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Will You Save Money With A Diesel Car?

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Have you ever thought about purchasing a diesel car that gets 40+ miles per gallon? I mean, it almost sounds like a no-brainer to buy a car like this. It’ll save you money, right? Well, it all depends.

The Alternative Choice to Gas and Diesel

Since we’re discussing the costs of gas and diesel vehicles, I thought it would only be fair to throw in a few words about the alternative: the electric car (I actually wrote a post a few months ago about the Nissan Leaf, which gives the details of initial and ongoing expenses of the electric-run machine).

In all honesty, I think electric cars are still a little too new and are beyond “affordable”. Even after a government tax rebate, the Nissan Leaf will still cost $25,000, plus tax! All this money to travel 100 miles at a time…

Hopefully, electric cars will be improved exponentially in the coming years, but for now, I don’t think they’re really saving us that much money.

The VW Golf TDI Purchase

A friend of mine has recently been in search of a new used car. She currently owns a Jeep and it was just costing her too much in gas to get to and from work. Enough was enough, and she decided it was time to buy a fuel efficient vehicle!

In her searches, she stumbled upon a Volkswagon Golf TDI (Turbo Diesel) that claimed to get an average of 40 miles per gallon on the highway! Sure, the diesel car was more expensive than the regular model, but the gas mileage was quite a lot better. So, she decided to buy the car (for cash by the way, kudos to her! 🙂 ), but there were still unanswered thoughts swirling in my head – how much extra did she spend to get the diesel car over the regular gas model, and how long will it take her to make this purchase worth it?

Crunching the Numbers

Here are the facts and figures that I utilized for my analysis:

Car #1

Car #2

Other constants included the price of gasoline and fuel. In my area, they are currently $3.93 and $4.25, respectively. I assumed the average rate of 12,000 miles per year. And, I also assumed that the repair costs would be the same for each vehicle.

Results

Obviously, the VW Golf TDI has a higher initial cost, so how long will it take to make this purchase worth your while?

Save money with a diesel car

Can you see how long it takes for the TDI to make up that $4,565 (the amount paid over the regular model)? It takes almost 10 years (9.8 years to be exact)!

Be Smart – Don’t Fall in Love With Amazing Gas Mileage

Initially, it seemed like it would be worth it to pay extra to get better gas mileage, but unless you hold onto the vehicle for 10 years, it’s really not worth it at all.

In all fairness to my friend, she actually bought the TDI for a very reasonable price, and will only have to drive it for about 5 years to make it worth her while. 🙂

Have you been thinking about buying a more fuel efficient vehicle? You may want to consider the extra initial costs!

 

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AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

23 Comments

  1. How about maintenance and life of vehicle? TDI engines are supposed to last forever, or at least longer than a regular gas engine (a million miles is not unheard of), or and diesel engines require less regular maintenance.

    • Yep, that was one of those factors that I just could not include in this analysis. Plus, some cars might only last 100,000 miles, whereas others might last 1,000,000. You just don’t know. Good point though.

  2. I have generally seen things your way on this topic, based on the premiums I’ve seen for hybrids in particular (not specifically the Leaf). There’s a premium to be paid, and one should look at the payback period – which you did. Your findings make sense.

    What’s interesting to me is the notion put forth by 101 Centavos that these engines could potentially reach 1,000,000 miles. Really? I have to admit that I haven’t followed them that closely, but if that’s the case, things change quite a bit for someone like me who wants to ride a car until it’s super old.

    • Yep, I think my mind naturally analyzes stuff like this. I’m actually glad it does, because I would never have thought that a diesel car would actually cost me more money in the first 10 years of ownership.

  3. Really good write up. I always had the thought of diesel in the back of my mind, and now I’ll just erase it thanks to your analysis.

    • Hi Jeff! Well, if you can find a great deal on a diesel, then it’s definitely worth it! But, with rising gas prices, they are in pretty high demand, and they’re selling for even more than suggested retail….. so that great deal is probably pretty tough to find… I’m glad I could help you with my analysis! 🙂

  4. I have been wanting to get a diesel for ages – Back when I used to drive 150 miles per day it would have made a lot of sense, but now that I walk everywhere I dont really need a car at all. I think that eventually im going to move though, and I’ll need a car – diesel is where I will look, even though they often cost more. You also forgot to mention that diesel engines usually last much longer than gas engines.

    • That’s nice that you can walk everywhere you need to go. Right now, I’m living in the country, and I definitely need a vehicle! 😉

  5. Interesting comparison, it would be interesting to see what the Prius looks like vs. the VW turbo diesel.

    • That would be a pretty good comparison! Maybe next week… If others would like to see it anyway.

  6. I stumbled upon your post today, just looked at a jetta sportwagen tdi last night and wondering the same thing. We put on 15-20K per year. How does that change the pay off timing. It is about a 5K difference in price as well. One other consideration is resale value down the road if you sell…does one hold better value than the other? Thanks. I am going to spend some time looking through your blog, we are on a mission to continue to improve our financial situation and freedom.

    • Great questions. The TDI’s do hold their value a little bit better than the regular gas models, but that was just one too many factors to enter into the equation (sometimes it’s better to keep general comparisons simple)…

      Let’s say you were going 20k miles per year. You could simply apply a ratio to find the amount of years that it would pay off. Since I used an original example of 12…, 12:20 as X:10(years). So, now you’ll have to drive the TDI for 6 years in order for the extra expense to pay off.

  7. Here’s my 2 cents
    I travel a average of 40000 per year being a medical device rep and go through a car about 1 every 4 years the last 2 being Honda accords 4 cylinders I trade them in at 120.000.00 .doing all recommended mantanence the engines are usually tired .one of my coworkers has a tdi and I pushing 250.000.00 and it still runs strong he plans on going to 500.000.00 before getting another one .
    So if you drive a ton which I do the diesel is the way to go the extra buy in pays off in the really long run most four cylinder gas engines are fine for normal milage drivers but are tired buy 100.000.00 miles if they make it that far .
    Another one of are partners bought a Prius a year ago already looking to get rid of it not because of MPG just zero fun to drive something else to keep in mind if your in yor car slot make shire it’s comfy and has some driving fun to it the Prius which I drove was the most disappointing machine to drive .
    I know other hybrids are probably beter to drive but won’t help my type of driving lots of freeway . You have to way what your going to do with your car and how long you plan to keep it .thanx

  8. Driving a TDI is a blast!
    For us in Canada it costs only ~+$900 to buy a brand new 2012 Jetta TDI vs a 2012 Jetta 2.5L

    To be fair it wont take to long to earn back the $900 if you are in the market and looking for a fun and fuel efficient vehicle. Then again Canadian prices are a robbery vs the USA prices for the same car -_-

    • Mmmm, you’ve got me salivating for a deisal car again! 😉 Although, with a deisel, you’ll pay an extra $0.30 per gallon (not sure what it is per liter up there in Canada), so it’s not all savings. Thanks for the comment Alex!

  9. I think its also important to mention that TDI engines do much better than the EPA fuel estimates. I drive a TDI and I average 48 mpg with about 60% highway and 40% around town.

    • Very true Nate. Thanks for the comment!!

  10. I drive 120 miles 5 days a week. At a minimum, 30,000 miles per year. Would you recommend TDI?

    • Hi Kabir. TDI vehicles are often very dependable, but the prices on diesel fuel is so much more expensive than regular gas right now! Around here, it’s about $4.19 compared to $3.11 for unleaded. For this reason, I’d shoot for a vehicle that is dependable and runs on regular unleaded. I drive a Honda Civic right now for this very reason.

  11. Here is real world driving for me and what I think ….

    I had a 2008 Civic getting 550KM a tank (approx 45L tank?) Power wasnt the greatest..I now have a 2013 Jetta TDI that averages 850KM on 55L tank.

    Diesel = 15.5KM/L
    Gas = 12KM/L

    30% greater distance in real world numbers with much more power/torque than a civic. I expect the 15.5 per KM to reach 19KM/L within 1 year as the engine breaks in.

    Factor in that Diesel in USA is 35% MORE EXPENSIVE than gas…….. your losing money …. not to mention initial upfront costs to get diesel…….

    If you live in Canada I guess its a win/win for diesel for now….

    The reasons I can think of a US customer to buy diesel is for…
    1. Torque/Power
    2. Longevity of a diesel
    3. Less trips to fuel/gas pump
    4. Resell value
    5. Much more enjoyable to drive

    Hope I helped bit! If the difference between a Civic and a Jetta TDI is minimal, as in $2K I’d go diesel just for the power and refuel durations.

    • Thanks for the comment Alex! For me, I’d rather drive my Civic since the upfront cost is cheaper and the per mile cost is cheaper. I don’t really care about how quickly I can get from 0-60mph.

  12. We have a civic as well.Would love to get TDI jetta but Price of diesel is outrages.Any ideal why diesel is so expensive here in US?

    • I’m honestly not sure why the price of diesel is so high in the U.S. It wasn’t always that way. I remember when diesel was a great deal less than regular unleaded! At this point, I would say that’s it’s almost not worth it to have a TDI due to the inflated costs.


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