The Gas Issue

by Stacy Francis, CFP®, CDFA

I paid over four dollars per gallon at the pump today! While this may not impress Europeans, who have paid such prices for ages, the cost of oil certainly isn’t helping the US economy right now. Herds of people are making the switch from large SUVs to compacts – even hybrids. But in dollar terms, how much of a difference does it make what kind of car you drive?

Though the numbers vary slightly, the main consensus seems to be that the average American commutes 33 miles per day, between home and work. Nine out of ten drive a car. So say that your commute is 33 miles per day, and that you work 5 days per week, fifty weeks per year (gotta have a few days off). This adds up to 8,250 miles per year.

Now let’s look at cars. On one side of the spectrum, we have small Japanese hybrids such as Honda Insight, Toyota Prius, and Honda Civic Hybrid. These cars will get you 66, 57, and 47 highway miles per gallon, respectively. The other extreme is sports cars, or huge SUVs. A Hummer will get you 10 highway miles per gallon, a Dodge Ram 12, and a Lamborghini Murcelago 13.

So if you’re driving a Honda Insight 8,250 miles per year, at $4 per gallon gas, this will cost you $500. If you on the other hand go for the Hummer, and drive the same number of miles, your price tag will be $3,300. The difference is $2,800.

So while your car is likely to land you somewhere in the middle, with several thousand dollars per year in potential savings, it is not hard to see why to many Americans, bigger is no longer better.

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