Buying A Car To Save Money

Cars that get over 40 miles per gallon in fuel efficiency are, reportedly, becoming all the rage, with more models from American and foreign car makers being introduced at the latest Detroit Auto Show.

So I got curious, having just started a 18-mile-each-way commute, what exactly are the savings one can achieve by buying a more fuel efficient car? I assumed a situation faily like mine: My car is paid for and costs me only minimal maintenance to keep up (a 14-year-old Toyota Camry) and a 20 mile each way commute.

Say you’re considering buying a new car which gets 40mpg for $20,000. That seems moderately standard for these cars. Assume a 40 mile daily round trip commute, and an additional 40 miles of weekend or additional driving. Assuming a current care actual efficiency of 20mpg. Assume the price of gas goes up to $4/gal. How long would it take for you to make up the cost of that new car in fuel savings?

I calculated savings as follows:

(([Daily Commute]/[Old MPG])-([Daily Commute]/[New MPG])) x [Price of Gas]) = Daily Gas Savings

[Cost of New Car]/([Daily Savings] x 6 x 52) = Years to make up cost of car

How long would it take? 16 years.

Then I decided to go at it the other way. What changes would allow me to pay off the expense of a new car in gas savings over a normal financial window of five years?

– If the cost of a new car gets below $6,500
– If the cost of gas goes over $12/gal
– I tried coming up with an increased MPG efficiency answer, but it’s impossible. Even if you could get 100,000 MPG, it would still take eight years (assuming gas prices of $4/gal) to pay off the expense of a new $20k car via gas savings. If you assume a 100MPG car and seek for the gas price which get you to break even in five years, you need a gas price of $8 per gallon.
-If you vary the length of commute, a 130 mile daily commute (assuming 780 miles per week of driving total) would allow a $20k car to pay for itself in gas savings in five years with gas prices of only $4/gal.