Should I Buy a More Fuel-Efficient Vehicle?

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

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.

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.