Should I Upgrade to a More Fuel Efficient Vehicle?

Using the Calculator

Like any financial calculator, you plug in numbers based on a set of assumptions. These include the cost of gasoline per gallon, the number of miles you drive per day, and the miles per gallon your old vehicle gets vs. your new car's mpg.

The calculator also includes cost assumptions for your current and prospective new vehicle. These include the monthly payment on your current vehicle, the number of payments remaining, and your anticipated sale price. For the new vehicle, the calculator looks at your estimated monthly payments, the number of months in the loan, your down payment, the taxes and registration fees you'll pay for it. It will also account for state and Federal hybrid tax credits, if applicable.

Plug in the numbers and you may be surprised at what comes out.

Let's assume gasoline is $4.00 per gallon and you drive 33 miles per day, or 12,045 miles per year. If like many SUVs your current vehicle gets only 14 mpg and your new vehicle gets 36 mpg, it can still take 65 months for the gas savings to pay for itself, assuming your old vehicle is worth $7000 and the new one costs about $19,000.

If your current car is worth less and the new car costs more, it will take even longer for a new gas efficient vehicle to pay off. If your current car is worth $5000 and your new one costs $24,000, it will take 114 months (9½ years) for the $2103 in yearly gas savings to pay for itself.

But this analysis doesn't account for everything. First, you can't assume your old clunker will run for 9 years; having a new car is its own reward. Second, the more you drive, the shorter the payoff will be. Finally, the payoff period drops as gas prices rise, which may be some consolation if gas prices soar to $5 a gallon.