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Will fuel efficiency save me money ?

Will fuel efficiency save me money ?. A COST VS. BENEFIT ANALYSIS. Most car companies now offer a hybrid version of an existing model. 2011 Ford Escape. 2011 Ford Escape Hybrid. HOW DOES ONE COMPARE THE COST OF THE HYBRID TO THE COST OF THE STANDARD VERSION?.

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Will fuel efficiency save me money ?

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  1. Will fuel efficiency save me money? A COST VS. BENEFIT ANALYSIS

  2. Most car companies now offer a hybrid version of an existing model 2011 Ford Escape 2011 Ford Escape Hybrid

  3. HOW DOES ONE COMPARE THE COST OF THE HYBRID TO THE COST OF THE STANDARD VERSION? • The standard version of the Ford Escape costs $21,215. • The hybrid version costs $30,045. So what? Does that mean that the standard version of the Ford Escape is a better value? What other data do you need to know in order to determine if the higher cost of the hybrid will result in a greater benefit in the form of saving fuel costs in the long run?

  4. What variables may affect the comparison? • Should we compare the same model year? • Should the cars be equal in nearly every way other than engine type? • What data is available? • Is there MATH involved? • What about changing variables such as gas prices, etc? • Use as much common information as possible. • DUH! • Auto companies do extensive research to create data. It’s out there. • Again, DUH! • We can take into account depreciation, etc, but lets keep data constant.

  5. WHAT DATA DO WE NEED? THE BASICS

  6. Year, model, MPG, MSRP.

  7. HERE WE GO…. • 2011 Ford Escape • MPG – 25 • MSRP - $21,215 • 2011 Ford Escape Hybrid • MPG – 32 • MSRP - $30,045 That is a cost of $8,830 more for the hybrid. The benefit of the hybrid is 7 miles to the gallon.

  8. COST VS. BENEFIT ANALYSIS LOOKING AT THOSE RESULTS, DOES THE BENEFIT OF BUYING AN ESCAPE HYBRID EXCEED THE COST? DO WE NEED MORE DATA?

  9. What we know: • The difference in purchase price is $8, 830. • The difference in mileage is 7 mpg. What we need to know: • Is 7 mpg worth more or less than $8,830?

  10. Lets assume that the average life of a car is 100,000 miles, AND that gas prices will remain constant at, say….$3.20/gallon throughout those 100,00 miles.

  11. At 100,000 miles: At 100,000 miles: • The Escape will use 4,000 gallons of fuel. • Those 4,000 gallons will cost $12,800. • The total cost of the car (purchase price + projected fuel costs) is $34,015. • The Escape hybrid will use 3,125 gallons of fuel. • Those 3,125 gallons will cost $10,000. • The total cost of the car (purchase price + projected fuel costs) is $40,045. However, the $2,800 you save will NOT make up for the additional $6,030 you will spend to buy the hybrid. The additional 875 gallons of fuel will cost you an additional $2,800 over the 100,000 miles.

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