I'm the youngest of my parents' seven children. If you ever have seven children in your family, you'll start to see that there are certain expenses and costs that many other families with fewer children don't get to enjoy. Those costs would range from the cost of going out to eat.

Just about any restaurant visit automatically turns into a $100 meal if you have seven kids and you're trying to go out to eat. One of the costs is transportation because you need to want a vehicle big enough to carry your family around. If you have three, four, five kids, there are lots of options.

But when you get to seven, all of a sudden now you have nine people total that you've got to cart around. And that requires a larger vehicle. When I was growing up, all during my younger years, my parents had a 1985 Chevy 12-passenger van. We used that van for many, many years, drove it all over the United States, had a lot of great memories in that van.

My dad fixed it up and it was repainted a couple times and just was a great vehicle for us. But sometime probably about the late '90s, we needed to upgrade. And so my parents were looking around and trying to figure out if they could switch to a different kind of vehicle.

They were shopping. They knew they probably needed a van. At one point, I have a clear, vivid memory of going and looking at the Chevy Astro. The Chevy Astro had three rows, but at that point in time, they put me in the backseat and I probably wasn't as big then as I am now, but I'm about 6'5", 6'6" and I'm not skinny.

And they put me in the backseat and realized they needed something a little bit bigger. So after a while, they found a 1995 Chevy conversion van and bought that. I found it used and bought that. And we had a lot of great memories in that vehicle as well. It was very, very useful, very, very comfortable.

It was a great car. One of the problems though of driving a full-size van is it's not the most fuel-efficient vehicle. Well, my parents kept that vehicle for many years. And when I was in college, most of the needs of being able to carry the whole family together had been eliminated simply due to kids growing up, getting married, starting their own families.

And my dad just got kind of tired of this big van that he was driving to work every day. We lived out west of town, about 20 miles, and he would drive this thing in and out, in and out, in and out. And looking at the gas tank, I mean, to fill the thing up is 80 bucks.

And it gets hard to do that. So he was thinking, "Well, it might be time to get something a little bit more fuel-efficient for his commute." He was also getting tired of putting money into it and fixing a few things. And so he was talking to me about whether he should switch to a different car.

Well, I didn't know the answer. So I sat down and built a calculator in Excel to try to figure out the answer. And the results of that challenge that I had set for myself really, really shocked me. Because what I learned was that even though he was driving one of the worst vehicles in terms of fuel mileage, even so, and even though he was driving a lot, it still didn't make a lot of financial sense for him to move up to a newer car based solely on gas mileage improvements.

Since that time, I've done this calculation many times. I sent my calculator out to all my friends and would email it out. And anytime somebody was thinking about buying another car and they're trying to justify it based upon gas mileage, I would send them my calculator, let them do the numbers.

And there are times at which this makes sense. And I'll go over those in today's show. The answer, of course, is you need to calculate your own numbers, which is why in the show notes for today's show, in the blog post, you'll just see a link right to it, which is to the Excel file.

I haven't touched this thing since 2000. I think I built it in about 2008. But you can download it and run the numbers for your own situation. But today I'm going to run you through some numbers and give you some examples. Because I want you to get this very, very clearly in your head.

Gas mileage matters, but it may not be the most important thing for you to focus on such that you sell your older car that's functional to buy a newer one because of gas mileage. Now let's start with the real numbers for my dad's vehicle. And I'm going to punch these into my calculator.

If you'd like to do them yourself, again, the Excel file is linked in the blog post or show notes for today's show. You can pull it up. What you do is you just edit the cells in yellow and all this does is calculate what the actual cost is. And this is a very, very simple calculation.

I'll explain it as we do it. So the first thing we enter in is what the current MPGs are of that vehicle. Well, that big old Chevy van with a thirsty 350 V8 got about 14 miles per gallon. We drove it smoothly enough. Most of the highway miles were ...

Most of the miles that we drove on it were highway miles. So my dad was looking at a car, just an average sedan. He actually wound up later on getting a Buick sedan. So that's what I'm going to use as my proxy here. And that Buick sedan was a perfectly functional, normal, mid-level consumer sedan that got probably about 23 or 24 miles per gallon.

So I'm going to use 24 miles per gallon as my calculation. Now in my calculator, you have to put in the cost per gallon of gas. And so for the sake of our analysis, let's leave it at just about what it is today right now, about $2.30 across the country.

So we'll just plug in $2.30 worth of gas. Now the next two numbers that you've got to calculate is what is the current price that you're going to sell your car for? And you need to figure this out. Well, if you're going to sell your current car, as I remember that that van was worth about $2,500 at the time that he was looking to sell it, you want to put that number in as how much are you going to sell your current car for, and how much will you pay for your new car?

And my dad, I think, was looking at cars that were going to be about $7,500. Now I also want to make sure that you calculate what are some of the additional expenses or some of the additional savings that you're going to have. We'll come back to that in a moment after I give you this example.

And then how many miles you drive every month. And in this case, the miles that he would drive every month were about 1,000. So we'll keep it at 1,000. Well when you run the numbers on that, you wind up with 73 months, 73 months before you would finally make up the cost of the purchase of the newer car.

If that number doesn't shock you, it's simply because you're a human calculator and you've never worked with people. Because when I've interacted with people, usually they say, "Oh, about a year or two I'll break even." Six years just to break even on a very, very sensible vehicle change. Remember, I'm talking about moving from a $2,500 car up to a $7,500 car.

I'm not talking about going to a $30,000 new car. Just moving up from a $2,500 car to a $7,500 car. For somebody who drives 1,000 miles a month and gets a 10 mile per gallon improvement in their gas mileage from 14 miles per gallon to 24 miles per gallon.

And it takes six years to break even on the fuel cost. I'm going to give you a couple other examples here just to drive this point home to you. And then we'll talk about some of the factors that should influence your personal decision. So I'm going to give you two more scenarios.

Not real scenarios. I'm just making these up. I thought of friends that I knew and people that I am encountered with and I just thought this would be interesting. So scenario one is that you drive a 2,000, currently as I record this 2016, you drive a 2,000 Ford F-150, which gets you 16 miles per gallon of combined mileage according to fuel economy.gov.

And this vehicle is worth $1,500. So that's the amount of money that you're going to sell it for. Again, 2,000 Ford F-150, you get 16 miles per gallon. It's worth $1,500. And you're looking around and you're concerned about gas prices at $2.30 a gallon. And you're looking around and by the way, I'm giving you this now.

Don't laugh at the $2.30 per gallon number. We were doing these numbers when they were up in the $3 and $4 numbers, but I'm doing it now because I want you to be thinking about gas mileage. We're going to keep today's numbers and then we'll show you all the variables that can affect your personal situation.

Now back to the scenario. So 2,000 Ford F-150, get 16 miles per gallon according to fuel economy.gov. I just priced it on auto trader and I saw some of these listed that I think you could get these for about 1,500 bucks. So that's what you would sell it for.

You're going to buy a 2016 Toyota Corolla. So you're going to go and buy a new car, but it's a very sensible car, intelligent car choice, small, very fuel efficient, should have a very long lifespan. And I checked that out on trucar.com to see what the prices are in my area.

And I could get a 2016 Toyota Corolla for $21,510. So that was what they said is the average price actually paid. Doesn't include taxes, doesn't include title, but that's just the number that we're going to use, $21,510. Now that Toyota Corolla gets according to fuel economy.gov, 30 miles per gallon.

So 30 miles per gallon, 2016, very reasonable situation and scenario here. I think very reasonable. Now guess how long with no other savings or expenses every month to count in. Just exclusively based upon gas mileage, not depreciation, not any other expenses. How long do you think it takes to break even on that car purchase?

The answer is 298 months, which comes out to 24.8 years. We'll round that to 25 years among friends. Going from an old 2004 F-150, 16 miles per gallon to a new 2016 Toyota Corolla takes 25 years to break even based on gas mileage. You say, but I don't want to have a car that's that old and I don't want to buy a car that's not new.

I planned out one other scenario to share with you. You're going to upgrade from an SUV, a 2006 Honda Pilot to a slightly newer but still used Prius that's very fuel efficient. So I pulled the numbers here from autotrader.com, a 2006 Honda Pilot would sell for about 5,000 bucks and that currently, that car is rated for 18 miles per gallon according to fuel economy.gov.

So we're going to sell it for $5,000, 18 miles per gallon. Now your new miles per gallon that you get with a Toyota Prius, it's rated by fuel economy.gov to get you 48 miles per gallon, 48 miles per gallon. And you're going to pay $11,000 for it because it's in the used market.

No additional savings, no additional expenses. And by the way, in all of these, I've kept constant that you're driving a thousand miles per month. Guess how many months to break even? Answer, 75 months. Seventy-five months to break even just based upon gas mileage. When I started running these scenarios using my calculator, I was stunned because there are other factors and other expenses and other things that you've got to consider as well.

But I was stunned at how long it took to break even on gas. Now you say, "Well, what if gas is more expensive?" Because let's stick with this Honda Pilot to Toyota Prius example because this is the one where it's the closest. This is the most reasonable type of scenario where you should consider changing on gas mileage.

2006 Honda Pilot worth five grand, upgrading just a few years, five years into a Prius and you go from 18 to 48 miles per gallon. You pick up 30 miles per gallon. Let's just change that and let's just bump gas prices up to $3 a gallon and see what the break even point is.

Well, now it's 58 months, five years at $3 a gallon. At $4 a gallon, it's 43 months. Just under four years. I'm not going to take it higher than $4 a gallon. Okay, let's double your mileage and here's where things matter. Let's take you up to 2,000 miles. At $4 per gallon and 2,000 miles per month, it takes you 22 months to break even on that upgrade from a 2006 Pilot SUV to a 2011 Prius used.

So what do we learn from this? A few things. Gas cost and gas mileage is probably generally not your biggest expense and it will almost never make sense to upgrade your car in terms of cost exclusively based upon gas mileage. I emphasize again, it will almost never make sense to upgrade your car based on cost to a more expensive car exclusively based on gas mileage.

The upgrade word is important because where can we save money? Well, first, if you could go from a similarly priced car to a similarly priced car that gets better gas mileage, then you will experience some savings. So let's just do this. Let's say that instead of going from a 2006 Pilot to a 2011 Prius, you went from a 2006 Pilot to a 2006 Prius.

Well here we start to get into cars that are worth about the same amount of money. Now you've got to look for the individual numbers for your deal in your area. I just again, am doing a web search for cars listed for sale and doing a quick average. But when I do that, I find that a 2006 Pilot would be worth about $5,000 and a 2006 Prius would be worth about $5,000 to $6,000.

Well in this situation here, if we drop this gas back to $2.30, you're going to pay, let's just say you're going to pay $6,000 for your new car and you're going to sell your current car for $5,000 and you drive 1,000 miles a month, 18 to 48 miles per gallon.

Now all of a sudden at $2.30, you've got 13 months and you'll be in the clear. You'll be in the black in 13 months. And if we drop that to 5,500, you'd be there in six months. Maybe you can do an even swap. Well in this situation, if you drove 1,000 miles a month, you would wind up saving, switching from the Pilot of 2006 Pilot to the 2006 Prius, you would wind up saving about $80 per month in fuel.

And that would add up pretty quickly. So if you want to change out your vehicle because you're concerned about gas mileage, look for a vehicle that gets better gas mileage, but that's of a similar vintage to your current vehicle or that is cheaper than your current vehicle. Because when you look at that, you can definitely save money based on gas mileage.

What else do you need to consider? Well, you've got to consider what you actually expect the cost of gas to be. And that's the reason why I'm doing the show right now. I know very few people who are complaining about the cost of gas. It's a little funny. There's a bumper sticker.

It's a political bumper sticker, but it's funny. It says the cost of gas and has a picture of Barack Obama. It says the cost of gas when President Obama took office in January 2009 was, I think it was about $1.90 a gallon. And the idea here is that when gas was close to $4 a gallon, that was quite the damning political statement.

Well, today with gas at $2.30, every time I see that bumper sticker, I just kind of chuckle and say, "Haven't you removed that yet?" That didn't really make a big argument for yourself. So $2.30, no one is complaining unless you work in the oil industry or unless you live on dividends from your oil shares.

Then you're complaining about current gas prices being what they are. But if you expect gas prices to change in the future, then this can be something that you should pay attention to. And you can use this calculator and you can use it to figure out what would be some significant changes that I can make in order to be prepared for changing gas prices.

As an example, if I switch the cost of gallon per gas from $2.30 to $4 a gallon, now all of a sudden you're going to be saving $140 a month if you swap out your pilot for a Prius. And the time to do that is when prices are low.

The time to shop for fuel-efficient cars is when the demand for them is low. Right now, the demand is low. People aren't thinking about that. People are very happily going out and buying bigger vehicles. They're not worried about it because at $2.30, it's easy to fill up the tank.

That's not for you. You're smarter than that. So you should be shopping for your fuel-efficient vehicle now and my calculator can help you. One other fact, two other lines that are on my calculator that will make a big difference for you. First is how many miles do you drive every month?

If you drive a low number of miles per month, and this should be intuitive, but for many people it's not. If you only drive a few hundred miles a month, the actual MPGs of your vehicle is probably the least relevant number for you because you're only paying for gas when the vehicle's moving.

If you have a full-size van or like me, I want my vehicle to have this big Dodge van RV. The thing gets about 15 miles per gallon, but I don't drive it all that much. It's not a commuting vehicle. So the cost of gas matters, but it doesn't matter all that much unless I'm on the road a ton, a ton, a ton, but it's an RV.

They usually don't get driven all that much. So don't worry. If you don't drive very much, don't worry about swapping out your vehicle because you're concerned about gas prices. The other number, however, on my calculator is one that you do need to pay attention to. And I have it listed here.

It's called additional monthly expenses or savings from the change. And the idea is you want to make sure that when you're thinking about a purchase decision like a car, that you factor in all the costs. Now the way this process goes for most people is they run out and they start looking for cars.

And unfortunately, they start by looking according to their budget. Then they start going to dealerships and looking at the newer cars because after all, I want to get an idea of what's out there and it's a lot easier to look at the newer cars at the dealership. Well, at the dealership, all of a sudden you find out how nice those newer cars are, how comfortable they are, how beautiful they are, and how inexpensive they are.

And so you start looking at the numbers and many people just calculate them based upon the monthly number and they forget about the total cost of ownership. What you need to do is you need to calculate the actual number. If you're going to change from one car to another car, you need to calculate the cost of transferring the title, transferring the tag, paying the tax.

In my state, we have a 6% sales tax. So if I were going to switch from one car to the next, I'm going to automatically incur a 6% sales tax from that. You want to consider if there are any savings with insurance because this can help a lot. My calculator does make provision for that.

You might drive an older vehicle that has a very high insurance cost, but you might be able to switch up to a newer vehicle that has a very low insurance cost. In that situation, you want to count that as savings. Or you want to factor in savings based upon you're not having to repair your older vehicle.

Older vehicles do tend to nickel and dime you on repairs and newer vehicles might have fewer repairs. Here you need to figure out, are we talking about actual repairs or are we talking about maintenance items? All vehicles burn up batteries about once every two, three, four years. All vehicles burn up tires.

You got to replace your tires every five to six years, even if you're not putting a lot of miles on them just to keep them safe. So that six year, most people aren't going to run through an entire set of tires. You can buy a set of tires now at 90,000 with a 90 to 100,000 mile.

I've seen them with 90,000 mile warranty. So figure 70 to 100,000 miles of useful lifespan. Most people are going to be replacing their tires, not because they're worn down, but because they're old, which by the way, if you don't know that, you need to do that for a safety consideration.

Majority of significant, let me not say a majority because I don't know that to be the fact, a significant number of catastrophic blowouts of tires are caused due to the age of the tire, not due to another factor. So when your tires get to about five to six years old, you need to replace them proactively so that you don't wind up with a catastrophic blowout.

Catastrophic blowout is the type of thing that you want to avoid. That's when it happens at 70 miles an hour and all of a sudden the tire shreds. You get a flat tire because you popped it with a nail. That's no big deal. That's not a safety hazard. Catastrophic blowout on the interstate is a safety hazard.

So replace your tires when you get them to about five to six years and don't take a chance on that. It's not worth it. Point of the tire issue though is all vehicles need tires. All vehicles need oil changes. So sometimes with an older vehicle, there aren't a lot of actual changes.

I've had now a little 1998 Toyota Corolla that I bought for $500, a little more than a year ago. I have not repaired anything with it and I put 4,000 miles on it. There's not been a single problem. I haven't had to repair anything. The vehicle just works. It works largely due to its nature, meaning it's very, very simple.

It's mechanically simple. I've got a manual transmission and roll up windows. I don't have anything. There's very few things on it that can break. Now, of course, things can break, but mechanically it's very simple. That's different than the TPMS, tire pressure monitoring system light on my other car that I can't seem to fix no matter how much money we throw at the thing because it's got more issues, more things to break.

So do some actual true calculations for your situation. Figure out if there are additional monthly expenses. Do you have insurance costs that go up? Or if there are additional monthly savings, you need to factor those in. Obviously, of course, you also want to factor in the depreciation. Now my calculator does not factor in depreciation, but you need to do that mentally.

What I mean is, and the reason it doesn't is because I built it real quick and I was just trying to answer the question of fuel mileage. But remember that your car is going to be worth progressively less and less and less for each year that goes on. Now you can't always drive a 1922 vehicle.

Of course, you've got to upgrade at some point in time, but that depreciation is a real cost. And if we were going to go back to my Toyota example, my Toyota Corolla example, let me run these numbers again. So we've got a 2000 Ford F-150, 16 miles per gallon.

2016 Toyota Corolla gets 30 miles per gallon. Gas, let's put it at $2.50 now. We're going to pay $21,510 for it. We could sell our current car for $1,500, drive a thousand miles a month. So in my situation here, under this example, what I find out is that the average, the current cost of fuel per mile is 16 cents per mile, just gas in that F-150.

And the newer cost of fuel per mile to go up to the Toyota Corolla is 8 cents per mile of gas. So I'm going to save some money in gas. I'm going to wind up saving a total of $73 per month of fuel. Now it's going to take me 412 months to break even on the fuel costs, but I'm saving $73.

But now let's talk about depreciation on that $30,000 vehicle. $31,510 times 0.15 comes out to $4,726 of depreciation in the first year. Brought out monthly, divide that by 12, we wind up with $393 per month of depreciation, meaning the car is just worth progressively less from sitting in my driveway and from driving me to work.

That's $400 out the door gone before we even get to fuel savings. My calculator doesn't take this into account, but you need to take this into account. Now it won't always be $400 a month because in the future the car will be worth less and less. But let's say a couple of years from now it's now worth $15,000.

Well a $15,000 car is losing $2,250 this year in depreciation costs. Divide that by 12, that's $187 gone. Equal what I'm saving on fuel mileage savings. At that point in time, I guess the car would probably have to be what, $7,500. So we'd have to get down to when the car is worth, in order to save money on fuel here, in order for the loss of depreciation to equal the loss of savings on fuel, we've got to get down to $5,000 times .15, 750 divided by 12, a little bit more.

Okay, $6,500 times .15 divided by 12. Great, good enough. So when your 2016 Toyota Corolla is worth $6,500, now at this point in time you are finally going to only be losing $81.25 this month, every month this year, in depreciation costs where you're saving $73 per month of fuel.

So you've got to drive, in that example, if you were going to think about trading in your 2000 Ford F-150 and buying a 2016 Toyota Corolla, you would have to drive off $24,000 of value of the Corolla before you ever make up your fuel savings when we factor in depreciation.

Point of the story, don't buy a newer car because it saves you money on gas. Buy a newer car because you want a newer car, because at this stage of your life it's appropriate for you to have a newer car. Buy a newer car because your circumstances change. Buy a newer car because you have a reason to buy a newer car that's not financial.

Now when you're buying a newer car for a reason that's not financial, make sure you factor in good financial decisions. There's no reason to buy something that gets bad gas mileage if you have an option to buy something that gets better gas mileage. I remain convinced in consumer reports and many other people agree with me that if you are interested in driving a car, a Toyota Prius is the best car for the vast majority of people to buy and to be driving.

It's fantastic. I'm going to do a show, it might be tomorrow, on the Chevy Volt, the new 2017 Chevy Volt. I think it's one that if I were buying a newer car today, I would seriously consider it. It's a great vehicle. But I wouldn't be telling myself that I'm buying the newer car because I'm going to save on money by switching from gas to electric.

Although that will come eventually. Yes, you can save on gas by switching to electric. But it's going to take a really long time to make up those savings. I'm just saying if you're in that stage of life where you need to upgrade your car, make a sensible decision at that point in time.

And don't fool yourself into thinking that you can buy the new car because you're going to save on gas. I'm the youngest of my parents' seven children. If you ever have seven children in your family, you'll start to see that there are certain expenses and costs that many other families with fewer children don't get to enjoy.

Those costs would range from the cost of going out to eat. Just about any restaurant visit automatically turns into a $100 meal if you have seven kids and you're trying to go out to eat. One of the costs is transportation because you need to want a vehicle big enough to carry your family around.

If you have three, four, five kids, there are lots of options. But when you get to seven, all of a sudden now you have nine people total that you've got to cart around. And that requires a larger vehicle. When I was growing up, all during my younger years, my parents had a 1985 Chevy 12 passenger van.

We used that van for many, many years. Drove it all over the United States. Had a lot of great memories in that van. My dad fixed it up and it was repainted a couple times and just was a great vehicle for us. But sometime probably about the late '90s, we needed to upgrade.

And so my parents were looking around and trying to figure out if they could switch to a different kind of vehicle. They were shopping. They knew they probably needed a van. At one point I have a clear, vivid memory of going and looking at the Chevy Astro. The Chevy Astro had three rows, but at that point in time, they put me in the backseat and I probably wasn't as big then as I am now, but I'm about 6'5", 6'6" and I'm not skinny.

And they put me in the backseat and realized they needed something a little bit bigger. So after a while, they found a 1995 Chevy conversion van and bought that. I found it used and bought that. And we had a lot of great memories in that vehicle as well. It was very, very useful, very, very comfortable.

It was a great car. One of the problems though of driving a full-size van is it's not the most fuel efficient vehicle. Well, my parents kept that vehicle for many years. And when I was in college, most of the needs of being able to carry the whole family together had been eliminated simply due to kids growing up, getting married, starting their own families.

And my dad just got kind of tired of this big van that he was driving to work every day. We lived out west of town, about 20 miles, and he would drive this thing in and out, in and out, in and out. And looking at the gas tank, I mean, to fill the thing up is 80 bucks.

And it gets hard to do that. So he was thinking, "Well, it might be time to get something a little bit more fuel efficient for his commute." He was also getting tired of putting money into it and fixing a few things. And so he was talking to me about whether he should switch to a different car.

Well, I didn't know the answer. So I sat down and built a calculator in Excel to try to figure out the answer. And the results of that challenge that I had set for myself really, really shocked me. Because what I learned was that even though he was driving one of the worst vehicles in terms of fuel mileage, even so, and even though he was driving a lot, it still didn't make a lot of financial sense for him to move up to a newer car based solely on gas mileage improvements.

Since that time, I've done this calculation many times. I sent my calculator out to all my friends and would email it out. And anytime somebody was thinking about buying another car and they're trying to justify it based upon gas mileage, I would send them my calculator, let them do the numbers.

And there are times at which this makes sense. And I'll go over those in today's show. The answer of course is you need to calculate your own numbers, which is why in the show notes for today's show, in the blog post, you'll just see a link right to it, just to the Excel file.

I haven't touched this thing since 2000. I think I built it in about 2008. But you can download it and run the numbers for your own situation. But today I'm going to run you through some numbers and give you some examples. Because I want you to get this very, very clearly in your head.

Gas mileage matters, but it may not be the most important thing for you to focus on such that you sell your older car that's functional to buy a newer one because of gas mileage. Now let's start with the real numbers for my dad's vehicle. And I'm going to punch these into my calculator.

If you'd like to do them yourself, again, the Excel file is linked in the blog post or show notes for today's show. You can pull it up. What you do is you just edit the cells in yellow and all this does is calculate what the actual cost is. And this is a very, very simple calculation.

I'll explain it as we do it. So the first thing we enter in is what the current MPGs are of that vehicle. Well, that big old Chevy van with a thirsty 350 V8 got about 14 miles per gallon. We drove it smoothly enough. Most of the highway miles were ...

Most of the miles that we drove on it were highway miles. So my dad was looking at a car, just an average sedan. He actually wound up later on getting a Buick sedan. So that's what I'm going to use as my proxy here. And that Buick sedan was a perfectly functional, normal, mid-level consumer sedan that got probably about 23 or 24 miles per gallon.

So I'm going to use 24 miles per gallon as my calculation. Now in my calculator, you have to put in the cost per gallon of gas. And so for the sake of our analysis, let's leave it at just about what it is today, right now, about $2.30 across the country.

So we'll just plug in $2.30 worth of gas. Now the next two numbers that you've got to calculate is what is the current price that you're going to sell your car for? And you need to figure this out. Well, if you're going to sell your current car, as I remember that that van was worth about $2,500 at the time that he was looking to sell it, you want to put that number in as how much are you going to sell your current car for, and how much will you pay for your new car?

And my dad, I think, was looking at cars that were going to be about $7,500. Now I also want to make sure that you calculate what are some of the additional expenses or some of the additional savings that you're going to have. We'll come back to that in a moment after I give you this example.

And then how many miles you drive every month. And in this case, the miles that he would drive every month were about 1,000. So we'll keep it at 1,000. Well when you run the numbers on that, you wind up with 73 months, 73 months before you would finally make up the cost of the purchase of the newer car.

If that number doesn't shock you, it's simply because you're a human calculator and you've never worked with people. Because when I've interacted with people, usually they say, "Oh, about a year or two I'll break even." It takes years just to break even on a very, very sensible vehicle change.

Remember, I'm talking about moving from a $2,500 car up to a $7,500 car. I'm not talking about going to a $30,000 new car. Just moving up from a $2,500 car to a $7,500 car. For somebody who drives 1,000 miles a month and gets a 10 mile per gallon improvement in their gas mileage from 14 miles per gallon to 24 miles per gallon.

And it takes six years to break even on the fuel cost. I'm going to give you a couple other examples here just to drive this point home to you. And then we'll talk about some of the factors that should influence your personal decision. So I'm going to give you two more scenarios, not real scenarios.

I'm just making these up. I thought of friends that I knew and people that I am encountered with and I just thought this would be interesting. So scenario one is that you drive a 2,000, currently as I record this 2016, you drive a 2,000 Ford F-150, which gets you 16 miles per gallon of combined mileage according to fuel economy.gov.

And this vehicle is worth $1,500. So that's the amount of money that you're going to sell it for. Again, 2,000 Ford F-150, you get 16 miles per gallon. It's worth $1,500. And you're looking around and you're concerned about gas prices at $2.30 a gallon. And you're looking around and by the way, I'm giving you this now.

Don't laugh at the $2.30 per gallon number. We were doing these numbers when they were up in the $3 and $4 numbers, but I'm doing it now because I want you to be thinking about gas mileage. We're going to keep today's numbers and then we'll show you all the variables that can affect your personal situation.

Now back to the scenario. So 2,000 Ford F-150, get 16 miles per gallon according to fuel economy.gov. I just priced it on auto trader and I saw some of these listed that I think you could get these for about 1,500 bucks. So that's what you would sell it for.

You're going to buy a 2016 Toyota Corolla. So you're going to go and buy a new car, but it's a very sensible car, intelligent car choice, small, very fuel efficient, should have a very long lifespan. And I checked that out on trucar.com to see what the prices are in my area.

And I could get a 2016 Toyota Corolla for $21,510. So that was what they said is the average price actually paid. Doesn't include taxes, doesn't include title, but that's just the number that we're going to use, $21,510. Now that Toyota Corolla gets according to fuel economy.gov, 30 miles per gallon.

So 30 miles per gallon, 2016, very reasonable situation and scenario here. I think very reasonable. Now guess how long with no other savings or expenses every month to count in, just exclusively based upon gas mileage, not depreciation, not any other expenses. How long do you think it takes to break even on that car purchase?

The answer is 298 months, which comes out to 24.8 years. We'll round that to 25 years among friends. Going from an old 2004 to F-150, 16 miles per gallon to a new 2016 Toyota Corolla takes 25 years to break even based on gas mileage. You say, "But I don't want to have a car that's that old and I don't want to buy a car that's not new." Okay, I planned out one other scenario to share with you.

You're going to upgrade from an SUV, a 2006 Honda Pilot to a slightly newer but still used Prius that's very fuel efficient. So I pulled the numbers here from autotrader.com, a 2006 Honda Pilot would sell for about 5,000 bucks and currently that car is rated for 18 miles per gallon according to fueleconomy.gov.

So we're going to sell it for $5,000, 18 miles per gallon. Now your new miles per gallon that you get with a Toyota Prius, it's rated by fueleconomy.gov to get you 48 miles per gallon, 48 miles per gallon and you're going to pay $11,000 for it because it's in the used market.

No additional savings, no additional expenses and by the way in all of these I've kept constant that you're driving 1,000 miles per month. Guess how many months to break even? Answer, 75 months. 75 months to break even just based upon gas mileage. When I started running these scenarios using my calculator I was stunned because there are other factors and other expenses and other things that you've got to consider as well but I was stunned at how long it took to break even on gas.

Now you say, "Well, what if gas is more expensive?" because let's stick with this Honda Pilot to Toyota Prius example because this is the one where it's the closest. This is the most reasonable type of scenario where you should consider changing on gas mileage. 2006 Honda Pilot worth 5 grand upgrading just a few years, 5 years into a Prius and you go from 18 to 48 miles per gallon.

You pick up 30 miles per gallon. Let's just change that and let's just bump gas prices up to $3 a gallon and see what the break even point is. Well, now it's 58 months, 5 years at $3 a gallon. At $4 a gallon it's 43 months, so just under 4 years.

I'm not going to take it higher than $4 a gallon. Okay, let's double your mileage and here's where things matter. Let's take you up to 2,000 miles. At $4 per gallon and 2,000 miles per month, it takes you 22 months to break even on that upgrade from a 2006 Pilot SUV to a 2011 Prius used.

So what do we learn from this? A few things. Gas mileage is probably, gas cost and gas mileage is probably generally not your biggest expense and it will almost never make sense to upgrade your car in terms of cost exclusively based upon gas mileage. I emphasize again, it will almost never make sense to upgrade your car based on cost to a more expensive car exclusively based on gas mileage.

The upgrade word is important because where can we save money? Well, first if you could go from a similarly priced car to a similarly priced car that gets better gas mileage, then you will experience some savings. So let's just do this. Let's say that instead of going from a 2006 Pilot to a 2011 Prius, you went from a 2006 Pilot to a 2006 Prius.

Well here we start to get into cars that are worth about the same amount of money. Now you've got to look for the individual numbers for your deal in your area. I just again, I'm doing a web search for cars listed for sale and doing a quick average. But when I do that, I find that a 2006 Pilot would be worth about $5,000 and a 2006 Prius would be worth about $5,000 to $6,000.

Well in this situation here, if we drop this gas back to $2.30, you're going to pay, let's just say you're going to pay $6,000 for your new car and you're going to sell your current car for $5,000 and you drive 1,000 miles a month, 18 to 48 miles per gallon.

Now all of a sudden at $2.30, you've got 13 months and you'll be in the clear. You'll be in the black in 13 months. And if we drop that to 5,500, you'd be there in six months. Maybe you can do an even swap. Well in this situation, if you drove 1,000 miles a month, you would wind up saving, switching from the Pilot of 2006 Pilot to the 2006 Prius, you would wind up saving about $80 per month in fuel.

And that would add up pretty quickly. So if you want to change out your vehicle because you're concerned about gas mileage, look for a vehicle that gets better gas mileage, but that's of a similar vintage to your current vehicle or that is cheaper than your current vehicle. Because when you look at that, you can definitely save money based on gas mileage.

What else do you need to consider? Well, you've got to consider what you actually expect the cost of gas to be. And that's the reason why I'm doing the show right now. I know very few people who are complaining about the cost of gas. It's a little funny. There's a bumper sticker.

It's a political bumper sticker, but it's funny. It says the cost of gas and has a picture of Barack Obama. It says the cost of gas when President Obama took office in January 2009 was, I think it was about $1.90 a gallon. And the idea here is that when gas was close to $4 a gallon, that was quite the damning political statement.

Well, today with gas at $2.30, every time I see that bumper sticker, I just kind of chuckle and say, "Haven't you removed that yet?" That didn't really make a big argument for yourself. So $2.30, no one is complaining unless you work in the oil industry or unless you live on dividends from your oil shares.

Then you're complaining about current gas prices being what they are. But if you expect gas prices to change in the future, then this can be something that you should pay attention to. And you can use this calculator and you can use it to figure out what would be some significant changes that I can make in order to be prepared for changing gas prices.

As an example, if I switch the cost of gallon per gas from $2.30 to $4 a gallon, now all of a sudden you're going to be saving $140 a month if you swap out your pilot for a Prius. And the time to do that is when prices are low.

The time to shop for fuel-efficient cars is when the demand for them is low. Right now, the demand is low. People aren't thinking about that. People are very happily going out and buying bigger vehicles. They're not worried about it because at $2.30, it's easy to fill up the tank.

That's not for you. You're smarter than that. So you should be shopping for your fuel-efficient vehicle now and my calculator can help you. One other fact, two other lines that are on my calculator that will make a big difference for you. First is how many miles do you drive every month?

If you drive a low number of miles per month, and this should be intuitive, but for many people it's not. If you only drive a few hundred miles a month, the actual MPGs of your vehicle is probably the least relevant number for you because you're only paying for gas when the vehicle's moving.

If you have a full-size van or like me, one of my vehicles, I have this big Dodge van RV. The thing gets about 15 miles per gallon, but I don't drive it all that much. It's not a commuting vehicle. So the cost of gas matters, but it doesn't matter all that much unless I'm on the road a ton, a ton, a ton, but it's an RV.

They usually don't get driven all that much. So don't worry. If you don't drive very much, don't worry about swapping out your vehicle because you're concerned about gas prices. The other number, however, on my calculator is one that you do need to pay attention to. And I have it listed here.

It's called additional monthly expenses or savings from the change. And the idea is you want to make sure that when you're thinking about a purchase decision like a car, that you factor in all the costs. Now the way this process goes for most people is they run out and they start looking for cars.

And unfortunately, they start by looking according to their budget. Then they start going to dealerships and looking at the newer cars because after all, I want to get an idea of what's out there and it's a lot easier to look at the newer cars at the dealership. Well, at the dealership, all of a sudden you find out how nice those newer cars are, how comfortable they are, how beautiful they are, and how inexpensive they are.

And so you start looking at the numbers and many people just calculate them based upon the monthly number and they forget about the total cost of ownership. What you need to do is you need to calculate the actual number. If you're going to change from one car to another car, you need to calculate the cost of transferring the title, transferring the tag, paying the tax.

In my state, we have a 6% sales tax. So if I were going to switch from one car to the next, I'm going to automatically incur a 6% sales tax from that. You want to consider if there are any savings with insurance because this can help a lot. My calculator does make provision for that.

You might drive an older vehicle that has a very high insurance cost, but you might be able to switch up to a newer vehicle that has a very low insurance cost. In that situation, you want to count that as savings. Or you want to factor in savings based upon you're not having to repair your older vehicle.

Older vehicles do tend to nickel and dime you on repairs and newer vehicles might have fewer repairs. Here you need to figure out are we talking about actual repairs or are we talking about maintenance items? All vehicles burn up batteries about once every two, three, four years. All vehicles burn up tires.

You got to replace your tires every five to six years, even if you're not putting a lot of miles on them just to keep them safe. So that six year, most people aren't going to run through an entire set of tires. You can buy a set of tires now at 90,000 with a 90 to 100,000 mile.

I've seen them with 90,000 mile warranty. So figure 70 to 100,000 miles of useful lifespan. Most people are going to be replacing their tires not because they're worn down, but because they're old, which by the way, if you don't know that, you need to do that for a safety consideration.

Majority of significant, let me not say a majority because I don't know that to be the fact, a significant number of catastrophic blowouts of tires are caused due to the age of the tire, not due to another factor. So when your tires get to about five to six years old, you need to replace them proactively so that you don't wind up with a catastrophic blowout.

A catastrophic blowout is the type of thing that you want to avoid. That's when it happens at 70 miles an hour and all of a sudden the tire shreds. You get a flat tire because you popped it with a nail. That's no big deal. That's not a safety hazard.

Catastrophic blowout on the interstate is a safety hazard. So replace your tires when you get them to about five to six years and don't take a chance on that. It's not worth it. The other side of the tire issue though is all vehicles need tires. All vehicles need oil changes.

So sometimes with an older vehicle, there aren't a lot of actual changes. I've had now a little 1998 Toyota Corolla that I bought for, I bought it for $500, a little more than a year ago. I have not repaired anything with it and I put 4,000 miles on it.

There's not been a single problem. I haven't had to repair anything. The vehicle just works. It works largely due to its nature, meaning it's very, very simple. It's mechanically simple. I've got a manual transmission and roll up windows. I don't have anything. There's very few things on it that can break.

Now, of course, things can break, but mechanically it's very simple. That's different than the TPMS, tire pressure monitoring system light on my other car that I can't seem to fix no matter how much money we throw at the thing because it's got more issues, more things to break. So do some actual true calculations for your situation.

You figure out if there are additional monthly expenses. Do you have insurance costs that go up? Or if there are additional monthly savings, you need to factor those in. Obviously, of course, you also want to factor in the depreciation. Now my calculator does not factor in depreciation, but you need to do that mentally.

And what I mean is, and the reason it doesn't is because I built it real quick and I was just trying to answer the question of fuel mileage. But remember that your car is going to be worth progressively less and less and less for each year that goes on.

Now you can't always drive a 1922 vehicle. Of course, you've got to upgrade at some point in time. But that depreciation is a real cost. And if we were going to go back to my Toyota example, my Toyota Corolla example, let me run these numbers again. Okay, so we've got a 2000 Ford F-150, 16 miles per gallon.

2016 Toyota Corolla gets 30 miles per gallon. Gas, let's put it at $2.50 now. We're going to pay $21,510 for it. We could sell our current car for $1,500, drive 1,000 miles a month. So in my situation here, under this example, what I find out is that the average, the current cost of fuel per mile is 16 cents per mile, just gas in that F-150.

And the newer cost of fuel per mile to go up to the Toyota Corolla is 8 cents per mile of gas. So I'm going to save some money in gas. I'm going to wind up saving a total of $73 per month of fuel. Now it's going to take me 412 months to break even on the fuel costs, but I'm saving $73.

But now let's talk about depreciation on that $30,000 vehicle. $3,510 times 0.15 comes out to $4,726 of depreciation in the first year. Brought out monthly, divide that by 12, we wind up with $393 per month of depreciation, meaning the car is just worth progressively less from sitting in my driveway and from driving me to work.

That's $400 out the door gone before we even get to fuel savings. My calculator doesn't take this into account, but you need to take this into account. Now it won't always be $400 a month because in the future the car will be worth less and less. But let's say a couple of years from now it's now worth $15,000.

Well a $15,000 car is losing $2,250 this year in depreciation costs, divide that by 12, that's $187 gone. Double what I'm saving on fuel mileage savings. At that point in time, I guess the car would probably have to be what, $7,500. So we'd have to get down to when the car is worth, in order to save money on fuel here, excuse me, in order for the loss of depreciation to equal the loss of savings on fuel, we've got to get down to $5,000 times .15, 750 divided by 12, a little bit more, $6,500 times .15 divided by 12.

Great, good enough. So when your 2016 Toyota Corolla is worth $6,500, now at this point in time you are finally going to only be losing $81.25 this month, every month this year in depreciation costs where you're saving $73 per month of fuel. So you've got to drive, in that example, if you were going to think about trading in your 2004 F-150 and buying a 2016 Toyota Corolla, you would have to drive off $24,000 of value of the Corolla before you ever make up your fuel savings when we factor in depreciation.

Here's the story, don't buy a newer car because it saves you money on gas. Buy a newer car because you want a newer car, because at this stage of your life it's appropriate for you to have a newer car. Buy a newer car because your circumstances change. Buy a newer car because you have a reason to buy a newer car that's not financial.

Now when you're buying a newer car for a reason that's not financial, make sure you factor in good financial decisions. There's no reason to buy something that gets bad gas mileage if you have an option to buy something that gets better gas mileage. I remain convinced and Consumer Reports and many other people agree with me that if you are interested in driving a car, a Toyota Prius is the best car for the vast majority of people to buy and to be driving.

It's fantastic. I'm going to do a show, it might be tomorrow, on the Chevy Volt, the new 2017 Chevy Volt. I think it's one that if I were buying a newer car today, I would seriously consider it. It's a great vehicle. But I wouldn't be telling myself that I'm buying the newer car because I'm going to save on money by switching from gas to electric.

Although that will come eventually. Yes, you can save on gas by switching to electric. But it's going to take a really long time to make up those savings. I'm just saying if you're in that stage of life where you need to upgrade your car, make a sensible decision at that point in time.

And don't fool yourself into thinking that you can buy the new car because you're going to save on gas. Hey, Cricut customers, Max with Ads is included with your Cricut $60 unlimited plan at no additional cost. Max is the streaming platform where you can watch Scoob, Meg to the Trench, The Nightmare on Elm Street Collection, and so much more.

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