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Mar 30, 2012

How Our Prius Paid For Itself and Put $10,000 Back In Our Pocket

 

Our 2006 Prius topped 100,000 miles last weekend as we drove on Interstate 70 through Colorado’s Glenwood Canyon, prompting my wife and me to wonder how much money we’ve saved. The result, calculated conservatively, is an eye-popping $34,441—most of which comes from becoming a one-car family living in an urban core when we bought the Prius. That’s $10,000 beyond the sticker price of the car, so we could say we got a free car and paid for some nice vacations.

Here’s how it happened:

In March 2006, I started work at the Detroit Free Press, moving from Des Moines, Iowa. I had always lived inside the city whose name appeared on the newspaper where I worked, disdaining the idea of suburbs and sprawl. I had about a 15-minute drive to work in Des Moines—a local joke being that everything there was a 15-minute drive. I also was struck in my 18 years in Des Moines by the folly of sprawl, paving over farmland ever farther away from the core of a pleasant, safe city, creating unnecessary commutes, wasting time, money, land, and fuel.

In Detroit, Angye and I moved into a high-rise apartment downtown, less than a mile from my job. We were paying for two parking spaces and my car was sitting most of the time during the week because I walked to work or took the funky People Mover, an elevated train on a 3-mile loop.

We each had a Toyota Corolla and admired the technology and fuel economy of the Prius. “What if,” we asked after we had been in Detroit about a month, “we traded in both of our Corollas for a Prius?” About a week later, we felt like we were in a spaceship as we pulled our “super white” Prius onto Southfield Road. (This is not meant as a Toyota endorsement. It’s great to see many companies producing fuel-efficient cars these days and pushing new technologies.)

We had to make some adjustments—most having more to do with the oddities of living in Detroit, which lacks full-service grocery stores in the city limits and effective mass transit throughout the metro area—but never were inconvenienced. In fact, we walked home from baseball games, concerts, and festivals giddy that we weren’t sitting in bumper-to-bumper traffic.

I typically did not have access to a car during the day, but never was deprived. My dentist, barber, bank, favorite restaurants, and most other routine stops were within walking distance or a 50-cent People Mover ride. We planned weekend shopping trips for groceries, hardware, clothing, and other needs—trips that we likely otherwise would have taken separately. Having only one car added to our togetherness and our feel for our neighborhood.

In November, we moved to Basalt, Colorado, so I could work at RMI. We live six miles from work, and I wondered how it would be with one car. The answer is that it’s no different. Now that it’s warm, I can bike or run to work, and the mass transit options in the rural Roaring Fork Valley actually are better than in metro Detroit.

Before RMI’s Reinventing Fire was written, we were among the people living its recommendations for using autos more productively. “We can eliminate the need for many trips entirely, and we can use vehicles in smarter ways, improving access to places or goods with fewer, shorter, or faster trips. …" the book says. "We must explode a deeply held myth—that efforts to reduce travel inevitably take away cherished freedoms, choices, and mobility.”

Rather than lost freedoms, my outcomes were reduced stress from less time commuting, more time with my wife, and greater connection to community. Humans see and experience things around them much more richly on foot or by bicycle than in a car. Looking at our savings over six years—much more than we expected—it seems that if families can save a few thousand dollars a year along with hours of time by living closer to work and driving less, we can create demand to rebuild our cities into closer-knit, sustainable communities as we cut our dependence on oil and reduce environmental damage. That’s a better life.

Here’s a detailed look at the savings shown in the accompanying graphic:

I assumed an average cost of gas at $3 a gallon. The U.S. average from when we bought our Prius in April 2006 until it hit 100,000 miles on March 25, 2012, comes out to $2.93, but prices in both Detroit and Basalt typically run above the national average. My other assumption was that our second car would have been one of the Corollas we traded in, which averaged about 32 miles per gallon.

  • I conservatively estimate that had my wife and I each had a car, we would have put 10,500 miles a year on each. (The U.S. average is 13,476.) Based on the 10,500-mile estimate, we reduced our vehicle miles traveled over the six years by 26,000 total. Savings: $2,437 for 812 gallons of gas we didn’t have to buy.
     
  • Better yet, the Prius gets a year-round average of 45 mpg, allowing us to cover the 100,000 miles with 903 gallons less fuel than with the Corollas. Savings: $2,709
  • Insurance is pricy in downtown Detroit. My agent there tells me a second car would have cost $140 a month to insure. Then I calculated $50 a month for a second car in Basalt. Savings: $9,630

  • As urban dwellers, with one car versus two, we saved on a parking space at about $75 a month for the 67 months we had the Prius in Detroit. Savings: $5,025

  • We had only one car payment instead of two, and, after paying the loan, the Prius is worth about as much on the market today as both of our Corollas would be together. One of our Corollas wasn’t paid off when we traded it, so we’ll calculate that we avoided 36 payments at $240 a month. Savings: $8,640
     
  • I estimated $1,000 a year, on average, for routine maintenance, including tires, which aren’t bought every year. Savings: $6,000
     
  • TOTAL SAVINGS: $34,441

(Individual results would of course vary. Urban parking and insurance costs are higher than for many Americans, but most Americans don’t have two cars that get 32 mpg and many would have more costs in vehicle payments than calculated here. )

Join the Discussion


Showing 1-10 of 15 comments

March 30, 2012

This all sounds good - but it really bothers me the way you have inflated the figures. Who on earth spends $1000/yr to maintain a new vehicle? We have a 2001 Honda Insight with 120K miles on it and spent less than $300/yr on maintenance. Our first actual non-maintenance repair was last year (at 115K miles) and cost us about $400.

I agree with your premise in principle - just don't go throwing all these crazy numbers in there to justify your investment OK?


March 30, 2012

I sought to be carefully conservative with these numbers, leaving out, for example, avoided costs of annual registration for a second car. In calculating fuel savings, I was conservative by assuming that we would have driven about 6,000 miles a year less than the average for an American couple if we'd had two cars.
We checked our credit card statements for the past two years on maintenance at the dealership, and it was $1,400 each year for the Prius. (That included a set of tires and an 80,000-mile checkup.) To be conservative, I dropped that amount down to $1,000 for the second, older car we didn't own.
And, as I acknowledge, parking and insurance costs in an urban center are high, which account for a big part of the savings.


March 31, 2012

We also have a single car, and have for most of the 37 years we've been married. Our car is a 2003 Saturn VUE and it gets only about 18 MPG. On the other hand we drive it an average of about 6000 miles per year. We also save big time by insuring only one car. I go to work on the bus or, occasionally, by shanks mare. (It's only 5Km/3.1mi.) As a senior citizen, I pay $275/year for my annual bus pass. Our town (Mountain View, CA) is much smaller than Detroit but our grocery store, drug store and other conveniences are in the same shopping center two blocks away. We still have all our maintenance tickets (we had a 5-year extended warrantee, so nearly all of our maintenance until 2008 was "free") but we have had a few big ticket items in the past few years, so our recent costs may approach your experience--and, yes, we still go to the dealer, now a Cadillac dealer, for maintenance. I have not tried to calculate our total cost of ownership (TCO), as you have, but I doubt it's as low as yours. I'd love to have an electric car but I don't think it would save money, TCO, and I can't afford to do it just to save CO2.


March 31, 2012

I think the overall message is that people can downsize, drive less, enjoy life more, and save money.

I agree that Randy's case was unique for many reasons, leading to higher savings than most: the move from Detroit to Basalt (insurance and parking), having owed money on their second Corolla which counted as savings, and their maintenance history. These add up to a significant amount of their total savings.

Perhaps if the article could state more clearly (sometimes italics de-emphasize text) that most people actually won't calculate as much savings. It could encourage people more directly to crunching numbers, analyze use patterns, and seeing what they CAN save. Maybe even invite people to share their results as a step toward making a change. This might not involve the purchase of a new Prius. Some of the savings could be put aside for a new car (like a Prius) when the life of the current car starts coming to an end.


April 4, 2012

@Guy Marsden - No need to be bothered about the figures, they are pretty good for an American average. (I guess the average American isn't driving a new Honda). One good place to find an American average here is the Consumer Expenditures in 2006, released in February of 2008 by the U.S. Department of Labor's U.S. Bureau of Labor Statistics. You can find a nice table and summary of that report here:
http://www.investopedia.com/articles/pf/08/cost-car-ownership.asp

Obviously, your Honda is doing better than average, although I have to wonder how you got all the scheduled maintenance (see here: http://www.insightcentral.net/KB/faq-maint.html ) done plus tires for less than $300/yr. Possibly you get free oil changes and maintenance as part of the purchase price of the vehicle? In that case, you pre-purchased those services but you still paid for them.


April 4, 2012

Although you state in your very first para of your article that most of the savings came because of going from two cars to one, the headline misled me into thinking you were doing a 1 for 1 comparison. At the very least, you could have calculated what you would have saved by going from two Corollas to one. The difference would be the incremental benefit of the Prius. I feel that one has to be careful in writing an article like this especially under the banner of RMI because the naysayers could easily twist this to persist their view. Why give them that room?


April 4, 2012

I have to say the title is quite misleading. The vast majority of your savings came from downsizing to one car, not owning a Prius versus another car.


April 4, 2012

I generally agree with Ethan. It looks like most of the savings were from having one car which I can appreciate given your circumstances. Wouldn't you have saved about the same amount if you just had one older Toyota until it was no longer practical to drive? I like the idea of combining trips and spending more time walking or riding a bike to get around and the added benefit of spending time with family by combining those trips.


April 4, 2012

Randi, You are conflating two distinct actions: (1) changing your lifestyle to an urban habitat where you could walk and easily jettison one car that you already owned; and (2) buying a Prius. The fact that you did them both as once doesn't justify the headline or your thesis that your acquisition of the Prius saved you all that money. Perhaps you contend that you wouldn't have gone urban without having bought the Prius in particular. Financially, you should have run the numbers separately for the two events, as one is not dependent upon the other. If you had made your pitch as "how we went urban and automotively downsized from two cars to one hybrid," you're numbers may have validity. I'm disappointed that this kind of voodoo accounting came out of RMI. It is not the conservative (and therefore compelling) economic justifications that I see in "Reinventing Fire" or the multitude of economic and policy analysis that RMI is known for.


April 4, 2012

I teach environmental science and know for a fact that most people can't do these calculations without help, so I like seeing them published. However, a better comparison would have been buying a new Corolla to replace the two older ones.
I understand with an older car, it can be nerve-wracking to have just one in case it won't start when you have an important appointment, so comparing keeping one older Corolla vs. buying the Prius may not be as good an example.

As for maintenance, you paid 1400/year for years 5 and 6 for the Prius and assumed 1000/yr for the older cars. I have a 2000 VW Jetta TDI and I pay around 1k/year and I go to a shop that costs half of what the dealer costs, so 1k is a good guess.

Also, if you wanted to be nerdier/more accurate, you would convert all cash flows to one point in time (e.g. we'd have 10k less today if...) using the time value of money. I would advise using the interest rate on your auto loan as the discount rate. I can't teach this method in one post, but look up time value of money and do some reading. In my experience, even Ph.D. scientists find the concept a bit strange at first, but the math is really easy for a scientist once you get the concept.

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