So on NPR a few weeks ago there was a story of how gas prices have "trapped" an Ohio family with their Ford Excursion and Ford Expedition. For the uninitiated, these vehicles make a Ford Explorer look like a Yugo. With lots of coasting and gentle acceleration, you may be able to squeeze 12-15 mpg out of these things. Krusty the Clown would be envious.
The gentleman has five children and explained that he needed the big SUVs so he and his wife could take the kids to soccer games, etc. But now the they are spending about $200 a WEEK to fill the vehicles. Oh my. So they began looking into selling or trading in the Excursion for something smaller. You see, it turns out he was mostly just driving the Excursion around by himself for his home inspection business, so maybe they didn't need it after all. And here is where we all break out our tiny violins. Because the highest offer they could get after taking it around to several dealers was $11,500, while Kelly Blue Book said it was worth 24k. And they had paid 50k when they bought it new three years ago.
My Word. Fifty thousand dollars?? On what planet does this make any sense? Much hullabaloo is made of gas prices. But if gas prices remained at the roughly $2/gal when he bought the Excursion, he's still capital S Stupid to have sunk fifty grand into a depreciating asset. (and he probably borrowed heavily for the privilege!). Losing 60% of the value in three years and $100/week on gas is fine by him, while losing 80% of the value and $200/week on gas needs a news story? The poor schlub needs to sell the Excursion for 11k, the Expedition for 8k, buy a used minivan for the kids and a compact pick up if he needs it for the business. Done. Quit your whining.
Main takeaway from this post -- when you put everything into cents per mile, depreciation will still be a bigger cost for most vehicles then gasoline. Gas will need to be around $7/gallon before operating costs start routinely exceeding capital costs. So drive the car you have a little longer, and let someone else fall for the new car smell.
In related news, the Institute for American Values has launched For a New Thrift: Confronting the Debt Culture. Be sure to take the Thrift Quiz! And remember what our patron said:
Thrift is the really romantic thing; economy is more romantic than extravagance. It is the more poetic. It is poetic because it is creative. --G.K. Chesterton