Dear Dave: Do you think I should get a new hybrid car to save money on gas? A lot of my friends have done this, and with the rise in gas and oil prices lately, they’re telling me I should, too. According to them, I’ll save a ton of money, especially since I have a bigger car and a longer drive to work. What are your thoughts? — Daneen
Dear Daneen: I get lots of questions about these kinds of scenarios, and how it plays into people’s budgets. Many folks wonder if it would be better to go out and get a new vehicle with better gas mileage. Well, do you really want to lose more money?
Let's say you currently drive a vehicle worth $10,000 that gets 15 miles per gallon. There's a $25,000 hybrid you're thinking about buying that gets 25 miles per gallon. That's a $15,000 price difference just to get 10 more miles a gallon. If you drive 100 miles a week, that's about a $10 difference a week. That would be about $40 extra you're spending a month in gas if you stuck with the current car. A monthly car payment is a whole lot more than that! In short, the math doesn’t work. You'd have to drive to the moon and back to make it worthwhile.
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There are a lot smarter things you can do to cut down on your fuel bill. Have you thought about trading for something smaller? If you’re driving a gas guzzler, trade it in on another car worth no more than your current car's selling price. This means better fuel efficiency without a car payment. Carpooling is an option, too, even if you split the driving just a few days a week.
If you want to get a little more radical with the money-saving ideas, you could think about moving closer to work. Spend some time doing the calculations and looking at the specifics to see if it makes sense in your case. Finally, and this may be a last ditch effort, you could consider changing jobs. No one’s forcing you to work where you do, especially if you’re spending a lot of time and money on the road just getting to and from work. If you’re really spending a ridiculous amount on gas each month, it might even be time to look into ideas you may have once had to start your own business.
But don't use better gas mileage, or bad advice from your friends, as a rationalization for buying a new car. It’s just not worth it! —Dave
Dave Ramsey is a personal money-management expert, a bestselling author and host of the nationally syndicated radio program “The Dave Ramsey Show,” which is heard locally on KROC-AM. For more financial advice, visit daveramsey.com.