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Last updated: December 14, 2023

Should I Buy a More Fuel-Efficient Vehicle?

Find out whether it makes sense to trade in for a more fuel-efficient vehicle.

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Depending on how much you drive and the cost of gas, it might make financial sense to sell your car and buy one with better gas mileage. In the long term, the fuel savings will help you recover the out-of-pocket costs of buying a new vehicle. Our calculator estimates how long it will take to break even on your purchase.

How to Use Our Fuel-Efficient Vehicle Calculator

A fuel efficient vehicle can save you hundreds and even thousands of dollars on fuel costs each year. However, buying another vehicle incurs out-of-pocket costs — especially when you consider that hybrids and electric vehicles tend to be more expensive than gas-powered cars. Typically, it takes at least a few years — and often longer — to recover the out-of-pocket costs associated with buying a more fuel-efficient car.

To weigh your potential fuel savings against the cost of buying a more fuel-efficient car, you’ll need the following information.

Gasoline Consumption and Cost

  1. Cost of gasoline where you live: As of December 2023, the average cost of gasoline in the U.S. is $3.22 per gallon. AAA reports the average cost of gas by state daily.1
  2. Daily mileage: This is the estimated number of miles you drive each day. To get this number, you can also divide your total annual mileage by 365. For example, the average American drives around 13,500 miles annually, which is 37 miles daily.
  3. Fuel efficiency of your current vehicle and potential new vehicle: This is the average number of miles your current and new vehicle get per gallon of gas (MPG). You can enter a vehicle’s year, make, and model into the U.S. Department of Energy website and see its estimated MPG.2

RELATED:

Get a sense of how much you’ll spend at the pump for your commute or a road trip with our Fuel Cost Calculator.

Current Vehicle Costs

  1. Current monthly payment: This is the amount you pay each month toward your current auto loan.
  2. Remaining payments: This is the number of payments left on your loan. For example, if you took out a 48-month loan and have been paying it off for exactly one year, you have 36 payments left.
  3. Anticipated trade-in value: This is the amount of money you may be able to get if you trade in your vehicle to a dealership or sell it privately. Kelley Blue Book offers a free tool to estimate your car’s value.3 Typically, you can get more money selling your car privately, though it requires more effort.

TIP:

Looking to save on car costs without the hassle of getting a new vehicle? Check out our advice on how to lower your auto insurance costs. If you’re unsatisfied with how much you’re spending on insurance or the quality of service you’re receiving, compare quotes from at least three providers at renewal time.

New Vehicle Costs

  1. Estimated new monthly payment: If you’re unsure of this number, use our Auto Loan Calculator to estimate your monthly payments for a particular vehicle. Not sure how much you can afford? Our Car Affordability Calculator will help you find a vehicle that fits your budget.
  2. New loan term: This is how quickly you plan to pay off the new car. In general, shorter loan terms result in higher monthly payments but less total interest.
  3. Down payment or sales price: This is how much you plan to put down toward the new car. In general, experts recommend putting down 20 percent.  If you plan to purchase the new car in cash, enter its price here.
  4. Sales tax and registration fees: Sales tax and registration fees can sneak up on you. They differ by state, so it’s a good idea to look them up ahead of time. That way, you won’t be surprised at the dealership.
  5. Federal and state income tax credits: The federal government offers a $7,500 tax credit for the purchase of certain new electric vehicles and $4,400 for certain used EVs. Additionally, states like California and Massachusetts offer their own alternative fuel incentives.

GO FURTHER:

If you’re thinking of ditching gasoline entirely and going full electric, check out our Gas vs. Electric Calculator to see whether an electric vehicle will save you money.

Other Factors to Consider

A big factor to take into account when deciding whether to buy a more fuel-efficient car is depreciation. New cars depreciate most in the first few years of ownership. If you recently purchased your current vehicle, it might have already sustained a substantial depreciation hit. Trading it in too soon means you absorb a larger portion of this initial depreciation. If your existing vehicle has depreciated significantly, you might not get as much value for trading it in at the dealership, and this can offset potential fuel savings from a more efficient vehicle. Unless your fuel savings are significant, it’s often best to keep your current vehicle until it’s at least 10 years old, at which point depreciation has essentially stopped and a trade-in is more financially sensible.

Often, you’ll save the most by purchasing a reasonably priced new EV or a gently used EV and taking advantage of all available tax credits and incentives. For example, after the $7,500 federal tax credit, a new Chevrolet Bolt costs $19,500. EVs will save you the most in fuel costs, and government credits may help offset initial costs.

Is It Worth Buying a New Car to Save on Fuel?

Trading in your current car for one that’s more fuel efficient will usually cost more upfront, but depending on your car payments, gas consumption, and the new vehicle you’re considering, you can save in the long term.

In general, it’s wise to drive your current vehicle for a while — ideally at least 10 years — so that you can minimize the effects of depreciation, which can outweigh fuel savings.

If it fits your lifestyle, a moderately priced electric vehicle can lead to the biggest savings — plus, it’s the best option for the environment.

Ultimately, the decision comes down to your personal preferences and finances. The best car is the one that comfortably fits your budget.

Citations

  1. Gas Prices. AAA. (2023).
    https://gasprices.aaa.com/

  2. Shared Fuel Economy Estimates. U.S. Department of Energy. (2023).
    https://www.fueleconomy.gov/feg/browseList.jsp?src=feg

  3. My Car’s Value. Kelley Blue Book. (2023).
    https://www.kbb.com/whats-my-car-worth/