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| Decision Center | Dumping your gas hog?
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Whoa! Not so fast. You might have to spend plenty to save. The magic formula is gallons-per-year, not miles-per-gallon.
By Scott Burns
What's your GPY?
That's gallons per year. Not MPG, miles per gallon.
The ultimate measure of how we respond to our new energy crisis is how much energy we consume. Efficiency helps, but not if our absolute consumption continues to rise. This is important.
Why?
Because gasoline has been, and remains, a minor cost of transportation. As a consequence, we have to spend a lot of money to save a little money.
According to the American Automobile Association's 2005 transportation cost study, Your 2005 Driving Costs, for instance, the average total cost of owning a car was 51.6 cents a mile if you drove 15,000 miles a year. It would rise to 68.2 cents a mile if you reduced your driving to 10,000 miles a year, a difference of 16.6 cents a mile. The same study showed that the cost of gasoline was 8.2 cents a mile.
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Worse, if you own a low-mpg vehicle, you've probably "paid" in advance for any improvement in mileage you could achieve, since higher gas prices, in effect, accelerate the depreciation of these vehicles. The Hummer H2/Prius resale ratio that I introduced this spring (see "A Hummer of an Economic Indicator at the Dallas Morning News) has declined with a vengeance in the last six months. For example, the Kelley Blue Book wholesale value of a good condition 2003 Hummer H2 with 30,000 miles was $30,285 at the end of the 1005 third quarter, down a whopping $5,115 since March, or 14.6 percent. The value of a 2003 Prius with comparable mileage, on the other hand, had declined only $640 from $15,450 to $14,810.
The growing depreciation gap
The following table compares original manufacturers suggested retail price for new vehicles followed by wholesale resale prices after original sale.
| The Hummer H2/Prius resale ratio* | | Vehicle | MSRP** | | | | | | | | Jan.
03 | Jan.
04 | May
04 | Sept.
04 | Jan.
05 | Mar.
05 | Sept.
05 | | 2003 Hummer H2 | $52,200 | $41,600 | $40,300 | $38,000 | $36,400 | $35,400 | $30,285 | | 2003 Toyota Prius | $20,730 | $16,100 | $15,700 | $15,550 | $15,500 | $15,450 | $14,810 | | H/P Resale Ratio | 2.52 | 2.58 | 2.57 | 2.44 | 2.35 | 2.29 | 2.04 |
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*H2 price divided by the Prius price. ** Manufacturer's suggested retail price.
Source: Kelley Blue Book
Alas, that probably understates the hit that low-mpg car owners will eventually take. Six months ago, Autotrader.com listed 1,007 model year 2003 Hummer H2s for sale. Recently, the number listed had soared to 1,296. During the same period the number of 2003 Priuses offered declined from 187 to 98.
Detroit didn't take the money straight out of consumer pockets, but every dime, and then some, of "employee pricing" that benefited new car buyers came at the expense of existing car owners. More people are now further upside down on their loans. That means summer sales came at the expense of future sales: Few owners will be in a position to buy anytime soon.
While gasoline is a minor part of our cost of transportation, it is growing compared to average grocery spending. According to the Food Marketing Institute, average weekly spending on groceries is now $92.50. Anyone with a long commute in a gas-guzzler may now be spending as much on gasoline as on food.
Talk about hard choices.
Some solutions
So what can we do?
In the Burns family, we've done a little of everything. In 2003, we traded a turbo-charged New Beetle (22 mpg, premium gas) for a 2003 Prius (45 mpg, regular gas). I now work in my home office most of the time, a 30-foot "commute." My wife has retired, so she is no longer driving all over Dallas six days a week. We drive the Prius whenever possible. We no longer leave the house to buy a pint of ice cream. We combine our trips as much as possible. And we try to reserve our aging Jeep for its primary purpose: hauling stuff.
No rocket science. But simply paying attention has big results.
We've cut gasoline consumption from about 1,100 gallons a year to about 565 gallons: We're driving fewer miles and trying to do it in the most fuel-efficient vehicle.
Could we do more?
You bet. Invest more, and we could cut our gas consumption in half again.
Were there an inexpensive retrofit for the 2003 Prius, we could convert it to an overnight plug-in car, double the mileage, and eliminate another 140 gallons. But there is no inexpensive retrofit.
Similarly, we could sell the Jeep and get on the waiting list for a Ford Escape Hybrid, spending at least $27,000 on the new car, plus sales tax and collision insurance, to save about 130 gallons.
Bottom line: The big energy savings will come from changing habits, not from big purchases.
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