Cars: Initial Cost vs. Life Cost

Buying a new car or truck is one of the most important — and expensive — purchases that most of us make. But the cost of a vehicle isn’t fully included in the sticker price (not that you should ever pay full price); in fact, a vehicle’s gas costs are almost as important over its life as its initial price.

You’d never buy a car without knowing how much it costs, so why would you ever buy one without knowing how much it’s going to cost you over its life? Seemingly small differences in miles per gallon (mpg) ratings between cars can dwarf seemingly significant upfront cost disparities.

Choosing the Right Vehicle

For instance, a 2010 Toyota Prius costs about $28,100, while a 2010 Toyota Camry costs about $19,400.  Seems like a no-brainer to buy the cheaper Camry. But if we assume that each car will be driven for about 150,000 miles over its roughly 14 year life, then it turns out that because of the Prius’ much better fuel economy — it has a combined city/highway average of 49 mpg compared to the Camry’s 26.2 mpg — the Camry will end up spending almost $9,000 more on gas over its life than the Prius, almost exactly equal to their initial price difference. Given gas price’s recent volatility, there’s a good chance that future prices will end up being more expensive than predicted, so more expensive, more efficient cars could end up being a bargain in the long-run. And by picking the Prius, you’d use 2,720 fewer gallons of gas over the life of the vehicle, emitting 6.6 fewer metric tons of carbon dioxide.

It’s also important to look at the actual mpg of the vehicle, and not get carried away by a certain brand or term. For instance, when most of us hear “hybrid” we think “efficient.” And normally that’s true, but it depends on what the hybrid is being compared to. A hybrid SUV will frequently get worse mileage than a smaller car using a standard combustion engine just because it’s so much bigger and heavier.

You've Chosen a Car — Now What?

Once you’ve decided on a vehicle, there are still ways to reduce driving costs. Making sure to use the recommended grade of motor oil (shown in your owner’s manual) can improve gas mileage by 1-2 percent, saving you $30 per year. Keeping your tires properly inflated can also save you money — up to $50 per year. And simply by driving less aggressively, you can save 10 percent or more on your gas bills, worth around $70 per year (not to mention the avoided cost of all those speeding tickets).

Of course, the easiest way to save on gas is to not drive at all. When possible, take the bus, ride a bike, carpool or walk — it’ll save tons of money and energy and avoid harmful CO2 emissions.  And the less you drive your car, the longer you’ll be able to wait before going through this decision again.