Spending money to save money

OffGridLiving

I was reading an interesting article in an inflight magazine yesterday (sorry, I can't remember the name of the mag) that mentioned spending money to save money.

It was US centric but basically discussed that the average US car was over 10 years old and that with increases in engine efficiency, high fuel costs and such low interest rates on car finance, buying a car actually made more money than leaving the cash in a savings account.

Clearly this all depends on how much mileage you do, with more mileage giving a better return on your investment due to efficiency savings, but I was wondering whether the 'spend to save' was also true over here, especially given we pay far more for fuel than the US?

Alter_ego

I recently traded in a 40mpg car for a 53mpg car. How long to get my £9000 back at 14000 miles a year?

shortchanged_2

I think most older American cars are all 5 litre plus V8's doing about 12-15 miles to the gallon which was fine when their petrol was only about 50 -70p a gallon(equivalent).

With prices of petrol rising dramatically over the past few years in the US these cars are really hurting the pocket.

In the UK our cars have been much more efficient for much longer so this doesn't really apply to us.

OffGridLiving

Alter_ego wrote: »

I recently traded in a 40mpg car for a 53mpg car. How long to get my £9000 back at 14000 miles a year?

Was the new car bought on finance?

nicko33

Alter_ego wrote: »

I recently traded in a 40mpg car for a 53mpg car. How long to get my £9000 back at 14000 miles a year?

you save about 86 gallons per year
17.5 years assuming £6 per gallon

marathonic

Alter_ego wrote: »

I recently traded in a 40mpg car for a 53mpg car. How long to get my £9000 back at 14000 miles a year?

14,000 @ 40mpg = 350 gallon per year
14,000 @ 53mpg = 264 gallon per year

Savings: 86 gallon per year

Price per Gallon: £6.10
Savings per year: £524.60

Time to recoup £9,000: 17 years

shortchanged_2

marathonic wrote: »

14,000 @ 40mpg = 350 gallon per year
14,000 @ 53mpg = 264 gallon per year

Savings: 86 gallon per year

Price per Gallon: £6.10
Savings per year: £524.60

Time to recoup £9,000: 17 years

Not really a great return if it is taken on finance as well. :eek:

Alter_ego

OffGridLiving wrote: »

Was the new car bought on finance?

No, but I've lost 3% savings interest on the cash.

wotsthat

Most things are getting more efficient - cars, household goods, houses etc.

Therefore the day to day running costs will generally be cheaper if a modern item is purchased.

The difficulty is deciding what payback period is acceptable. If the payback period is longer than the anticipated life of the replacement item, say a washing machine, then the original item may as well be run into the ground even though it costs more to run.

zygurat789

wotsthat wrote: »

Most things are getting more efficient - cars, household goods, houses etc.

Therefore the day to day running costs will generally be cheaper if a modern item is purchased.

The difficulty is deciding what payback period is acceptable. If the payback period is longer than the anticipated life of the replacement item, say a washing machine, then the original item may as well be run into the ground even though it costs more to run.

But by then it may well cost more than £9,000 to replace so timiming is also a factor.
If you can replace immediately before a peruiod of inflation then the whole transaction will look much cheaper.

marathonic

shortchanged wrote: »

Not really a great return if it is taken on finance as well. :eek:

Definitely not… although there are other factors to consider – increased comfort, possible reduction in maintenance costs, etc.