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      05-24-2008, 12:33 PM   #43
chuck92103
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Drives: 2011 535i
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I have been watching the financial news this AM and something does not seem right.

Is it me, or is there a lot of Americans who do not understand basic finance?

With oil prices inching upward, there seems to be a mad frenzy to trade out the truck or big car for a Prius or some other fuel efficient vehicle.

People understand fuel efficiency. However, they do not seem to understand financial efficiency.

Yeah they can trade that SUV that gets 10-15MPG for a 40MPG car. But they are paying $30k plus for the Prius with interest, maintenance, etc. How long will it take before the recoup trade in loss?

It seems that emotion is playing into a lot of this and folks do not understand that transportation costs include more than the cost of fuel.

Car purchase/lease
Insurance
Maintenance
Interest
depreciation at trade in or sale
etc.

Also, if someone owns a car like a Prius and they also own an SUV like an X5, the true fuel costs and MPG is the avergae of the total monthly fuel costs between the two vehicles.

Anyway, just like bad mortgages of the past, I see Americans making the same mistake again and going further in debt to get increased fuel economy.

If Joe has a Suburban that gets 12MPG and drives enough each month where his fuel bill at $4 per gallon is $400 per month

and

Sally sold her SUV for a Civic that gets 40MPG, she is only spending 1/4 for fuel for $100 per month to drive the same distance. A savings of $300 per month. Not including trade in loss, and interest on the loan, maintenance, etc. it will take her 4-5 years to break even. And if gas goes back down which it is expected to do once the dollar goes up, the picture is even worse. Plus, sally cannot haul her family and all their gear in a Corolla so their lifestyle has to change as well. The car becomes basic transportation rather than a vehicle for hauling, camping, etc.
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