Lately, I’ve been thinking a lot about the costs and benefits of speeding. Is pushing the pedal a bit actually worth it? Or are you better off staying inside the speed limit?

In order to start cranking the numbers on this, I had to use a few assumptions. Let’s walk through them.

First, I figured that you have 1/4% chance of receiving a speeding ticket for each mile you’re over the speed limit for an hour. So, if you drive 68 in a 65 zone for an hour, you have only a 3/4% chance of receiving a ticket. On the other hand, if you drive 82 in a 65 zone for three hours, you have a 12 3/4% chance of receiving a speeding ticket.

Second, I figured the cost of a speeding ticket is $200 and has a ten minute time cost. The ticket itself will cost you less than that, but the raise in your insurance rates will eat the rest.

Third, I figured you lose 1% fuel efficiency for every mile per hour over 65. I’m using government estimates for this figure.

Fourth, I’m using a figure of $2.50 a gallon for gas, and I’ll use a car that get 25 miles per gallon for the calculation.

Got that? Let’s get cracking.

Is it more efficient to drive 80 miles per hour or 65 miles per hour on the interstate? Let’s say you’re making a 200 trip on the interstate.

If you go 65, you have zero chance of receiving the speeding ticket. You’ll consume 8 gallons of gas and arrive in three hours and five minutes, costing you $20.

If you go 80, you have an 11.25% chance of receiving a speeding ticket. If all goes perfectly, you’ll consume 9.4 gallons of gas and arrive in two hours and thirty minutes. However, if you receive a ticket, you’ll arrive in two hours and forty minutes – that’ll happen 11.25% of the time. So, combining the odds of the two, an average trip driving 80 will allow you to arrive in two hours and thirty one minutes (saving thirty four minutes) and cost you $46.03.

So, driving faster saves you thirty four minutes but costs you $26.03 – an hourly rate of $45.11 for driving slower.

What about going 70? You have a 3.75% chance of receiving a speeding ticket. If all goes perfectly, you’ll consume 8.4 gallons of gas and arrive in two hours and fifty one minutes. However, 3.75% of the time, you’ll receive a ticket and arrive in three hours and one minute and drop $200 on that ticket. So, combining the odds of the two, an average trip driving 70 will allow you to arrive in two hours and fifty two minutes (saving thirteen minutes) and costing you $28.55 (costing an average of $8.55 more). Your hourly earnings from driving 65 instead of 70 is $38.91.

What about going 66? Only a completely malicious cop bent on getting their quota would give you a ticket then – you have a 0.75% chance of getting a ticket over three hours. If all goes perfectly, you’ll consume 8.1 gallons of gas and arrive in three hours and two minutes. However, you have a 0.75% chance of getting a ticket, and if you do, you’ll arrive three hours and twelve minutes and get a $200 ticket. Combining the odds, on an average trip going 66, you’ll arrive at three hours and a bit over two minutes (saving a bit under three minutes) and spending $21.70. Your hourly earnings from driving 65 instead of 66 is $36.50.

Here’s the data up through 120 miles per hour. The data in the “TRIP COST” column is the total cost (gas plus odds of a speeding ticket) of an average 200 mile trip on the interstate at that speed in a 25 miles per gallon car. The “SPEED COST” indicates the total cost you incur by going that speed instead of going 65. The “MINS SAVED” column tells you how many minutes you save by going that speed instead of 65. The “HOURLY” column indicates the hourly wage you earn by simply going 65 instead of speeding. So, for example, if you go 120 miles per hour, your trip costs, on average, $126.94, which is $106.94 more than you’d spend if you drove the speed limit. Driving this fast saves you 84.6 minutes on average, though, so if you drove the speed limit instead of going this fast, you’d earn an hourly rate of $75.83 for your time.

Conclusions
First of all, each mile per hour you speed is more costly than the one before it. Going from 70 to 71 is more costly than going from 69 to 70. That’s fairly straightforward, though.

Second, if you look at it in terms of an hourly wage, speeding can be pretty costly. Remember, we’re talking about after-tax dollars here, not the raw amount you bring home. Thus, a $36.50 hourly rate for the two minutes and forty eight seconds you spend driving 65 instead of 66 is more like $50 or $55 an hour in pre-tax money. The chances of a speeding ticket are more costly than you might think.

Third, this doesn’t include a “wear and tear” factor. Continually speeding puts additional wear and tear on your car – an amount that’s hard to quantify. With an enormous pool of real-world data, one could come up with a factor for this, but it would simply serve to make the cost of going faster even higher.

Fourth, this is all about probability. You’ll hear from people who claim to always drive eighty and never get a ticket. Others may get a ticket going 37 in a 35 (the ticket said 42, but I was going substantially slower – an officer was pretty obviously trying to get a quota filled). One lucky person is a great anomaly, but it doesn’t change the simple fact that the faster you go, the more likely you are to get a ticket.

Finally, some people with a high value on their time can justify speeding. If you are hurrying to a place so you can start billing $100 an hour, there might be a great justification in speeding. However, the more you push it, the less you actually gain, because the hourly cost for each mile per hour goes up.

However, on most road trips, you’re better off setting the cruise control at the speed limit and just cruising along. Getting to Aunt Melba’s ten minutes earlier isn’t worth the potential cost for most people.

The comments on this one should be fun. All I suggest is that you shouldn’t get bogged down in picking apart the assumptions, because even radically changing them still results in the same conclusions. I tinkered with and researched the assumptions extensively for this post and found that even if you modify the assumptions radically, the conclusions still hold.

In the next few weeks, I’m going on a lengthy road trip with my wife, my children, and my parents. We’re going to visit several relatives that are spread out all over the southern part of the United States. Along the way, we’re planning longer stops in the Dallas/Fort Worth area, the New Orleans area, and the Memphis area (in fact, if you’d like to have me speak at your library or other event in one of those areas in early June, contact me).

Our trip, as currently planned, is 2,548 miles in length – and that doesn’t include the inevitable driving around in local areas or any side trips we decide to take along the way. Yes, it’s long. Yes, it’s fairly intimidating.

Originally, our plan for the trip had involved taking two vehicles – our Prius and my parents’ car. From our perspective, this was a good idea, since the Prius gets great gas mileage, but my parents’ car doesn’t do as well.

As we discussed the trip more, we came to the realization that it made much more sense to drive in one vehicle, for several reasons.

First, one vehicle at 20 miles per gallon consumes the same amount of gas as two vehicles at 40 miles per gallon. In short, even if one of the vehicles is our Prius, we’re still better off purely in terms of gas driving a minivan.

Second, maintenance costs over 2,500 miles are significant. The average car has 5.3 cents per mile in maintenance costs beyond fuel – oil, transmission fluid, coolant, tires, and so on. That’s a total of $132.50 per vehicle over the trip.

Third, 2,500 miles on your vehicle is 2,500 miles of depreciation. Again, the average car depreciates roughly $0.20 per mile – this is very hard to precisely estimate, but it’s a real value. Again, by reducing to one vehicle, we save $500 in depreciation. Note, here, that depreciation includes major repairs and other such factors.

Fourth, two cars means double tolls. On our trip, assuming no detours, each car would be paying somewhere around $15 in tolls. Reducing to one car saves another $15.

In total, we realized that we would save roughly $650 by using just one vehicle on this trip – and that assumes no fuel savings and also assumes no detours, no construction, and no environmental impacts.

At that point, we really beat the pavement to accelerate the purchase of our second vehicle. The problem, though, was that we couldn’t find a vehicle we really wanted.

So, finally, my wife raised the question: would it be cheaper to just rent a van for this trip?

The trip is scheduled to be nine days in length. I did some calling around to local rental services and found several vans that could be rented for $400-500 for the length of the trip – unlimited miles.

So, let’s look at the math. We would save depreciation on two vehicles ($1,000), maintenance on two vehicles ($265), toll on one vehicle ($15), and a small amount of fuel savings, too, for $400. That’s a total savings of $880.

In order to make sure there wouldn’t be any nasty surprises, I contacted our auto insurance provider, who told us that coverage while driving the rental would be essentially identical (in terms of our cost) to coverage if we were driving our own car. Thus, no need for the additional cost of rental car coverage.

Thus, for our purposes, the decision has been made – we’re going to rent for this long road trip and split the cost. This choice will save us $440 and also save our parents $440.

Sometimes, thinking outside the box a bit can save you a surprising amount of money.

A few months ago, I posted about our decision to buy a Prius after the fact. Although I’d mentioned for months that we were actively car shopping, I waited until after the purchase to discuss it.

And the flame war was mighty potent. The post currently sits at roughly 174 comments, about equally divided between positive and negative, and I’ve received at least that many emails on the subject.

Since we acquired the Prius, though, our other “old” vehicle has largely died. It’s capable of making it around town, but drives of any distance cause it to rumble so ominously that I’m scared to drive it more than a mile or two. We’ve had it checked over twice and the conclusion has been the same – it needs thousands of dollars in parts and repairs to get the truck back to any degree of stability and reliability – and that won’t fix everything.

So, for the last two months, we’ve experimented with essentially being a one-car family. And, to put it simply, it doesn’t work.

Although I work at home most days, there are many days when I have meetings or research trips outside the home (particularly with regards to my second book).

Another key problem is that we’re likely going to have a third child in the next few years, meaning that none of our current vehicles can safely seat our family.

A third problem is winter weather. While the Prius gets incredible gas mileage, it’s not adept at winter driving in Iowa. My truck is fairly adept, but it’s not reliable at all without some significant investment.

So, we’ve started the process for buying a replacement for the truck. Luckily, as we were researching the car, we were also doing research on what we might purchase for a truck replacement.

To put it in a nutshell, we’re looking for a late model used van, (strongly) preferably with all-wheel drive. Let’s walk through some of the concerns.

Our Criteria
As I mentioned recently, our primary concerns are reliability and safety. We also require seating for five, and prefer seating for another head or two. For this vehicle, since it won’t be used for a regular commute, gas mileage is still a concern but it’s a lesser concern.

So, what does that mean in terms of actually finding a good vehicle for our dollar?

As with the Prius, we expect our best deal with this criteria to be a late model used. Our research starts there – we’re looking at 2005, 2006, and 2007 model vans, but are open to looking at both newer models and older models with limited mileage.

Since reliability is a concern, one of our bigger factors is lower mileage. Although it’s not a guarantee of reliability (nothing is), lower mileage simply means that there’s fewer miles’ worth of wear and tear on the parts on the vehicle.

Since safety is a concern and we live in a winter climate, all wheel drive is practically a requirement. Add in the factor that both of our parents live in a similar climate and off the paved road (with one set of parents living at the top of a steep hill with a gravel road that becomes like a sheet of ice in the winter) and all wheel drive is very important. Recent years have seen us borrowing a four wheel drive locally in order to make it to visit many of our relatives – my very heavy but not four wheel drive truck can’t do the trick. To put it simply, our situation strongly encourages an all wheel drive vehicle.

We’re not married to any brand beyond the reliability numbers. I’ve spent time at the library looking at individual reviews and reliability data on vans in the 2004 to 2009 model years. The picture becomes pretty clear – the Toyota Sienna is clearly at the top of the heap for all wheel drive and reliability, with several other vehicles in the next tier.

The problem? The all wheel drive Toyota Sienna doesn’t depreciate much in price, so it’s significantly more expensive at the late model used stage than other options.

Our Plan
So, what’s our plan?

First, we’re trying to maximize the value of our old truck. This involves cleaning it up and detailing it, as well as getting a small amount of work done on it to make it road-worthy over the short term. We’ll likely trade the vehicle.

Second, I’ve already begun checking out the prices on such vehicles from all dealerships anywhere near us. Most dealerships have online listings so that you at least have a good sense of their inventory. I’m not ignoring new vehicles, but as of yet the prices aren’t close enough to late model used to really have them in the comparison.

Third, I have a few friends who visit bankruptcy sales keeping an eye out for me. This is a long shot (estate sales rarely have vans), but it’s worth a chance.

Fourth, we’re not going to “over-wait” like we did with the Prius. With the Prius, we sat around waiting for the “perfect” deal to arrive – but it never did. Along the way, we wasted quite a bit of money on repairs and jumping through travel hoops, negating any benefit of waiting around for the best deal. Instead, if we find a good deal, particularly towards the end of the month when salesmen are trying to hit quotas, we’re just going to jump on it. There are costs involved in waiting for a deal that’s just a bit better.

Thoughts? Comments?

“Michael” writes in with a common question:

What do you do when you find your car is worth less than you owe on it?

This is a pretty common question, particularly given the current state of the economy. Some people are out of work. Others are looking to seriously cut back. Thus, there are a lot of people out there that would like to get rid of their current car loan – but they’ve found that their car is worth less than they owe on it. Often, there’s not enough cash laying around to make up the difference, either.

So what do you do? I see a handful of options.

Ask yourself if you really need to change cars. Many people who are underwater in their car loans are looking at upgrading their car. If you’re in this situation, spend some time asking yourself if you really need to make a change. Would this upgrade serve any purpose other than aesthetics? If there is a purpose beyond that, is it worth the huge amount of debt you would incur?

Delayed gratification is the key here. If you can put off the purchase for even a year or two, you’ll end up in substantially better financial shape than if you pushed things right now and wound up even further in the hole than you are now.

Trade down. If you still need the car for transportation, consider trading down – you’ll take a big loss on the value up front, but over the long run, it will definitely balance out.

Let’s say, for example, that you’re driving an almost-new 2009 Toyota Avalon that’s worth $6,000 less than you owe. You realize you can’t really swing the $500 a month car payments. So, you take it in and trade it for a $7,000 late model used low-end sedan. Some dealerships will accept this trade – others won’t – but what you’ll wind up with is an upside-down loan on this used car. However, the car payments will be significantly lower, as will the insurance rates.

Park it and remove insurance. If you don’t need to drive the car right now, consider parking it somewhere safe and eliminating insurance on it. This will reduce your monthly bills (no insurance), plus you’ll not actually have to give up the car – it’ll still be there for you if you return to work. It’s not accumulating miles or wear and tear, so you save on maintenance costs as well.

This strategy works well if you’re in a situation with a healthy emergency fund and are anticipating several months without work. I know of several people in this position – they’re currently staying at home, either looking for work or trying to get their own business started while living off of savings.

Get a different loan, then sell. If you have very strong credit, you might have the option to get a personal loan or perhaps add to a home equity line of credit in order to pay the car loan down enough so that you’re not upside down in the loan. When you’ve done that, actively seek to sell the car.

This is a great solution if you have strong credit (or at least access to a healthy credit line with low interest elsewhere). Essentially, you’re just eliminating the car (and its value) from the loan, leaving you with just a small debt that can be repaid over time. Plus, you get the additional savings of no insurance and no vehicle tags.

Are there any other good ideas that Michael might be able to try?

One of the interesting features of our Prius is that it keeps a running tab on your current gas mileage. You can see both the mileage at any given moment or the average over your trip. Having such easy access to this information while you’re driving subtly teaches you how to drive more efficiently. Here are a few things we’ve learned.

Coasting makes a huge difference on your gas mileage. One thing this data has taught me is the huge value of coasting, particularly through a series of stoplights. Stopping and starting eats a lot of gas – our gas mileage during acceleration goes down to as low as 10 miles per gallon. Coasting, on the other hand, uses virtually no gas at all.

Before adjusting my driving, I had a strong tendency to leave a stoplight, accelerate to the speed limit in town, then often find myself hitting the brake and stopping again as I approached the next stoplight. That meant I was doing a ton of acceleration, then losing most of that speed by braking again just a block later.

Instead of doing that, I’ve found it’s just as quick (and way more energy efficient) to coast as much as possible through long strings of stoplights. I accelerate up to roughly the speed limit, then I coast for a while, particularly if the light ahead of me is red. Almost without fail, I catch up to the car ahead of me just as they’re accelerating away from the stop – and I already have some momentum going forward, which means I don’t have to accelerate nearly as hard to get back up to the speed limit. It doesn’t take any longer and it saves money.

I tested this out driving through the town where I live and the difference was tremendous – doing this added about 25 miles per gallon to my mileage through town.

Driving 75 on the interstate is substantially less fuel efficient than driving 55 on a two-lane highway. One regular trip for us is driving south to the West Des Moines area, about a 35 mile trip or so. We have two routes to get there that are roughly equal in length, but the interstate is a bit faster. On the interstate, of course, we drive around 75 miles per hour to keep up with the traffic. On the other hand, we can take the highway and go around 55 miles per hour. The highway usually takes us about six minutes longer to get to our destination, so before getting our Prius, we’d simply always use the highway.

But here’s the kicker. If we take the interstate, we would get around 38 miles per gallon. If we take the highway, we get about 52 miles per gallon. So, if we take the interstate, we use 0.92 gallons, but on the highway, we use 0.67 gallons. That’s a savings of about $0.48 on the trip, even in our relatively fuel efficient car.

This changes the equation just a little bit. The two lane highway is far more scenic than the interstate as well – there are many more interesting things to see and talk about along the highway route (meaning it’s easier to engage the kids). When you also toss in the fact that it’s cheaper – and it would be a much bigger difference in a less fuel-efficient car or if the price of a gallon of gas were higher than $1.94 – the balance starts to shift towards the slower route. Does the balance actually shift? Not entirely – for us, it still depends on a number of factors (the time of day, the presence of kids, and so on) – but the balance of values has changed.

Wind resistance makes a tremendous difference in your drive. Simply put, driving on a windy day (unless the wind is consistent and at your back) is incredibly inefficient.

On a recent windy day, my family and I embarked on a lengthy road trip where the wind was mostly in our face. This forced us to accelerate quite a bit more to maintain speed – and it pushed the gas mileage down about 35% (29 versus 44). As a test, I drove with the wind on another windy day and found that it improved our mileage by only about 10% (48.5 versus 44).

Thus, unless the wind is very, very consistent and at your back, a windy day will hurt your gas mileage. If you have an optional trip to make and there’s a heavy wind outside, you’re better off delaying the trip. That’s what I’ve already done twice since seeing the impact that a heavy wind can have on gas mileage.

Turn off your cruise control in hilly areas. In virtually every car I’ve used, cruise control has been a great tool on flat roads. It helps me control my slight lead-foot tendencies and seems to do a good job with gas mileage. The data from our Prius backs this up – on flat roads, that is.

If you enter a hilly area, though, cruise control is very inefficient. Instead of maximizing your speed going down hills and using that momentum, cruise control instead tries to keep the car within a few miles per hour of your set speed.

Since it can’t read the road ahead, it doesn’t know what’s coming up. You do. Take advantage of that and turn off the cruise control in hilly areas. I turn it off any time I go downhill or uphill, since it seems to be more efficient to build up speed going down the hill (getting well above your cruise speed) then coasting at the bottom until you get back to your cruise speed, and doing the opposite on hills (allowing yourself to get well below your cruise speed instead of accelerating into a hill).

In the end, our best value from the Prius might be the ability to actually see how our little driving choices affect our gas mileage – and how we can make better choices to vastly improve that mileage. As time goes on, these better choices become ingrained in our driving habits, making the more efficient choices our natural choices – ones that we’ll carry on to other cars. Fuel efficient driving doesn’t cost you time – it just saves you money.

Personally, I’d like to see all cars have a fuel mileage indicator. It’s been an invaluable tool for directly teaching someone how to drive more efficiently – and it’s easy to see the benefit when you go to the gas pump.

If you had told us a year ago when we started our research that we would wind up settling on a new car for our car purchase, I would have laughed at you. We’ve been strongly committed to buying a late model used car for a long time, since we viewed it as the best “bang for the buck” option, especially since we intended to drive our newly purchased car until it literally began falling apart – a state that our 1999 Mercury Sable was in.

When we started our process for buying a new car, we focused on a small handful of factors:

We wanted a late model used car with a reasonable number of miles on it. We didn’t want to buy a car with a lot of miles on it because we believed we would be back where we started in just a few years. We were looking mostly for late model used cars with less than 60,000 miles on them.

A compact car doesn’t work. I’m six and a half feet tall. Our 1999 Mercury Sable is about the smallest car I can sit in comfortably. Smaller models simply do not work for me – I cannot sit in them because my knees are literally pressed into the dashboard.

Fuel efficiency and reliability were our primary factors. We’ve never been interested in bells and whistles. We don’t need a six-disc CD player or in-dash GPS. We have no interest in leather seats and so on. The basic package is enough for us.

We actually calculated the fuel efficiency of each car by calculating how much we would have to spend on gas over the lifetime of the car – up to 150,000 miles, which is our estimate for how far we would drive it. We figured 15,000 miles per year, with the cost of gas being $3 per gallon on average.

Fuel efficiency is particularly important for us because this car will be used for my wife’s commute. Roominess for long trips isn’t nearly as important here – we’ll mostly use it for commuting, local errands, and some weekend trips.

Thus, we started our search looking at 2004, 2005, and 2006 sedans. I visited the library several times along the way and we looked at quite a few cars. We eventually settled on a handful of models that we were interested in – the Honda Accord and the Toyota Camry led the pack, with a few other models we were considering. (The Prius wasn’t even on the radar at this point.)

What we began to notice is that, in the models we were looking at, the new cars weren’t a lot higher than the used versions we were looking at. We would see a used 2005 Camry with 50,000 miles on it at 60-65% the price of a new Camry, for example, and our per-mile calculations would show us that we would get the same value-per-mile out of the new car if we drove it to 150,000 miles, plus with the new car, we would get two or three years of initial low-trouble driving out of the car (the first 50,000 miles).

The prices were mostly the result of the economy in late 2008. Reliable used cars were holding their value well, but new cars, even on models that sold well, were seeing great prices.

Thus, we began to include new cars in our search. This was cemented at a large Toyota dealership in mid-February, when one salesman quoted us a price on a used ‘09 Camry (with a few features we didn’t want) that was only $1,000 less than a new ‘09 Camry.

Another factor: the stimulus package. Here’s the scoop, per cnn:

Under the Auto Ownership Tax Assistance Amendment, car buyers will be able to deduct sales and excise taxes on the purchase price of a car up to $49,500. As originally proposed by Sen. Barbara Mikulski, D-Md., interest payments would have been deductible as well.

The full text of the amendment (featuring fifty tons of legalese) is here, but the summary above makes the benefit pretty clear – the taxes paid on a new car plus car loan interest (note: the car loan interest provision was removed in a revision of the bill) are tax deductible. This saves us a few hundred dollars (at least) for buying new instead of buying used.

Yet another factor that nudged us towards new is the warranty offered on a new car. To put it simply, with auto insurance and a warranty, our only expenses on the car over the first several years are maintenance and deductibles (if anything happens). Although many used models have some degree of warranty available, most are very short term or are severely limited in some regard.

As our 1999 Mercury Sable began to exhibit more and more problems (failing struts, a transmission that would take five or so seconds to shift from first to second gear, our search began to grow more urgent. We received the 2009 car issue of Consumer Reports in the mail and my wife and I pored over it carefully.

We focused on the entry-level family sedan section and eliminated them based on a handful of factors: it had to have at least average safety, it had to have fuel efficiency above 22 miles per gallon, and it had to have a good reliability history. These factors quickly eliminated quite a few models, leaving us with just four new models that we agreed to consider along with the used models we were considering: the Toyota Prius, the Toyota Camry, the Nissan Sentra, and the Honda Accord.

Here is where the Prius began to really stand out for us. We did fuel efficiency calculations for these models assuming that we would drive them to the 150,000 mile mark with the same cost-per-gallon assumption we used above. According to that calculation ($3 per gallon), the Prius would cost us $9,782 in gas over the lifetime of the car (at 46 MPG), while the Camry (for example) would cost us $18,750 in gas over the lifetime of the car (at 24 MPG). A $9,000 savings on fuel (at the assumed $3 per gallon rate, of course) versus an average fuel-efficiency car was a huge factor for us in our calculations. To put it in another perspective, we anticipate putting roughly 15,000 miles per year on the car. Versus the Camry (which I’m using as an “average” sedan here for comparison), the Prius would save us $900 a year in fuel.

We spent a month comparing prices on used cars available at local dealerships as well as the new cars we had identified and, to put it quite simply, we could not find anything that really competed with the “bang for the buck” value of the Prius. Most of the used models we examined were priced close enough to the new models – even after negotiating – that we eventually came to the realization that the Prius was the right purchase for us.

Our down payment decision We had enough in cash to pay for the car in one shot, but two factors kept us from doing that. First, it would partially deplete our emergency fund, putting our family in a somewhat more risky spot. Second, we will have to replace our other vehicle (currently a Ford F-150 with somewhere around 140,000 miles on it) in the next year or two, so depleting our entire car savings might not be wise. Add into that the fact that our credit is stellar (we got a 4% rate on our car loan), we’re nearly breaking even by keeping the cash ourselves and holding it in a savings account plus we have the security of having a big emergency fund. We chose to put $5,000 down on the car to avoid any liability and insurance costs if we were to be underwater on the car at any point. The rest remains in our savings, minimizing our risk against other life emergencies.

(Edit: after reading many comments about whether or not we could afford the car, I wanted to note that we had enough in car savings to pay for the entire car in cash. We chose not to because we have a second vehicle that will need replacing in the next year or two and that may require major repairs in the near future (we consider that to be an emergency, hence the mention of “emergency” savings above – if our truck had failed right after buying the car, our emergency fund would have gotten hammered). At the same time, we were earning 3% in savings & CDs with the cash compared to the 4% loan – that didn’t offer enough incentive to lose the huge cushion in our savings.)

Thus, after all of this, we bought a 2009 Toyota Prius. After driving it for a weekend trip (and putting about 400 miles on it), the car is achieving almost exactly 42 miles per gallon (even with my wife lead-footing a bit on the interstate).

Here are four things we learned during the process.

Know what you actually want. Because this is a car we’ll use for commuting, our biggest factors were reliability and fuel efficiency. We did not want any extras, either – the base package is what we wanted. Thus, as we shopped, we were often comparing the base package for the new models versus a motley crew of packages for the used models, meaning the prices were often closer than they would be if we were demanding some certain “extras” as a minimum requirement. This changed our buying process significantly.

Before you even start shopping, spend some time figuring out exactly what you want. Spend some time considering the features you consider important – and focus on those factors. If a feature isn’t important to you, don’t pay for it.

Don’t restrict your horizons without a reason. Our original predisposition against new cars was mostly due to the prevailing notion that new cars simply aren’t a good buy. Yet, in those market conditions, we ran the numbers carefully and found that our overall cost of ownership with a new Prius over the period we intended to own it was lower than virtually all of the used models we could find.

Total cost of ownership per mile is a surprising (and useful) number. Most of our calculations centered around the total cost of owning the car up to 150,000 miles, then we figured out the cost-per-mile for the car. So, for example, if we have a used car we evaluate that has 70,000 miles on it, we figure out how much the cost of fuel and maintenance and insurance will be up to 150,000 miles, add that to the cost, then divide that by 80,000 miles (the amount we’ll actually use it). For the Prius, we figured up the cost of gas and maintenance and insurance through 150,000 miles, added that to the price, then divided by 150,000. In short, we looked for the best bang for the buck, not the lowest monthly payment, and the best deal turned out to be the new Prius.

Don’t go shopping in one day. Take your time. Visit lots of dealerships. Even if you know what you want, negotiate a bit with that dealer, but don’t sign on the dotted line immediately. Let them know that you’re visiting lots of dealers. I don’t claim to be a good negotiator, but I do know that visiting lots of dealerships, talking openly about the things we’re considering from other dealerships, and leaving dealerships after expressing some interest in a car on the lot only helped us over the long haul.

If you’re making a careful purchase, research and dealer visits will likely be part of the equation anyway, so play it to your advantage. This can easily save you thousands on the initial price.

Good luck!

As you read this, my wife and kids and I are in the midst of a lengthy Christmas trip. We’re visiting friends and family strewn all about the Midwest, and that means lots of hours in the car with two small children.

Much like everyone else, we strive to minimize both the time spent in the car and the financial cost of our car trips, and this week is definitely going to give us a chance to try out our tactics.

Here are twelve things we’re doing this week to shave some of the cost from our Christmas travel plans.

Air up all of the tires before you leave. A day or two before you depart, take your car to the local service station and check the pressure in all of your tires. Don’t know what the pressure should be? Check the sticker inside your door jamb. Make sure all of your tires are filled up to the maximum recommended pressure. Proper tire inflation can save you 3 to 4% on your gas bill during your trip, and over several hundred miles, that can really add up.

Get a tune up. If you can’t remember the last time your car received a tune up, get one before you go. A proper tune up is your best insurance that your car will operate in an optimal fashion while traveling, and a tune up from a quality professional can identify any major problems that may interfere with your travel.

Prepare an emergency kit. Traveling in winter can be hazardous, and the best way to minimize the risk is to be prepared. Pack some blankets, an extra charged cell phone (for 9-1-1 calls in a pinch), extra clothes, some food, and some road flares in your car and make sure you have a spare tire and equipment for changing it if you need to.

Make sure your auto insurance is up to date. A long car trip is not the time to be caught with out-of-date insurance. Make sure your insurance is up to date, and if it’s not, make every effort to get the premium paid so that your insurance is in effect over the course of your trip.

Pack food and beverages before each long leg. Tasty and nutritious snacks are always a hit in our car – we like granola, raisins, and dried cranberries for long trips. They’re perfect for taking the edge off of hunger, enabling us to happily survive without hunger pangs until we arrive at our destination. We also pack water bottles to keep us on the road instead of stopping for expensive beverages.

Plan for simple entertainment for the kids. Bored children can make a long trip miserable and can often cause you to make unplanned stops along the way just for a break from the noise, which wastes time and often wastes money, too. We usually pack a “trip bag” for our kids – a few familiar toys, some books that my son knows by heart (which he then reads to his sister) – and have some ideas in mind to keep the kids interested, such as pointing out interesting roadside items.

Check the maps, even if the trip seems very familiar. Use a mapping tool like Google Maps to plan your trip, even if you’re very familiar with the route. Since moving to my current area just a decade ago, the optimal route to visit my parents has actually changed four times, and now, compared to the original route, the trip takes more than an hour less than it used to. That’s pure savings.

Time your trip to avoid obvious traffic issues. If you know you’re going to be driving into a major metropolitan area, try to avoid entering the metro area during morning or evening rush. This can usually be done with some careful planning in advance. Leaving a bit later (and eating at home instead of on the road) can actually end up getting you to your destination just as quickly with a lot less time on the road and a lot less money spent.

Eat a homemade meal thirty minutes before you leave. Being purely sedentary right after a meal isn’t particularly healthy, but you should plan your trip so that you’re not hungry along the route (which will almost always result in unintended expenses). We try to leave roughly half an hour after meal time. Quite often, this coerces the children into taking a nap (which, again, makes the trip less expensive as there’s less need to stop) and also keeps the adults from being hungry along the way.

Use your cruise control over long stretches. This not only keeps your speed at a steady rate (keeping you from wasting money from accelerating and slowing down over and over again), but it can also keep you at a speed that will ensure you’re not pulled over and issued an expensive speeding ticket. In Iowa, most trips involve long, straight sections of highway, so we utilize our cruise control on almost every trip.

When you do stop during the trip, make everyone use the restroom. Trust me, with two young children, bathroom stops are a constant part of any long trip. Every time you stop, though, you lose time and you also lose a bit of money wandering around in a small town searching for a gas station that doesn’t make you afraid to use the toilet. When you do find a gas station, though, have everyone use the restroom. It might take you a bit longer while stopped, but it will keep you from making multiple stops later on, which will save you time and money.

If you need food along the way, don’t use fast food. Not only is it unhealthy, it’s often sneakily expensive. Instead, stop at a grocery store. You can get all the supplies you need for an easy meal right there – cold cuts, a loaf of bread, and some finger vegetables can be had for just a few bucks and will feed everyone in the car.

In just a few short months, the price of gas at the station I regularly use has dropped from $4.09 per gallon to $1.49 per gallon – an absolutely amazing drop. Not long ago, I spent $82 filling up my truck (which has a 20 gallon tank) – just today, I filled the tank for under $30.

From a strict personal finance perspective (and ignoring the larger global economic concerns), this is fantastic news for most people. If you have to fill a typical car tank each week (12 gallons), the price change is saving you somewhere on the order of $30 a week – that’s $120 a month, an amount that can really help with debt repayment, saving for a down payment, or preparing for retirement.

This shift in gas prices comes at an interesting time for me and my family. My wife and I have been carefully studying potential automobile purchases, and our calculations had led us to focus on automobiles that are efficient with their fuel. Using our numbers, assuming a $4-$5 gallon of gas going forward, fuel efficiency was so valuable that it often trumped a higher price at the dealership.

However, when we look at the era of $1.50 a gallon for gas, the math no longer holds true, and we’re typically looking at a better deal for a less fuel efficient car.

Here are some of our conclusions after talking over the situation and doing some additional research.

The price of gas will go up from here. If oil prices stay as low as they are, oil producing countries will have to cut production to drive the price up. Most nations and regions that rely on oil income have already budgeted and planned for oil prices that are significantly higher than they are right now, and if the market doesn’t automatically bring those prices back up, they’ll do what they can to bring them up.

… but it’s impossible to know how much it will go up, or how fast. No one can accurately predict the future, particularly when it comes to the future price of such a vital commodity with so many different fingers in the pool manipulating things. Perhaps there will be another speculative bubble. Perhaps the oil producing nations will begin to really tinker with production, driving prices up quickly. Perhaps the price will just slowly inch upwards over time. No one knows for sure, and there’s no way to make accurate bets on such moves.

That leaves gas mileage as an important but hard-to-estimate factor in determining the best car price. It’s obvious that greater fuel efficiency will save money over time – the only question is exactly how much it will save. What we can rely on is this: fuel efficiency is a much bigger factor if you intend to own the car for a longer period of time. My wife and I, for example, prefer to buy automobiles that are late model used when we purchase them, but drive them until they are experiencing severe repair issues. Thus, for us, fuel efficiency is a bigger factor than it would be for a person seeking to pick up a car for just a few years.

Buying a more efficient car results in lower fuel costs regardless of prices, meaning your monthly upkeep cost is lower. If you do choose to invest in a more fuel efficient car, it will save you money each and every month. Given the fact that we cannot know what the future holds, if you can make a choice now to reduce your required costs in the future, you’re generally well-advised to do so.

So, the best strategy is still acquiring a fuel-efficient car for the lowest price possible. While it’s not worthwhile to pay a large premium for fuel efficiency, you’re still well-served seeking out highly fuel-efficient options regardless of the market conditions of the moment.

The same strategies apply whether gas is high or low.

Start saving now. You’re always in a better position if you have the money in the bank to buy the car instead of having to take out a loan to buy it. Start saving right away – set up an automatic savings plan to take $100 a month from your checking and put it into a savings account designated for automobile savings.

Do your own research. Know what you want in advance, and remember that fuel efficiency is definitely a positive even when gas prices are low.

Shop around. That means don’t just jump in with the first dealership you visit. Instead, seek the best prices around. Stop in at several dealerships and use online tools as well.

Negotiate. That sticker price is just a starting point. Don’t be afraid to make a lower offer on the car once you’ve found the one you want.

What will we do? Since we’re still in the “research” phase of the purchase – and also because we’re somewhat waiting for one of our vehicles to finally give out on us – we’re still sitting back and waiting. However, fuel efficiency remains one of our big considerations in the purchase, regardless of where gas prices are or where they might go.