Diesel cars usually get better fuel economy than petrol cars. In Australia, the price of diesel, I have noticed, is about the same as that on petrol, so you get better running costs with a diesel car. However, diesel cars tend to be more expensive. There is a premium you have to pay to get diesel and this may erode any fuel efficiency benefits.
A friend of mine was thinking about whether he should get a petrol Toyota Corolla or a diesel Volkswagon Golf. He told me he was thinking about getting the Golf because apparently his friend told him that diesels have good resale value and are more fuel efficient. But let's do the calculations.
The estimated redbook resale value after three years on the cheapest Golf is 62 per cent and on the cheapest Corolla it is 66 per cent (see the back of Wheels Magazine). Considering that the Corolla is much cheaper, the absolute dollar amount lost through depreciation is much greater from a Golf than it is for a Corolla. In three years, if you buy a Golf, you will lose $10,640 in depreciation costs. If you buy a Corolla, in three years you will lose $6800 in depreciation costs.
Does the fuel efficiency of the diesel Golf compensate for its price premium?
The cheapest diesel Golf is the 1.6L TDI Trendline, which costs about $28,000 to buy. It consumes 5.5L/100km on diesel. The cheapest Corolla is the Corolla sedan, which consumes 7.4L/100km.
Assume diesel and petrol are the same price at $1.20 per litre. By travelling using a Golf you save $2.28 per 100km. The price difference between a Golf and Corolla is about $8000. In order to recoup the cost of driving the higher-priced Golf you will need to drive 350,877 km. The average person drives 20,000km per year, so it will take you 17 years. Will you drive your Golf for 17 years?
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