Questionable Value with Falcon E-Gas

I'm met a family with two kids deciding which car to buy. They were thinking of buying a Falcon with dedicated LPG because LPG is apparently cheap. A new Falcon XT eith E-Gas costs $37,390. If you get $1000 back from the Gov then effectively you pay $36,390. On the other hand, an Camry costs $29,500. That's a difference of $6890. Camry's fuel efficiency is 9.9L/100km and Falcon E-Gas's is 15.1L/100km. Assuming LPG price of $0.45 per litre and $1.10 per liter for petrol, then for every 100km you travel on the Falcon with E-gas you save $4.095 or $0.04095 per kilometer. The family does 15,000 km per year, and so every year by getting the Falcon E-gas they save $614.25. Therefore, it will take 11.21 years for the Falcon E-Gas to be cheaper than the Camry! And that's not factoring in the tax the Gov will put on LPG in 2011. The family got the Camry instead. They considered not only the economic reasons but also because refilling with petrol is so much more user-friendly than refilling with LPG.

A 4-cylinder small car has lower running costs than a large LPG car. Many see the price difference of LPG and petrol and find this idea hard to believe, but just do the math and you can see. A small car uses 6L/100km. A large car on LPG uses 15L/100km. Assuming cost of LPG is $0.45 per liter and cost of petrol is $1.10 per liter then the small car costs $6.60 per 100km and the large car on LPG costs $6.75 per 100km. So the large car on LPG costs 15 cents more per 100km! Now of course LPG prices and fuel prices fluctuate a bit and so a small 4-cylinder petrol car and an large LPG car will roughly be the same. However, think about the LPG tax coming and think about the fact that usually a large car costs about twice as much to buy as a small car. For a new Falcon you'd pay in the mid-$30,000s and for a Holden Barina or Toyota Yaris you'd pay about $15,000 or so.

There are a number of second-hand cars you can convert to LPG. However, conversion to LPG only makes sense if you do very many kilometers per year. Suppose you only drive to the shops to do the grocery every now and then. You are better off putting your LPG conversion money into shares and getting a higher return from that. If you put $500 into shares last year you'd get $610 back now because of 22% growth in the ASX200. If you put that $500 into LPG conversion then you'd have to do 14,896 km of driving in one year for your LPG investment to beat the investment in shares.

Furthermore, LPG conversion leaves you stuck with a red sticker on your car, which will invite sneers from BMW drivers.