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Thursday, 14 June 2007

Would you pay an extra $3 per litre for fuel?

A little while ago I wrote about my very nice but fuel-thirsty car and the arrangement I've entered into which obliges me to drive at least 25,000 km per year in it for another two years. My real issue with that is not so much the CO2 emissions (which can be offset to some degree) but that it's consuming an excessive amount of non-renewable fuel.

As I promised to do in that post I've been looking into my options for switching to something more efficient. The car which has caught my attention is a small four-door with a continuously variable automatic transmission (aka CVT) and fuel economy rated at a very impressive 5.6L/100km. And to my surprise there's actually more headroom in that tiny car than in the one I have now. At about $23,000 on the road I think it'd be a good choice.

But there's a problem with the financial side of things when it comes to the car I have now. The lease company wants thirty grand as a payout, and the car's worth only twenty as a trade-in: so if I want to do this it's going to cost me ten thousand bucks.

What will $10K get me? Well, over the next two years it'll drop my fuel consumption by about three thousand litres, assuming I were to continue to drive the same distance. Divide the one by the other and you get $3.33 per litre as the amount I'd be paying for the sake of using less fuel. (That's ON TOP of the actual cost of fuel at the pump!)

Of course the new car would cost less to purchase and run, so there'd be some compensation along the way. I haven't done the sums yet to work that one out, but I can imagine it still being in the vicinity of $3/litre.

I'm not sure I'm willing - or able - to do that. And besides, there's still the issue of what happens with the old car. A huge amount of energy was consumed making the thing, and it still performs its intended function perfectly well. It probably wouldn't be helping the overall cause to prematurely dispose of it.

So I guess there are three things I can do for the next couple of years to minimise the overall impact of my use of the car I have now:
  1. Drive as efficiently as I possibly can.
  2. Purchase CO2 credits to offset the car's emissions.
  3. Consider whether it's worth paying the tax penalties for not driving 25,000km a year.
That last one would also make the car more valuable at the end of its lease period. Hmmmm.


Ian said...

When I saw the article title I immediately thought "hell yes, I'd love petrol to cost $3 per litre more" because I don't buy the stuff (directly. Yes, I know I still use a lot of fuel indirectly.)

The assumption in your calculations that you'll drive the same amount in a new car as you have to in your old one seems suspect, given the implication that you only currently drive that much because you're obliged to. Do you have an estimate of how much you might drive if you weren't encouraged to by the tax laws?

Also, if you drop below 25000km/yr you'll still be in the 15000km/yr bracket; it's not like you'll drop right to the bottom bracket. I'm not an expert on vehicle FBT tax, but if you're trying to cut down private usage but still needing your car for a lot of work travel, perhaps you'd be better off keeping a logbook and calculating FBT based on operating cost rather than using the statutory method?

In the long run, probably the biggest thing that can be done is to get the government to scrap the tax rort that makes this attractive to so many people in the first place. Write to your local member, the treasurer, prime minister, etc. After all, there's an election on the horizon and it's tipped to be a close one...

TB said...


You can forget the log book idea - I'm just not capable of maintaining those kinds of records. Have tried in the past and failed dismally.

I'm not so much trying to cut down on private use. There isn't much of that these days anyhow. It's more that my work is likely to require an increase in the amount of around-town travel I do in the next couple of years, and that's the worst scenario for fuel efficiency in a "family" V6. If I were doing long drives around the state I'd probably be more content with what I have, especially once highway safety factors were taken into consideration.

As I said in the post, I'm going to find out what penalty I'd face if I simply reduced my use of that car by a significant amount. Given that it's going to improve the resale value of the vehicle at the end of the lease period it may turn out to be a reasonable option.

But I think you're right about the need for a change in the tax laws. As they stand now they seem to reward people for wasting resources.