Updated on 01.30.12

Focus on Reliability and Fuel Efficiency (29/365)

Trent Hamm

The last two weeks have focused on appliances. Now, we’re going to shift directions and take a deeper look at automobiles.

Focus on Reliability and Fuel Efficiency (29/365)

Let’s take a look at two hypothetical cars.

You’re looking at a class of cars that, according to the data you’ve researched, get to 150,000 miles pretty reliably before significant problems set in. You drive 25,000 miles per year, so you’re hoping to get six years out of the car. Gas costs $3.25 a gallon. We’re going to assume that insurance among the models is equal and that maintenance costs are equal, too.

Let’s call one Model A. Model A costs $25,000. It gets 35 miles to the gallon. Based on the data you’ve seen, Model A is about 10% more reliable than the average car in the class you’re looking at.

The other one, Model B, costs $18,000. It gets 22 miles to the galoon. Based on the data you’ve seen, Model B is about 10% less reliable than the average car in the class you’re looking at.

(I’m using “Model A” and “Model B” because I’m not advocating a particular car make or model here, but simply trying to demonstrate how much of an impact on your wallet that fuel economy and reliability make.)

Both cars will sell for about $1,500 used.

Which one is the better bargain?

The one figure I care about above everything else is the cost per mile while you own this car. Usually, you’d figure things like insurance and maintenance into this cost per mile number, but since we’re assuming they’re equal, we’re only going to worry about the cost of fuel and depreciation.

So, with Model A, you’re going to lose $23,500 due to depreciation. Given that it’s 10% more reliable than the average car of that class, you’re going to get 165,000 miles out of it. You’ll have to put 4,714 gallons of gas in it over that timeframe, totaling a cost of $15,321.43, for a total investment of $38,821.43. Per mile, over those 165,000 miles, you’ll be putting 23.5 cents per mile into the car.

With Model B, you’re going to lose $16,500 due to depreciation. Given that it’s 10% less reliable than the average car of that class, you’re going to get 135,000 miles out of it. You’ll have to put 6,136 gallons of gas in it over that timeframe, making for a fuel cost of $19,943.18, for a total investment of $36,443.18. Per mile, over those 135,000 miles, you’ll be putting 26.9 cents per mile into the car.

To put it simply, reliability and fuel efficiency are worth a lot when buying a car. You would need Model B to cost about $13,000 to compete on cost with the Model A (with a sticker price of $25,000). Yes, reliability and fuel efficiency are making up for about half of the price of the car in this example. The difference is enormous.

Not only that, the more reliable your car is, the greater the time between car purchases. That means less time spent looking at and buying a car and more time spent enjoying life. In the above comparison, Model A is going to last the owner more than a year longer than Model B even though the owner is putting 25,000 miles per year on the car. Not only is Model A cheaper per mile, it’s going to last longer, too.

So, how do you find out about reliability and fuel efficiency numbers? My first destination for such research is Consumer Reports, which usually has solid information on a wide variety of car models in terms of both fuel economy and reliability. Your library likely has several years worth of Consumer Reports car issues. Beyond reliability and fuel economy, I also look seriously at safety information, which Consumer Reports also helps with.

FuelEconomy.gov is a great online resource for fuel economy data. It gives all kinds of details on the fuel economy of various makes and models of automobile.

ReliabilityIndex.com is another tool that can really help you identify which models have a history of reliability and which do not. I use their reliability index as one significant factor when deciding on what car to buy.

All of the luxury features you might want in a car should be completely secondary in your search. Most of those features can be installed later if you decide you can’t live without them, so don’t pay for them at the dealership. Focus instead on getting the best bang for your buck that you can get in terms of fuel efficiency and reliability, and you’ll find yourself happy at the lighter load that car puts on your wallet.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

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  1. Vanessa says:

    I know this is just an example, but why not compare two cars that have the same price? That would make more sense. Why can’t the cheaper car have better gas mileage and be more reliable?

    Vanessa <– drives a cheap car with great gas mileage and is reliable

  2. AnnJo says:

    If one car is both more fuel efficient and more reliable (i.e., works better for longer) than the other and costs nearly 40% more new, it makes no sense that they would sell used for the same amount after the same period of time with equal mileage. This improbable assumption throws your whole calculation off substantially.

  3. Matt says:

    Why are we even looking at buying new cars?? It’s pretty well-established that buying used saves a lot of money – and you can get ones that are both certified by the dealer and within warranty pretty easily.

    Also, a difference of 13mpg is generally only found when comparing across classes (like small SUV vs. small car).

    25,000 miles per year is also above average, 15,000 is what’s normally assumed (and I know that’s above what my family averages, even owning just one car).

  4. lurker carl says:

    Reliability has nothing to do with longevity in the automotive world. Defective components can be repaired, rebuilt or replaced for far less than replacing the entire vehicle, especially when you perform the work yourself.

    Trent should have added that required maintenance specific to a vehicle, like timing belt and CV joint boot replacements, can add significantly to the overall cost of vehicle ownership. The optional 18″ tires cost big money come replacement time compared to the standard 15 inchers. These are just two examples that can add thousands to the ownership cost when comparing vehicles.

  5. Michelle says:

    I hate to keep harping on this, but the pictures in this series leave much to be desired. I am not a particularly creative person, but even I can think of at least 3 ways to illustrate this that are better than a picture of a computer printout. I’ve looked at Brittany’s facebook site, and I know that she’s got better pictures than this, please ask her to step it up a notch. These pictures are detrimental to the series.

  6. Sam says:

    Maybe I’m misreading this, but is Trent saying that one car will depreciate in value 94% in six years and the other will depreciate 91.6% in the same amount of time (and miles)? Here’s a tip: don’t buy either of those cars! Do more research and purchase a car that will hold it’s value better.

  7. David says:

    Try not to think about miles per gallon. To see this, consider the following problem:

    Alice has a car that does 30 mpg. She switches to a car that does 40 mpg.

    Bob has a car that does 12 mpg. He switches to a car that does 14 mpg.

    Assuming that both Alice and Bob drive the same distance over similar routes at similar times during a year, which of them will save more in fuel costs?

    If you answered “Alice, of course”, thinking (correctly) that she is getting 8 more additional mpg than Bob, and has improved her mpg by a factor of one third rather than one sixth, you should perform the necessary calculation. Your answer will surprise you, and you will start thinking in terms of gallons per mile, which is as it should be.

    Indeed, in 2013 American car manufacturers will be required to display information about gpm on the cars they sell. They will put it in the small print, and the misleading mpg information will be part of the large print, so it will make almost no difference. But it’s a start.

  8. valleycat1 says:

    We consider reliability and relative fuel economy as significant factors when purchasing a vehicle. We’ve used some of the resources Trent suggests. The general portions of the post are pretty good.

    However, I find Trent’s assumptions and oddly selected variables in the example he’s constructed to be a distraction & less than helpful. It seems he was working really hard to make the more expensive vehicle the better deal.

  9. kc says:

    What “luxury features” can be installed after the fact?

  10. Des says:

    There are way too many assumptions made here for this calculation to be of any real use.

    But, to extend on this: Car A costs $7,000 more upfront than car B, and saves (according to your calculations) $2,378.25 over the six years. If you put that $7k in an index fund and got an 8% return for those six years, you would have made $4,498.23, making car B a better value.

  11. Tracy says:

    Sam +1

    Trent has to make the example so ridiculous it doesn’t even match any cars out there in order to make the math support his point.

    I can’t even IMAGINE buying a new car ‘hoping to get 6 years out of it’ – I bought mine new 7 years ago and plan to keep it for many more. A well-maintained car doesn’t self-destruct in 5-7 years!

    And HOW this can be considered one of “365 Ways To Live Cheap” I don’t eve know.

    “All of the luxury features you might want in a car should be completely secondary in your search. Most of those features can be installed later if you decide you can’t live without them, so don’t pay for them at the dealership.”

    This is pretty ridiculous advice. How about:

    1) Narrowing down exactly which extra features you consider critical and then
    2) Doing the research on if it’s cheaper to get it included or installed after (fancy cd player, you can probably get cheaper … heated leather seats? Probably not so much)

  12. Johanna says:

    All that David’s and Trent’s examples go to show is that it is easy to “save” money when you are wasting a lot of it in the first place.

    With David’s example, why can’t Bob get a car that gets 40 miles per gallon? Even if he needs a lot of space to lug people and stuff around, he ought to be able to do better than 14.

    With Trent’s example, why not get a used model A or model B? Or change your routines so that you’re driving less than 25,000 miles per year. By getting a new model A or model B, Trent’s hypothetical person is spending $500 per month just for one car, before you even get to insurance, maintenance, repairs, parking, and tolls. If, for example, he could find a place to live with an easy walking, biking, bus, or train route to work, he could come out way ahead, even if it means paying more for housing.

  13. Evita says:

    25,000 miles a year is a LOT. It is 120 miles (200 km) per working day! Most people won’t reach that number! why not make the example more realistic ?

  14. Izabelle says:

    I have to admit that I zoned out before the end of Trent’s post… either it’s badly explained or just too irrelevant to my situation.

    Here’s how to “live cheap” car-wise, IMHO:
    Step 1: build up a car fund or dedicate a part of your “emergency” fund to the purchase (read on before you beat on me with this on).
    Step 2: research which used model you want for your budget. Overall car endurance and fuel consumption should come first.
    Step 3: buy car cash. Enjoy the years of no-payment to contribute back to your new emergency/car/etc. account.

    We did this 4 years ago when we bought a nearly-indestructible 2001 Ford Focus for $3900. The repairs and maintenance have never come close to what a car payment would have been. Insurance is cheap too. And when my husband lost his job, this was one less payment to worry about – I believe that this is what allowed us to keep the house.

  15. David says:

    Bob can’t get a car that does 40 mpg because Bob does not exist – he is a character in a problem designed purely to show that miles per gallon is not a sensible way to think about fuel efficiency (which it is not, but a lot of people think that it is).

    If you are set the following problem in an examination:

    A bath has two taps, one of which dispenses seven litres of water per minute and the other nine litres of water per minute. The water drains from the bath through the plughole at a rate of five litres per minute. If the bath has a capacity of 120 litres, how long will it take to fill the bath?

    you should not answer “Why don’t you put the plug in?” but Johanna would doubtless advise that you should.

  16. Troy says:

    So the site was sold a few months ago.

    And the payout rolled in and T-man decided to cash-out and pay off all his debt. Disregard the fact that this move now very much alienates him from his readership…for he is no longer one of “them”

    He now has little incentive to hit article homeruns. Because he sold out, and doesn’t own it anymore anyway. It’s not his baby…its someone elses.

    So he writes articles like this one inside series like this one with major assumptions and missing or unrealistic key information.

    Of course the smart thing would be to compare used cars. And to estimate normal 15K miles per year. And the solution in saving expenses is in driving less, not spending more. If you put 25K miles on you car per year your mileage isn’t the issue. The time driving is.

    No…the 90%+ depreciation in 6 years is not based in reality, but little in this post is. Go find me a “reliable fuel efficient” 2006 vehicle of any type that is selling for less than 10% of it’s purchase price.

    Get ready everyone. This is exactly what “I’m really not into it anymore” looks like.

  17. Nick says:

    As a fellow blogger, I must say that a quick proofread isn’t too much to ask.

    I don’t run my blog full time, still have a day job, and get a fraction of trent’s traffic. I would guess that my average post takes me 2-3 hours longer to produce than his.

    I still find time to at least read for spelling.

    What the heck is a Galoon?

    PS. This series is horrible.

  18. jim says:

    The Reliability Index linked in the article appears to be U.K. specific and doesn’t seem to cover the US market.

  19. Sara says:

    You need to include insurance…which can very between cars too

  20. kc says:

    Code Blue! This series needs emergency care.

    This post is poorly thought out, sloppily written, and features a reference to a site that Trent claims is a “significant factor when (he’s) deciding on what car to buy,” that is in fact for the UK. Really?

    TSD is going downhill awfully fast.

  21. Amyk says:

    Trant, I believe you have jumped the shark!

  22. Johanna says:

    I don’t know…is any of this any worse than the time Trent said, in two consecutive posts on the same day, that he needed to spend both more money on books and less money on books?

  23. Izabelle says:

    IMHO, he jumped the shark when he advised ladies to swim in their underwear (!)

  24. Izabelle says:

    …and yet a mix of morbid curiosity and the great comments keep me coming back.

  25. Mister E says:

    I’m pretty sure there are a lot of people who really just come here for a chuckle, certainly a large share of the commenters.

    Really though, the best was his desire to live among Nordic peoples.

  26. SwingCheese says:

    @14, Izabelle: We, too, have a 2001 Ford Focus. We’ve had ours for going on 7 years now, and it has never needed anything more than general maintenance and upkeep. We just paid the registration fees, and even those are cheap (as are insurance, repairs, etc.). I love our Focus!!

  27. Raya says:

    25000 miles per year is 100 miles per work day – if you calculate based on the assumption that you only use your car on workdays.

    But when you add in weekend travel and more distant travel once or twice a year that “100miles per work day” will drop.

  28. deRuiter says:

    I can’t say it any better than #24 Izabelle @ 7:54 pm January 30th, 2012, “…and yet a mix of morbid curiosity and the great comments keep me coming back.” Running dry idea wise is why Amy (rhymes with “decision”) ended her column, put all her work into the wonderful three volume set, “The Tightwad Gazette” and retired. The author of this blog has covered all the important stuff, sold the blog and lost interest. Hence the dull retread of a not very interesting book being flogged for 365 days in a row when he will not have to think up a subject. I make it a point to never look at the mass of ads.

  29. Gretchen says:

    I think he lost instrest before the sale.

    Yet I’m here, too.

    (But I can easily drive 100 reimbursable miles a day. Sadly. )

  30. Derek says:

    Thanks David #7, your example was interesting and made its point well. Don’t compare gallons, compare miles!

  31. Derek says:

    Hmmm… well, you know what I mean.

  32. maria says:

    Oh my Gosh!! A 2003 Dodge Neon is worth 4 grand!!!
    Seriously, I can’t believe there is still a 2003 Dodge Neon that is road worthy.
    How old is this picture???

  33. David says:

    Thank you Derek, but I claim little credit (as a frugal person should, of course). The June 2008 edition of Science magazine contained a paper by Richard Larrick and Jack Soll called “The MPG Illusion”, and there is now a website dedicated to the relevant issues. Since psychology and economics are not physics, there is of course some doubt as to whether the paper should have appeared in anything calling itself “Science”, being perhaps rather more suited to “Philately”, but…

  34. jim says:

    Maria, yes a 2003 SXT is worth around $4k give or take. 2003 is only 8 years ago. Dodge sold over a million Neons and there are certainly many thousands of them still on the road. Neons were below average reliability but that doesn’t mean they all fall apart in a pile of rust after 3-4 days.

    I drove a 1995 Neon for several years and over 80k miles with no major failures. Had to replace a starter motor once. At the same time my friends new Honda had the transmission completely fail and need replacement 2-3 times. Of course thats just anecdotal… but lets not act like Dodges all fall apart and certain other makes are guaranteed to run forever.

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