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Found an excellent post over at Frugal Dad about the decision making process for buying a fuel efficient car. Does it make good financial sense to purchase a new car to save money on gas? I’ve asked my self this question several times. Frugal Dad analyzes the costs, taking into account MPG on the old and new cars, insurance and maintenance costs, and the payment on the new car.

Frugal Dad’s conclusion?

“As you can see, from a purely economic standpoint it does not make sense to finance a newer, more efficient car in the short term. Over time, as the cost of gas continues to increase, and the costs of ownership of the newer car come down (and the loan is paid off), the savings realized could be significant. However, it would take a lot of fill-ups at the pump to justify adding a car payment to your monthly budget.”

FD goes on to discuss the non-financial impact of continuing to drive a gas guzzler. The environmental impact is greater if you continue to drive the gas guzzler.

My thoughts?

Frugal Dad is spot-on with his analysis. After taking into account the payment on a new car, it usually doesn’t make financial sense to purchase a new care solely to save money on gas. I have personally heard of people who drive enough miles to make the math work. In Frugal Dad’s example, you would have to drive around 28,000 miles to breakeven. When it is time for us to buy our next vehicle, we will definitely purchase one with better fuel economy.

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