Gas Price Pain – Media Hype and Consumer Illusion?
I just bought a new 2008 Chevy Silverado Crew Cab and have been taking some heat for it from friends and on this blog where I wrote about the purchase experience, how I got a great deal, and the experience of interfacing with dealerships.
The main themes: “How shortsighted”, “wouldn’t a smaller vehicle have worked?”, “You’ll regret it”, “gas prices will eat you alive”, etc. Even one “I thought you were smarter than that”.
Does anyone do the math on these sort of judgments? I did. Here is what I came up with.
Assumption: $3 per gallon was higher than we liked a year ago, but it didn’t generate the hysteria and behavior modification and purchase modification that $4/gal. seems to be creating, so I base my comparisons on $3/gal vs. $4/gal.
Case Study 1 – my driving habits
I drive about 1300 miles a month in the truck. It gets 15 mpg so far (same as the old one – 2001 Silverado).
That’s 86 gallons of gas per month that I purchase. At $4 vs. $3 per gallon, I’m paying an additional $86/mo. over last year to drive my truck. Nobody thought less of me a year ago. Now suddenly I’m a fool, according to some, for not taking measures to eliminate an additional $43/mo. cost of living.
Had I purchased a smaller car that gets 30 mpg, I’d be saving $43 per month. That’s not enough savings to forfeit the advantages of driving a truck.
My judgment: people who are trading in their 15mpg vehicles for economy cars probably spend way more than $43/mo on discretionary things, such as eating out. I don’t think people actually sit down and look at written budget numbers when determining where the best place to achieve savings would be. Instead, there seems to be an irrational emotional fleeing from low mpg vehicles to higher mpg vehicles, with no attention paid to where the break even point might be on the transition costs, or whether there are other, better ways to find find the savings.
Case Study 2 – Summer Vacation
I hear on the news and read that “people are staying home” this summer because gas prices are making travel too expensive. To watch the news, you’d think $4 has create a crisis. Really? Let’s do the math.
My family will be driving from Texas to Maine this summer, and back. It will be about a 20 day trip, through Wash DC and NYC also. It’s 2200 miles each way, 4400 total. Add in detours and side trips and call it 5,000 miles of driving.
At 20 mpg in our Honda Odyssey minivan, we will need to purchase 250 gallons of gas, which means our summer vacation this year will incur fuel costs of $250 more than the same trip would have cost last summer.
Sorry, but between the hotel stays, eating out, entertainment and attractions, etc., $250 is a drop in the bucket and is hardly an amount that would derail a family vacation. We could pack the tent and camp out a few nights instead of staying in the hotels and B&Bs, and we’d make up more than the excess fuel charge. We could stay in cheaper motels on the overnight driving legs of the trip. We can pack more sandwich material and eat out far less while on the road. There are multiple ways that the average family could offset the increased fuel costs of a trip and I don’t understand the news stories that claim there are vacationers canceling trips because of gas prices.
So, I think the media hype is getting to people. Get out a calculator and do the math before canceling your vacation or trading in your low mpg vehicle and base your decision on data and facts instead of emotion and media hype.