Auto manufactures advertise heavily on the basis of MPG. But what does it really mean to you? Are you saving money or actually spending more?
To evaluate the MPG effect, we need to look at the price comparisons of the vehicles against the actual savings by the MPG ratings. To do this we will first break down some examples of MPG comparisons. Here’s how the math works:
Given an average of 15,000 miles driven per year and a three year average ownership term, an example cost of fuel at $3.50 per gallon, we will plug in some MPG ratings. Assume you are looking at vehicles in the same class that have a spread in the MPG of as much as 5 MPG between them.
Our first example will be a comparison of a vehicle rated at 20 MPG and a competitor rated at 25 MPG. At a cost of $3.50 per gallon the 20 MPG vehicle will cost $7,875 in fuel over 3 years of ownership. That’s about $218.75 per month. The 25 MPG vehicle will cost $6,300 over 3 years at about $175 per month. That amounts to a savings of $1575 over three years or about $43.75 per month.
Our second example will be a comparison of a vehicle rated at 30 MPG and a competitor rated at 35 MPG. The first vehicle will cost $5,250 over the 3 years or about $145 per month. The second vehicle will cost $4500 over the 3 years or about $125 per month. This represents a savings of $750 over 3 years or about $20.83 per month.
Our third example will be a comparison of the higher mileage vehicles. Some are explosively advertising 40 MPG. So let’s look at a 35 MPG V.S. a 40 MPG vehicle. As we saw above the 35 MPG vehicle will cost $4500 over 3 years and about $125 per month whereas the 40 MPG vehicle will cost $3,937.50 or about $109.38 per month. This is a savings of $562.50 over 3 years or about $15.63 per month.
As you can see, the savings become smaller as you go up in the MPG classes. Now, if you compare a purchase price difference to these actual savings analysis, you might see things differently. You may also compare the monthly payment by a figure of $25 per thousand financed. An additional $3,000 financed could cost you and additional $75 per month.
So MPG is an important factor, but when comparing same class vehicles, remember to compare likes, dislikes, features and benefits, price, and compare MPG on a realistic basis weighed against cost.
Published in: Consumer Information