three year old used car generally has taken the biggest hit on depreciation but yet has a long and useful life.
Your situation is very timely for me. Some good friends of mine in Raleigh recently traded in their poor MPG old SUV that needed repairs each month and bought a new car with better mileage. Because of the miles they traveled and the monthly cost of repairs, the new car payment actually came out lower than keeping their old car.
The young couple did not have the best credit but the new car dealers often offer some pretty special deals and the manufacturers are willing to take a higher risk on car financing so even with bad credit a new car can sometimes be the better deal if you plan to keep it for a decade.
Some of the more fuel efficient mileage cars that carry a higher price tage don't seem to add up when you factor in the savings from the mileage with the cost of fuel.
I've done this same review for a few people over the last few years and each time the answer remains the same. It is better to keep driving a good car in good shape that gets good gas mileage than taking on the financial burden of a new or newer car payment.
The government has a good website for checking out fuel mileage. Go to fueleconomy.gov.
It's a good idea to do some additional research and find out what the real world mileage people are getting is rather than just rely on the reported best case scenario. That site I gave you also shows mileage based on a number of other users.
For example, the 2013 Ford C-MAX Hybrid FWD is reported to get 47 MPG combined but the average reported by 87 others was 38.8 MPG.
The Toyota Prius C is said to get 50 MPG and among two reported users of the car they got just about that. Based on your mileage of about 17,000 miles a year, a car like the Prius would use 340 galls of gas a year versus the 523 you probably use about now. The savings of having the new car would be $640 for the year if we assume gas is $3.50 a gallon. That's $53 a month in fuel savings.
So it is worth it to you to buy a newer vehicle when insurance is going to cost more so you can save $640 a year?
Only you can answer that one.
WRAL Get Out of Debt Guy
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