Fuel prices vs. car prices
I filled up the hire car today. It had a quarter of a tank remaining, but my obligation as a hirer is to fill it up if it dips below that level. So I did. It cost £67 for standard unleaded, at 137.9p per litre. (BTW, that’s £6.27 per gallon in old money, as my dad, and oodles of other dads, still say to this day.) That would make it around £89 for a full tank by my reckoning. Ouch.
I got to thinking about what fuel efficiency was worth when purchasing a new car.
Having done the analysis it seems that, to me, marginal fuel efficiency has a surprisingly small impact on the cost of car ownership. At 12,000 miles per year, a car running at 40 miles per gallon will guzzle 300 gallons per year at a cost of £1,880.72. At 41 mpg, the cost will be £1,834.85, an annual drop of a mere £45.87, less than a pound a week. And obviously, as the mpg increases, the marginal price differential of a single extra mpg reduces. So the difference between the fuel costs for a 50 vs. 51 mpg car falls to £29.50.
So assuming depreciation over five years and other things being equal, a new car offering 45 mpg can justify being priced £1,044 higher than one offering 40 mpg.
Now switch your attention to the gas guzzlers. A car running at 10 mpg will cost £2,507 more per year to run than one running at 15 mpg, so the more fuel-efficient 15 mpg-er can justify a price tag £12,538 higher than the 10 mpg-er. As an aside, for such cars to average 12,000 miles per year, the school to which the car is driven twice daily would need to be 15.8 miles from the home. 😉
(Environmental arguments were left to one side in the writing of this post.)