Used Car Tips

Don't be fooled by mileage estimates - photo by brionv

I’m going to show you one of the best used car buying tips for keeping the price of gasoline in perspective when buying a used car or deciding if it’s time to sell your old used car and trade for something getting better gas mileage.  I call it the gas price matrix.

According to a recent Kelley Blue Book market intelligence report nearly 70 percent of car shoppers will be influenced by gas prices, almost half (43 percent) say they have delayed a vehicle purchase over concerns around rising gas prices when purchasing a used car.  Here’s a simple comparison that will give you an edge whether selling or buying a used car.

Let’s say Joe Consumer is deciding between a relatively fuel efficient sedan like a used BMW Z3, like one found on MeCarz.com

A 2000 Z3 for $13,000

We’ll compare that to a 2008 Honda Civic Hybrid.

2008 Civic Hybrid $20,998

The Z3 is listed as having an EPA estimated mileage of 17 city and 24 highway.  The Civic Hybrid an impressive 40 mpg city and 45 highway.  On the surface this might seem like a no-brainer if you’re concerned about gas mileage, but let’s dig a little deeper.

Let’s start by averaging those numbers 20.5 mpg for the Z3 and 42.5 mpg for the Civic.  We’ll calculate the cost of gas for driving each car a 100,000 miles, not counting maintenance.  Just the fuel costs.

The Z3 is 100,000/20.5 = 4,878 gallons of fuel.  At today’s average price of $3.85, that adds up to $18,780 in gas.

The Civic 100,000/42.5 = 2,352 gallons at $3.85 again and we have $9,058 in gas.

Now, we’ll add back the original cost of each vehicle.  Why do that?  Because you can buy a lot of gas for the $8,000 difference in the sticker price.  Let’s see how much difference that makes over 5 years.

For the Z3 that’s $13,000 (sticker) + $18,780 (gas)  = $31,780.00

For the Civic $20,998 (sticker) + $9,058 (gas) = $30,056.00

The Honda still wins, but the cost difference over 100,000 miles (excluding maintenance) is only $1,724 over the life of the car!  Why so little?  Because you’re paying a premium on that Civic Hybrid when gas prices are high and dealerships know that number on the gas station sign is the top one in your head.

Now if gas prices go still higher the Civic wins by a higher margin.

At $5 gallon the Honda wins by $4,627.  At $6 gallon the difference jumps to $7,153.

Never get suckered again when buying a used car.  Use this vehicle/gas price matrix to figure out exactly how much the improved gas mileage will cost you over 100,000 miles.  With smart numbers you can find the sweet spot between vehicle cost and gas mileage. You can also go back to owner of the BMW with your math and offer $11,000 to wipe out the difference completely and the Z3 comes out ahead!

Create a spreadsheet and play “what if” with gas price scenarios.  If you think gas will go up to $8/gallon in the next five years, maybe that $10,000 premium on a hybrid is worth it.  Usually not.  Nine out of ten times the less expensive car with lower gas mileage will win out.

You can’t fight the math.  Be smart and win.  Happy buying.