Wheatworks Blog: Financial Matters

I’m the happy driver of a 2000 Ford F150 XLT SuperCab with 130,000 miles on it. It’s a great truck and it’s paid for.

My good friend also drives a 2000 Ford F150 with more than 300,000 miles on it. His is a great truck, looks good and is paid for, too. In fact, my friend’s F150 inspires me.

If his truck provides a hint of what I can expect of mine, I figure, at 16,250 miles per year, I have more than 10 years just to catch up with him on mileage. And his is still in good shape.

I buy gas, change the oil, do routine maintenance, (I need to have the transmission fluid changed), and pay my insurance on it.

In terms of gas mileage, it can’t compete with a fuel efficient small car and certainly not with a hybrid vehicle. I fill it up a couple times a month and spend a little less than $200 a month on gas. When I write that, I think of another friend who drives a small convertible and spends about $80 a month on gas.

So, should I buy a new vehicle to save money on gas?

Absolutely not.

Here’s the math explaining why purchasing a car to save on gas is a bad decision for me.

I average 16,250 miles per year and pay about $3.60 per gallon. I think my truck gets 14 mpg. Divide the miles per year by the mpg and I use 1160.71 gallons per year. Multiple the 1160.71 gallons times $3.60 per gallon and I’ll spend $4,178.57 on gas.

Suppose I buy a car that gets 25 miles per gallon. I’ll still drive 16,205 miles per year. The new car I might buy will use 650 gallons per year. 650 gallons times $3.60 works out to $2,340.00. If I subtract that from $4,178.57, it looks like I’ll save $1,838.57 per year on gasoline!

But wait.

My truck is paid for. I paid $15,000 (+ interest) for it (never buy a new vehicle) over 4 years at 8% for a monthly payment of $366.19. That was then. Now, I have no car note.

If I buy a new car to save on gas, I’ll have a car payment.

Suppose I find a small car that gets 25 mpg and I pay $366.19 per month for it. Now let’s add the annual cost of gas to the annual amount of the car note.

The new car payments add up to $4,394.28 per year which, with the $2,340 I’ll pay for gas in the new car, becomes $6,734 (and a few pennies).

That’s more than I spend now on transportation. In fact, it’s $2,555.70 more. Divide that by 12 months and you’ll see that by driving my truck, I save $212.98 per month over buying a small gas sipper.

Some might say I should be more eco-conscious and become green. I say, I use those little twisted flourescent bulbs where I can and I have a pretty, green yard.

My truck saves me money. I can haul stuff in my truck. And I can go places in it I can’t go in a car (like to my wife’s tree farm - it’s green).

Why all this about gas mileage and my truck?

• It shows how financial math can help you make good financial decisions and save money.
• Today, Ford unveiled their new 2009 F150’s that get better gas mileage.
• Ford’s truck sales fell 39% in September.

In my mind, Ford has made these F150’s so well for so long that buying a new just doesn’t make sense to me … maybe in 10 years I’ll be ready.