No Debt Plan

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Happy 4th of July, reader! I mentioned yesterday that I was trying to find something relative patriotic and American to write about for today. And what is more American these days than paying for gasoline?

Popular, But Time for an Update

The Automobile Gas Log and it’s associated MPG and price per gallon charts is one of the top set of posts that bring people to No Debt Plan from Google. In fact, if you search “mpg chart” the gas log article is the 6th result.

It’s been four months since I posted that article and I figured I could do an update to see if anything major has changed. Let’s take a look. (Click the images for full sized versions.)

MPG Down…

During the last four months my miles per gallon average has dropped about 2 miles per gallon versus my average for the entire time I’ve been tracking this data. We’ll see if this is significant in minute.

…and gas prices up 24%

Of course the most dramatic change over the last four months is the price at the pump. In my area gas has gone from $3.13 per gallon to $3.88 — a 24% increase. And it is still moving higher. If I couldn’t before, I can now definitely see why gas inflation is hurting the American economy and the average family out there.

Bad news everywhere, but a positive note

I also track how many gallons I buy each time I fill up. I haven’t put that into chart format as it is pretty consistent and the variation in the number of gallons isn’t important. I could buy twice in the same week if I saw a big drop in prices, or felt a huge increase was coming and just wanted to top off my tank.

However, if I compare March 10, 2008-July 3, 2008 to the previous year, there is a positive note to be added. I’ll count March 8, 2007 to July 5, 2007 as my comparable time period. During the 2008 period, I bought 128.739 gallons of gas. In the 2007 period, I bought 175.953! A decrease of 47.214 gallons of gas.

That’s a huge difference. At $4 per gallon, that equates to over $188. The only explanation I can provide for this change is we moved into our house in September of last year which cut my commute down. But I wouldn’t have guessed over four months I had saved that much gas.

Looking at the numbers it may look like I am buying a lot of gas (and spending a lot of money). I’ve also got to consider I do drive to work lunches. I wouldn’t say I drive a lot for my job, but when I do I get reimbursed for it. It may look like I’m buying a lot of gallons of gas, but when you net out the extra cost and the reimbursement, we only spend about $175 combined every month on gas.

But man, your MPG is dropping!

As I mentioned, compared to the average of all of my driving since I have been tracking this data (2002-present), my MPG for the last four months dropped over 2 mpg. That’s significant, right?

Well, it is significant. If it continued to drop I would start to really inspect the car (or have the mechanic do it at my next oil change). Tracking mpg for maintenance/safety concerns is the reason I started doing this tracking back in 2002. If your mpg drops significantly and your driving habits don’t change, you might have a problem.

In this case I am not as concerned. The MPG drop can be attributed to us not taking as many long interstate trips (high MPG time period). I do a lot of city driving — short commute to work, short trip to lunch with clients, short commute home. That’s my typical day. And I’ve dropped my total consumption of gallons by 47 thanks to the shorter commute.

What about you? Do you track your miles per gallon? Do you know how much you are spending on gas every month? Is your budget under a major squeeze due to gas prices, or are you handling it pretty well?

On Monday we started a discussion on how to save money on gas for your car. I made the point that many Americans are rushing out to trade in their SUVs to buy hybrids, even if the transaction as a whole is going to put them at a loss. The loss on the trade-in (significant these days on an SUV) plus the additional cost of purchasing the hybrid simply don’t add up. You shouldn’t spend $20,000 to save $100.

Well then, what should you do?

For some people you are just stuck with the SUV for a while. Reconsider why you bought the behemoth in your driveway in the first place. Do you have four kids? Do you travel a lot? The utility value of the vehicle may be worth holding onto it. You’ll just have to find other ways to save money in your budget to pay for gas costs.

However, for what I am guessing is a larger than expected majority, there is a second option.

Buy a scooter and save money in your budget

That’s right, buy a scooter. There’s been a great discussion going on over at the Get Rich Slowly forums on this topic. Many of you reading this live in cities that riding a scooter is not only feasible, it just makes plain sense. Perhaps you drive less than 5 or 10 miles one way to work. Perhaps your commute is normally through back roads that don’t go over 40 miles per hour.

It may sound crazy, but I am even considering making a move like this. Let me give you my thinking, and then you can apply it to your individual situation. If you can make it work, a scooter could save you a ton of gas use.

Am I all green, environmental talk and no walk?

I always talk with family, friends, and even my blog readers about going green. It sounds great… spend a little money up front, pay less energy costs over time, and save the environment. I like the idea behind a lot of this, but since we live under a homeowner’s association a lot of these great ideas (solar, wind, rain collection) are things I simply can’t put into place with our current home. We’ve done the CFL lightbulbs throughout the house, that’s a no brainer.

But couldn’t I do more?

I seem like the perfect example of someone that should buy a scooter. My commute is right at 5 miles and takes me about 15 minutes. Once I leave the neighborhood I stay on one major, rather busy four lane highway at 55 miles per hour. My office is less than a quarter of a mile off the major highway.

I currently drive a 2004 Honda Accord. I’ve been tracking my gas mileage and created a mpg chart. The last time I updated all of the numbers I was averaging about 26 miles per gallon. 26 mpg seems admirable when you consider a majority of my driving is short trips to work, out to lunch, and back home. I don’t spend an hour on the interstate doing a constant 70 mph. At current gas price levels it takes right at $50 to fill up a completely empty tank.

But my commute is so short… what about that scooter idea?

I did a quick search after reading through the Get Rich Slowly forum thread on scooters. The site administrator lives in D.C. and he and his wife both have Kymco scooters that they ride to work. He specifically mentions the Kymco People 150cc, pictured above. The MSRP that I have found online is only $2,799. The scooter is capable of riding safely at 70 miles per hour as well, from what I have found online. The poster also mentions his insurance is about $100 per year. That’s about $700 less than I pay on the Accord.

Obviously the real kicker is the gas mileage. He mentions he gets typically 90 miles per gallon, or right at 3.5x as much gas mileage as I get in my car. This dealership (which pops up first in Google for “Kymco”) says the specifications include a 1.8 gallon gas tank, and estimated mpg of 84. You could go roughly 150 miles before having to fill up. When you fill up, it would only cost you (at $4 per gallon)… $7.20.

To put it into other terms, a full tank in my Accord lasts around 300 miles depending on how much interstate driving I do. So I pay $50 for 300 miles. If the scooter could get 150 miles on a tank, and each tank would cost $7.20, then multiply by two. 300 miles for $14.40, or a savings of $35.60 for every 300 miles I drive. Pretty eye opening to me.

What we have considered doing is selling both of our cars and buying a newer, used, four-door Honda Accord. We currently have a 2 door Accord and a 4 door Civic. The Civic is older, and my wife loves Accords. We also need a four door vehicle since we’ve added a puppy to our family. We would have a substantial amount of money left after buying a used Accord to purchase a scooter like the Kymco People 150, even if we decked me out with safety classes, safety gear, and rain gear.

What’s holding me back from buying a scooter?

So why haven’t I stepped up and taken the plunge? A few reasons: safety, convenience, and work clothes. Safety: as has been discussed in the GRS forum thread, when you ride a scooter or motorcycle they teach you to act like a car. Meaning you ride in the 2/3rds of the lane and don’t weave in and out of traffic. However, there is still the risk of being struck by another vehicle. That definitely puts me off from purchasing just yet. If I had an alternate route to work that was back roads, I would not be as concerned.

Convenience: Another issue is obvious… convenience. Driving a scooter would be inconvenient. It would be hot or cold depending on the season. It would be wet when it rained. I couldn’t listen to NPR or carry many groceries. I could rationalize not purchasing with any number of other reasons. I’m not saying they are good reasons, just reasons.

Work clothes: This is actually the biggest problem I have. (My wife would be worried about my safety, thankfully). I work in a business casual environment. Slacks, polo shirt (or button up during fall/winter). I would have to put on my scooter safety/rain gear every morning either over my clothes, or change once I got to work. My clothes might get wrinkled or dirty doing this. That’s not that big of a deal. I could bring extra clothes to work, or use the shower facilities in our building’s gym to get cleaned up.

However, I also take my clients out to lunch two to four times per week. They’re also typically in business casual environments. I don’t think I could get away with riding up in full riding gear and walking in to lunch.

For now, I don’t think this option will work for me. I’m keeping my eyes and ears open, though. I’d love to hear suggestions of how to get past my three issues as well as hear about any issues you might have. The bottom line is we all need to do something to help save on gas. Many of us could get away with riding a scooter. Could you?

(Photo by Piutus)

As we all know the price of gas has gone through the roof. The larger and less efficient your vehicle, the more pain you are feeling. The further you drive, the more pain you are feeling.

Some people are thinking of trading in their older, inefficient vehicles for something new and efficient like a smaller car or a hybrid vehicle.

There’s a major flaw to this plan.

It all boils down to this question: Would you spend $20,000 to save $100 or $200 per month? If you have to sell your SUV at a loss (highly likely), buying a new more efficient is going to cost you a ton of money. If you have to finance the purchase, you’re hurting yourself even further.

Let’s say spending $20,000 saves you $200 per month. Not taking into account interest, your payback period (the time it would take to earn your money back) is 100 months… or 8 years and 4 months. By that time, your new car is pretty close to needing replacing.

Financing just makes the situation worse. For example, if you must finance your new Toyota Prius at $400 per month you may only save $150 per month in gas. That’s a losing proposition. If you have to trade in your SUV (and take a loss on the trade in), that’s an even worse financial position.

But gas is killing me, what can I do?

You’ve got a couple of other options other than purchasing a new car. Obviously try driving less and consolidating trips. Don’t go to the grocery store, come home, and go back out to the home improvement store. Car pool with other people in your neighborhood or office. If you go to lunch with your co-workers, ride together. If your city has quality public transportation, consider yourself lucky and use it. SquawkFox also gives us 10 tips to save money on gas.

Just because gas is going up and pinching your budget, you don’t have to look just at your car costs to save money. Go back to your budget and see where you can cut — less weekend movies, less high end groceries, turn up the A/C during the summer, etc.

Gas prices aren’t going down any time soon, so you need to make some major changes in your life. If you need to replace a car, then go ahead. But you may be better served by buying a used car that is a few years old (and thus costs much less than the new hybrid). If the used car is $10,000 and the hybrid is $25,000… that’s a $15,000 difference. Again, if the hybrid only saves you $100 or $200 per month in gas it is going to be quite a while before that purchase pays off.

Or maybe you can get a scooter. I’ll talk about that tomorrow. In the meantime, tell me what you’ve done to adapt to higher gas prices.

(Photo by iboy_daniel)

My wife and I got a lot of things done off of our large to-do list this evening. As a reward we took a trip down to Bruster’s Ice Cream. Now before anyone screams “hypocrite!”, I will admit I have talked about buying ice cream and eating it at home being an alternative to paying the premium of going to Bruster’s or Baskin Robbins.

But there are exceptions to rules, and tonight was one of them.

As we left the neighborhood, we started talking as we normally do.

“I’m going to write on something you said earlier today,” I mentioned. She cocked her head to the side.

“Oh really?”

“I’m going to write about our used car conversation. You know, about looking at something today so you can buy it way in advance,” I said. She had pointed out a new blue Toyota Camry in a parking lot and how she liked the color on the car. That opened up a discussion of buying a new used car in the future.

Currently, we are socking away money on a monthly basis so that in 4 years or so — fall of 2012 — we can sell her current car and pay cash for a new used one. She wanted to know how old of a vehicle we would consider.

Of course this all depends on inflation, the cost of a used car in the future, and the quality of vehicle we can afford.

“Probably a 2007 or 2008. That would be 4-5 years old and priced about right for the amount of money we are saving currently,” I told her.

“Well I guess I should get looking!”, she said jokingly. But it made me think. Maybe we really should be looking at today’s new cars for the future.

Go Look Today for Tomorrow

This may seem over the top to some of you. I’ll admit, it is taking things a little far. But if you are planning to buy in 4 years, and you are going to buy a 4 year old car in the future… that means the models you will be considering are new cars today. They are on the dealership lots waiting to be looked at. You can go in and test drive it today and see if you really like the car. You could look at all of the different options to see which ones you really want to include when you start looking four years.

But…

There are some downsides to this, of course:

• The cars you see today are new. They will drive differently new than they will used.
• There is no way to tell how cars will depreciate both physically and financially. Honda Accord’s may be great values today (I drive one), but there is no guarantee they will hold up in four years. You could test drive a car today and be disappointed in the future. On the flip side, Accord’s may not depreciate as they have in the past and we may not be able to afford one in the future.
• There is a slight risk you might get a bit too excited about the new car, or listen to a good sales pitch, and end up buying the car right there on the spot. That may seem crazy, but people make dumb money decisions all of the time.

What do you think? Would you look at cars today to buy them tomorrow?

Sometimes I wonder what that extra trip to the grocery store really costs you. People in the blogosphere have talked about making sure you get as many errands run as possible when you go out. I agree. But I always wondered, does it really matter?

The calculations:

Figure out total costs for some standard unit (time periods like year, month, etc.; miles):

• Insurance - $738.20 per 6 months ($123.03 per month)
• Tires - $400 every 50,000 miles
• Gas - I’ll estimate this at $3.50/gallon for now even though prices are at $3.13 or so. I’ll also estimate that we only get 20 miles per gallon, even though I know it is higher. As you know, city driving means lower mileage.
• Maintenance and Oil Changes - Maintenance is the hardest to calculate. It isn’t easily identified how much one mile will affect your vehicle down the road when parts start to need replacing. Oil changes are easy — at minimum you’ll have an oil change every 3,000-5,000 miles depending on how far you want to stretch it. We’ll estimate a bit high and say $25 per oil change. If you stretch it out to 5,000 miles like we do, thats $0.005 per mile. For maintenance in general (including oil changes), we set aside $25 per month, so we’ll just run with that.

Note this is for two cars. We could allocate some costs based on how much used by each vehicle. One example is insurance. The total cost is the combination of two different coverages for our cars. My Accord is more expensive by about $120 per 6 months. You can find this information somewhere in your insurance documents. I could take that information and figure out how much of each month should be allocated to my car. That’s complicated. For our purposes, I will just divide the number in half. The same goes for gas usage as well.

You also need to estimate how much you drive each month. If you track your gasoline usage like I do, that’s pretty easy. Or you can just estimate. I would guess we average about 15,000 miles per year each. That’s 1,250 miles per month. (I’m also hoping that estimate is a little high.)

Do the Math

Cost per mile per car:

• Insurance ($61.52 per month / 1,250 miles per month): $0.049 per mile for one vehicle
• Gas ($3.50 per gallon / 20 miles per gallon): $0.175 per mile
• Tires ($400 / 50,000 miles): $0.008 per mile
• Maintenance ($12.50 per month / 1,250 miles per month): $0.01 per mile

Total: $0.242 per mile per vehicle. If we each drive 15,000 miles, that comes to $7,260 per year.

Of course this is all based on estimates, not exact science. If I round up so the in-my-head math is easier, I can say it costs us 25 cents per mile to drive a vehicle. If we venture out 2.5 miles and come back, we’ve just spent roughly $1.25. This is just one of those little things to keep in the back of your mind when you consider going out for that extra bottle of wine, or block of cheese, or even to buy more gas. You’re spending money along the way.

If you live in a city with excellent public transportation, look at your numbers. Is it cost effective for you to stop driving? You would have to factor in costs of riding the subway or bus, but we both know you’d end up with money in your pocket. I’d love to have an extra few thousand dollars to play with each year, but our city’s public transportation is awful.

Do you know how much your driving costs you?