January 31, 2007

Is it a good deal or not?

A few weeks ago, there was a lady on the news who would fill up her car with gasoline in Ohio because the price is cheaper. At the time the Pittsburgh gas average was about $2.29 and the Ohio gas she was buying was $1.89 per gallon.

Her and her husband live near Ohio and he commutes to Pittsburgh everyday for his job. She said he spends about $100 a week on gas and that the difference in price from Ohio to Pittsburgh will save him half.

Let’s figure this out. She said it is about a 1-hour commute for him, but that doesn’t tell us how many miles it is. We will assume 60 miles. Lets also assume that he does spend $100 a week on gas. $100 divided by $2.29 per gallon = 43.6 gallons of gas per week! 120 miles a day x 5 days a week = 600 miles per week. 600 miles divided by 43.6 gallons…. Hmm 0.2 miles per gallon a new fuel inefficiency record!

I think this lady is mistaken, but lets continue with the analysis. She thinks her husband will spend half as much since the gas is cheaper in Ohio. Ok. $2.29 divided by 2 equals $1.145. $1.145 is less than $1.89.

How much is he really saving? Let’s assume he is still purchasing 43.6 gallons, so 43.6 gallons times $1.89 per gallon equals $82.40. Not near half, but still a savings and probably worth it since they live near the gas station.

The next time you think you are getting a good deal, run the numbers for yourself! I always laugh when someone starts telling me about this great deal they got on their new car lease! Then I really get a good laugh a few years later when the car lease is up and they actually run the numbers!

Enjoying the snow in Doe Valley.

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