Do The Math: Are You Saving Money Choosing Diesel or Hybrid in a Premium Car?

Wow you just bought that new Luxury/Premium Hybrid Sedan or even a SUV. Full of pride, you know that you are driving one of the finest examples of technology and engineering, while making an investment for the future of all mankind. You reassure yourself in the process that you are saving countless barrels of oil to OPEC, while smartly lessening the impact on your wallet…or so you think.

We can all rant and rave how much more economical that new pride and joys is. After all, you are taking all of that money to the bank and investing it right? Maybe? Not really.

 With all of the studies out indicating a Hybrid owner probably won’t ever break even during original owner tenure with the vehicle. I decided to take a look a two different alternative forms of transportation and run a quick feasibility check to see how that advantage still fared, and even how a diesel did when scrutinized.

Having owned a small diesel when I was just a mere lad, I can attest to the fact that spending $10 and having it last two weeks was a great benefit to the wallet.  However times have changed, as we all know, so it was time to make a review and these results actually surprised me a bit.

 First of all, a few assumptions to consideration for this exercise:

1. Only sister counterparts, similarly equipped Luxury/Premium vehicles will be used to be fair to all involved.

2. The trade out period for the vehicle is 5 years with an annual accrual rate of 15,000 miles, (7500 city, 7500 highway)

3. The price spread between the new low-sulpher diesel is constant with that of gasoline over the term of this exercise, and for simplicity, the fuel will remain constant (who knows what gas will run today much less tomorrow). 

We will assume, for argument sake, that premium gasoline is $2.17 a gallon and Diesel is $2.47 a gallon.  A quick glance at prices across the nation shows that these averages pretty much hold up in my area for right now.

Luxury/Premium Cars 

Lexus GS430 vs. GS450h.

As we can see the GS450h is a $2525.00 premium over the GS430 initially. Since Lexus recommends premium only fuel in this vehicle the price advantage between that of premium and diesel is about 30 cent per gallon. Running the math shows over each year of use the Hybrid owner will save $322.92 in fuel costs. Dividing the premium acquisition cost by the savings yields us with a break even point of 7.82 years in the ownership experience. Or almost 3 year after the original owner has traded out of the vehicle.

Mercedes Benz E350 vs. E320 BlueTec

The E320 BlueTec comes to the plate only having to overcome a $1000.00 price disadvantage. Seemingly a minute obstacle, until you factor in the additional cost of diesel fuel. The math quickly shows that the additional fuels saving of the diesel is almost offset by the additional cost of the fuel required. In this case we save $240.75 each year, making our break even point at 4.15 years. Or in simple terms this vehicle will break even about 8 month before we trade it in. Just under the wire.

Luxury SUVs

Lexus RX350 vs. RX400h

This time the price difference between models is a steep $3780.00. We save $353.38 annually in fuel costs, but this time our break even point is a staggering 10.70 years of ownership. It may be safe to assume that this vehicle may be in its third owner by now before the breakeven point is reached.

Mercedes Benz ML350 vs. ML320 BlueTec

Again we have a mere $1000 price disadvantage to overcome. But we save only $164.10 each year on the larger SUV, so our break even point pushes out to 6.09 years of ownership. This means the original owner will never recoup even the $1000 investment in the diesel.

Devils Advocate

Ok so even thought the prices are current you feel the price of gas was too low in the exercise? Lets play devils advocate and raise the price to see how they fare:

If we factor the prices at $3.17 for premium and $3.47 for diesel we get the following.

So looking at the figures both pros and cons in the Luxury/Premium segment the economic savings are not there if you plan to turn your vehicle in the commonly accepted 5 year turn around for the this segment at current fuel prices. So you might want to think twice if saving money was a primary concern because it probably won’t happen for you.