Archive for the 'Spending Less' Category

Vonage raises rates of lowest tier offering by 20%

Vonage Raises some rates in 2011Vonage is raising rates for its most basic plan from $9.99 a month to $11.99 a month (plus taxes).  I have been an on-again-off-again, user of Vonage for almost 7 years.  For those that are not familiar with Vonage; Vonage is a voice-over-IP (VOIP) provider of home Internet-based telephone service.  Because I do not need “unlimited” calling minutes, Vonage has always seemed the best option.  They provide acceptable service at a decent price.  Even comparing their unlimited plans, Vonage typically offers a price that is significantly better than Comcast or other providers bundled home phone pricing.

Unfortunately, today I got the following notice that Vonage was going to raise prices on my plan:

Modifications to your Vonage calling plan will appear on the first billing statement posted to your account on or after July 5, 2011.  Our plan will continue to provide a great value for home phone service, including an increase in monthly outbound minutes to 300 from 200. Your account will reflect this change at $11.99/mo plus taxes and fees.

In addition to 50% more minutes for calls in the U.S., Canada and Puerto Rico, your plan still provides the benefits you’ve come to expect:

  • Unlimited incoming phone calls AND Vonage-to-Vonage calls.
  • The same great low international rates on calls around the world.

The change is effective July 5th, 2011 and reflects a $2 increase per month or about an 20% increase from the $9.99 I was paying.  Additionally, since taxes and some fees are percentage based as well, I expect this change to cost me about $2.25 more per month when taxes and fees are included.  This means this rate increase will increase my home phone costs by about $27 a year.

With this price change, I plan on re-evaluating whether Vonage is still the best deal or not for me.  One option, I might consider is Ooma – their model is that you pay a flat fee up front and then get “unlimited access for life” (plus taxes).  For now, I need to do some research.  I will report back later with my findings.

Frugal Fail: “Smart” Tea for $1

 

Money Fail Sweet Tea

Driving today I heard a McDonald’s ad on the radio.  In it, a guy decides that since he’s “smart enough to get a sweet tea for just a dollar” he is also smart enough to build a gazebo.  His female companion points out that he’s building it upside down, and the guy sheepishly agrees to call the “gazebo guy.”

He should have called his 2nd grade math teacher.

Drinks (alcoholic or otherwise) are one of the most overpriced things you can get in a restaurant.  Now, I’m all for going to the bar with friends, or treating the family to a dinner out every now and then, but nobody should be excited about the “deal” they are getting.  For about $16 you can get a bucket of Lipton Iced Tea Sugar Sweetened Iced Tea Mix (Pack of 2) that makes 56 quarts or about 14 gallons of tea, which is enough for 56 large 32-oz servings of McDonald’s tea.  In other words, you can get the same serving for about $0.20 cents at home and the McDonald’s “deal” is 5x the cost.

Amazingly, the $1 tea from MickeyD’s isn’t the biggest rip off in tea … For $6.98 at Buy.com, you can get a packet of 10 instant tea mix packets.  That’s $.69/glass, IF you make them at home.  But the marketing guys show a bottle of water on the box, which will set you back another $1 – $2 at the convenience store.  That’s somewhere between $1.69 and $2.69 for a glass of tea.

We recommend you get a high quality portable thermos.  Personally, I use a Contigo West Loop Mug that will keep a cup of coffee hot, or a refrigerated drink cold, literally all day.  Using it means I’m NOT spending $1-$4 a day on drinks, depending on what I’m not buying (coffee, soda, or just plain water).  That might not sound like much, but over the course of a month (workdays only) it can add up to $20 – $80.  Let’s call it $50/month or $600/year that I can either invest or spend on things that really matter to me.  I think that’s better than spending $20 a month for 20 glasses of tea.

Just for fun, here is a video of tea being made at McDonald’s:

Frugal Fail: Renting your cable modem is harmful to your wallet

 

Don't rent a cable or DSL modem

Last month, I replaced my cable modem with a new Motorola SURFBoard 6120 (the same one that I would have rented from Comcast).  I did this because I wanted to take advantage of the new speeds offered in my area and my old DOCSIS 2.0 modem could not handle them.  This and a note from my sister-in-law, reminded of how great of a deal it was to own your own modem instead of rent one.

The following table shows how much money I saved by buying my cable modem 6 years ago.  When I first decided to buy my modem, the rental rate was approximately $3 plus tax.  I purchased my modem online, used it for 6 years and then was able to re-sell it on Craig’s List for $25.  Over that time, Comcast raised the rental rates twice.

Cable Modem rental vs. buy

If I use the same projections, and even assume the monthly rate will never rise (unlikely), I can see that I can expect to save even more money over the next 5 to 6 years after upgrading:

Cable Modem rent vs. buy projections

 

The main reasons Comcast and others say you should rent from them are as follows:

  • If it breaks, we will replace it
  • You are future proofed, as you get free upgrades as the technology improves

Both of these reasons are ridiculous, but let’s address them one by one.

First, “if it breaks, we will replace it”.  This is simply another way of paying overpriced insurance you don’t need.  Cable modems have no moving parts, this means that their failure rate overtime is very low and that most failures are electrical and will happen within the first year.  New modems typically include a 1 to 3 year warranty and as such, paying hundreds of dollars to “insure” your cable modem is simply a huge waste of money.  Regardless, at approximately $7 to $10 a month in rental fees, even if you have to buy a new modem every year, it is still cheaper to buy than rent one from Comcast.

Second, “you are future proofed and get free upgrades”.  Obviously, since you are paying hundreds more for the privilege of “free” upgrades, the upgrades are anything but “free”.  More importantly, it is critical to know that the standards that cable modems follow known as DOCSIS are only updated every 4 to 6 years.  Once new standards are released, it takes cable operators another 1 to 4 years to fully adopt them and phase out the old standard.  This means that if you buy a modern DOCSIS 3.0 cable modem today, you can expect that this standard will be supported for at least another 5 to 10 years.  To add to this, the current DOCSIS 3.0 standard actually supports speeds many times faster than what the average home internet plan offers, this means that it may take even longer for DOCSIS 4.0 to come out and be adapted than previous versions.

If you are concerned that buying and installing your own cable modem will be hard, don’t be.  The steps are very simple:

  • Buy your new cable modem, I recommend going with the Motorola SURFBoard 6120, as it is pretty much the standard by which others are measured.
  • Un-box it, and plugin 3 wires:
    • Power
    • Cable line
    • Ethernet line to your computer or router
  • Call Comcast or your cable company and tell them you have a new cable modem you just bought.  They will ask you for some numbers on the box and then they will configure it remotely.
  • Return your old modem to Comcast or your cable provider and start saving money.

I looked around online and the best price I could find from a non-fly-by-night company, including tax and shipping was Buy.com, which has it for $88.24 with free shipping and no sales tax in most states.

You can also get it from NewEgg.com here ($89.99, no tax + free shiping):

MOTOROLA SB6120 DOCSIS 3.0 SURFboard eXtreme Cable Modem

Or you can buy it from Amazon here:

For another related frugal fail, consider the somewhat dated story of the widow that paid thousands to rent a rotary phone.  However, before you start to laugh, remember if you are currently renting your cable or DSL modem, you are in the same boat.

Youth Savings Accounts, a good deal you probably aren’t taking advantage of

Recently, my wife and I celebrated the birth of our son.  Many of our friends have also recently had kids and, through casual conversation, I learned nobody really had good plans in place for saving for their children’s future.  I am not talking about 529 Plans or other college savings plans; I am talking about putting away some money that can be used for anything in the future; be it their first car, their first house, braces or maybe even their first business.

Since we live in Washington State, we are taking advantage of at least two deals for young savers:

  • BECU offers an APY of 6.17% on up to $500
  • Watermark Credit Union offers an APY of 3% on up to $500

Using this method, my son will earn an average interest rate of approximately 4.6% per year on $1000 of very liquid money and, because his total unearned income is below $950, he won’t pay income taxes on the $46 or dollars of interest.  Because it’s my son’s money, he will have $16 dollars more than I would have, even if I was able to match the interest rates, which is unlikely.  This makes for a pretty good, albeit small, tax shelter for the average family.

Note: While the interest rate on the first $500 or so is usually good, the interest after that is typically pretty low.  This means the compounding of interest earned on the $500 will be at a lower interest rate.

The deals I am taking advantage of are relatively small, but depending on what you are eligible for, there are other credit unions and banks offer the higher rate on larger sums of money.  For example, if you work for Chevron or meet other membership criteria, the Chevron Credit Union offers:

  • $25 initial deposit for newborns
  • 7% on up the first $1000 in a MySavings account
  • CFCU Youth Rewards, contests and more…

There are plenty of other youth account / kid’s accounts / early saver account deals out there.  This site provides an excellent search tool.  Some banks offer better than normal rates, and others offer other perks like sign up bonuses, reward programs and more, which (depending on the deal) could still make it worth it the effort.

Custodial Account – Advantages:

  • You are putting money away for the child – Unlike 529 or other such savings methods, savings accounts have 100% flexibility and can be used for any purpose.
  • It’s tax-free up to $950 in earnings – The money grows and earns interest federal tax free and you don’t even need to file a return for your child, so long as:
    • The total unearned income (interest / dividends) is less than $950
    • The child remains unmarried
    • The child is under 19 or a full-time student under 24

      Note: This assumes we are only talked about unearned income from Youth Savings Accounts, etc.  If your child is earning income, there are other rules that dictate whether they need to file.

      Important: Be sure to consult your tax adviser and the IRS to determine your individual tax advantages of this strategy.

  • Between $950 and $1900 of earnings it’s only taxed at 10% – For returns above $950 the child is probably in a lower tax bracket than you (usually 10%) and thus the unearned income is still taxed at favorable rates.
  • The child earns above market returns – Depending on the deal you find, the child can earn as much as 6, 7 or even 10% on between $500 and $1500 in various youth or early saver accounts.
  • The money is safe – So long as you are taking advantage of a savings account at an FDIC or NCUA insured institution, the likelihood of you losing this money is exceptional low.
  • You’re still in control (but) – Parents still have full control the money and the account until the child is 18 or 21 depending on the state.  As long as you use the money “for the benefit of the child” you are in the clear.
  • These accounts are usually free and include other goodies! – These accounts are usually free, have very low or no minimum balances, and sometimes include other goodies such as stickers, toys and bonuses designed to making “saving fun”.

    Note: If the deal you find is not free, or has too many strings attached, it is probably not worth it.  Be sure to read the fine print.

Custodial Account – Disadvantages:

  • This takes time to set up and manage – Although the time is generally pretty minimal, for our $500 Early Saver account, the process took about 20 minutes (including drive time) and we expect it to ideally take no additional effort for the next 18 years.  Because the account is for a minor, you may be required to show up in person.  BECU for example does not let you create accounts online for persons under the age of 13.
  • You are gifting the money – To take advantage of this plan, you are gifting the money to your kid.  While you still have control, legally the monies must be spent only for the benefit of the child.  In addition, there are possible tax implications, such as the $13k a year gift tax exemption that is reduced from your individual $1M life time exemption.
  • Eventual Loss of Control:    When your child no longer qualifies for the benefit, they also get full control of the money.  Young adults might not make the best decisions with the money you have saved up for them.
  • You may need to file a tax return for your child – Depending on how much you are gifting, and/or how much interest the child earns from that money, it may be necessary to file a tax return.  The following IRS site has more details on rules for filing requirements for children with unearned income such as we have discussed above.  Be sure to consult your own tax advisor.
  • Beware of the “kiddie tax” – This tax is really designed to prevent the very wealthy from moving large amounts of assets to their children to avoid taxes.  Unearned income that is earned by your child over $1,900 a year will fall under the kiddie tax and have to be carried over to your tax return and thus taxed at your tax rate.  This basically means the “shelter effect” of this tax strategy is limited.  You can read about a few gotchas of the kiddie tax here.

Regardless of the disadvantages, children’s accounts are still something to consider. Assuming you have the extra cash and the advantages outweigh the disadvantages, it is possible to scale this up.  The following table shows the benefits of the above strategy assuming a gift of $26,000 put into a 2-year CD at 1.5% on January 1st, 2011:

In this example, the strategy saves $277.04 in federal income taxes.  Assuming interest rates increase, you get a better CD deal, or you increase the amount gifted and took maximum advantage of this approach the results are even better:

This results in a theoretical maximum $570 in federal income taxes.

The ultimate guide to stretching your dollar when renting a car

The following are the 18 best tips and tricks for renting a car that 3 savvy business travelers, with 100’s of car rentals under their collective belts, could come up with.  These tips are targeted at people who want to maximize the dollars they spend on a rental car.

At BYM we don’t recommend being a cheapskate for the sole reason of hoarding pennies, but we do believe in only spending money if it is genuinely worth it to you.  Many of these tips help you have an equivalent experience for the same price, and help you limit expenses that sound reasonable at the time, but don’t really add much to your happiness in the long run.  Vacations and travel are a typical place where you can overspend if you don’t have your priorities straight in your head.  You’re on vacation and you’re worth it, so spend the money, right!  Wrong.  You deserve to have a great time and come home to your intact emergency fund and paid-off credit cards (or, if you’re new to living below your means, come home to your hard-earned progress on those two fronts intact.

Getting the most bang for your buck while traveling is a great way to let you see more places and spend more of your hard-earned money on fun stuff when you get there!   Renting a car when on vacation can be a real convenience and — depending on how much you need to get around — it could actually cost less than using other forms of transit.

Like many industries, the rental car industry makes the majority of its money through the obfuscation of its pricing structure, add-on services and fees.  Not only do prices vary widely from company to company, but the exact same car from the exact same company, for the exact same dates and location can have a drastically different price depending on what deal you get.

So know what’s important to you, have fun, and consider these ideas to help you get the best value for your dollar on your rental car:

 

DECIDING ON THE RENTAL

 

#1 – Decide if you really will use the car

Before renting a car, make sure it makes sense.  For example, most would say renting a car in a taxi and subway friendly like Manhattan is crazy, as even the locals don’t own cars.  Doing so will cost you not only the price of the rental, but as much as $50 a night in parking fees.  Even with pricy taxi fares, it may actually be cheaper and easier to not rent a car.    At a theme park vacation many hotels provide free or discount transportation between the hotel and the park, as well as other area attractions and major airports.  Think about what you are going to be doing on the trip, and how much you will use the car compared to other sources of transit.  Be sure to check your hotel parking rates, especially in a city.  And don’t forget to consider the cost of gas.

 

#2 – Make a reservation, but make it really early or very last minute

Reserving a car in advanced, especially when done via a website prevents all the hard-sell hassle of the rental counter.  It also can help you get the car you want and the best possible deal.

Like many industries that have time-sensitive inventory, the rate of a rental car changes over time based on availability.  If you show up the day you need the rental, you may end up paying the full retail rate — or in hotel terms the “rack rate” — which will definitely cost you.   Worse, you could be forced to rent much more car than you need, because it is the only vehicle available.  Booking ahead of time will help guarantee both that there is going to be the car you want / need waiting for you, and that you take maximum advantage of discounts, etc.We researched intermediate / mid-size car rental rates for every major US rental company at 4 major US airports.  This was done via each company’s website and no corporate or coupon codes were applied.  We researched rates at 14, 30, 45, 90, 180 and 240 days out from the reservation time.  The results were very interesting:

As you can see, “last minute” or in our case 0 to 30 day reservations rates were by far the best.  This was followed by a mountain of price increases that peaks around 90 days out.  The conclusion of our research is that you should book no more than 30 days from your arrival date or at least 240 days in advanced to get the average best price.

Quick Tip: Many companies let you cancel your reservation for no charge.  If this is the case, consider booking early, but then shopping around for last minute deals as your travel date arrives.  You may be able to cancel and re-reserve the same car for less money.

 

#3 – Consider paying up front

One of the advantages of living below your means and actually having savings is that you can pay for things up front.  Car rental companies (and hotels) provide discounts for doing so.  The discount ranges from 5 to 20% and is definitely something to consider.  Our research has shown that on a short notice rental, Budget has offered up to 60% off for using their “Pay Now Rate”.

Quick Tip: Be sure to read the fine print, sometimes when you prepay there are fees associated with modifying or canceling your reservation.

 

#4 – Reserve the smallest car you need

Why rent more than you need?  Most cars seat the same number of people and larger cars sometimes only offer marginally more room for comfort.  As a rule, I rent the smallest car I need… this stretches my dollar in multiple ways.  First the rental price is less, the lower rental price means the taxes and fees are less as well.  Smaller cars tend to get better gas mileage, so you spend less at the pump.  You also always have a chance of being upgraded for free, so you may end up with a larger car than you book anyway.  But see Tip #12 for thoughts on the cost of those ‘free’ upgrades.

 

#5 – Shop Around(Duh!)

This one is obvious, but it needs to be mentioned.  Shop around not only between different rental companies, but also different online rental sites, and rental aggregator sites like Expedia, Kayak, Priceline and others vs. the car rental sites themselves.  A recent check on Expedia.com shows a basic 4 day rental from Regan Nation Airport Renting an ‘economy car’ can range from $240 to $358 depending on the company you go with.  In our example the most expensive choice was Hertz, however when we checked Hertz.com, we found the exact same car, the exact same dates, for $282, or $76 less than the Expedia.com price.

Again, price is not everything – sometimes loyalty has its own rewards such as frequent flyer miles, points, upgrades, free rentals, etc.  To maximize this, consider picking two programs to join and stay between the two of them.  If the difference in price is minor, try to focus your rentals with one over the other to maximize the frequent rental perks.  I personally belong to Hertz Gold and Avis Preferred and will simply shop between the two of them to get the best deal.  When the difference in rental is $10 or less, I usually go with Avis to stay in their First tier.While not always true, especially when corporate or coupons are taken in consideration, our research shows that Hertz and National are the almost always the most expensive option, while Dollar, Thrifty and Enterprise are almost always the lowest.  Avis, Budget and Alamo rid the middle.

The follow chart shows single-day, mid-size rental car rate averages for 4 major US airports at 14, 30, 90, 180 and 240 day reservations.  We compared prices for all major US carriers: Avis, Hertz, Budget, Dollar, Thrifty, Enterprise, Alamo and National.

Quick Tip: Save yourself some time and don’t bother comparing between Dollar and Thrifty, our research shows there prices are almost 99% identical for all locations and dates that we sampled.

 

#6 – Be mindful of hidden fees and fine print

In addition to the usual fees and options like insurance (See Tip #8) and frequent flyer mileage program fees (See Tip #14) there are numerous other fees you need to look out for.  Here is a short list, but there are others:

  1. Under 25 Renter – Some companies charge extra if you are under the age of 25. Note: Some insurance companies allow you get around this through especial agreements with particular rental car companies.
  • Per Mile – Some companies or rental options require you to pay for miles instead of offering the standard unlimited option.
    1. Smoker Cleaning Fee – If you smoke in a non-smoking car, you may get charged $250 or more in cleaning fees.
    1. Alternate Driver Fee – Sometimes only the renter is allowed to drive, other times it is anyone in the party.  This varies based on state law and individual rental car company policies

 

#7 – Avoid fancy vehicles

Remember, this is a rental. Aspirational rentals are an even bigger waste of money than aspirational purchases. Unless the highlight of your trip is the car you drive, avoid renting fancy vehicles.  Hummers, Corvettes, Camaros and convertibles are nice to look at, but will cost you 2 to 15 times as much as a “lesser” vehicle.  Is it really worth it?   The $200 to $500 bucks you don’t spend on your rental can be put to something that will be much more memorable to you then an overpriced ride.

As an example, consider a two day Las Vegas rental for Friday through Sunday, where you could pay $51 for a generic compact car, or $319 for a Cadillac CTS.  That’s a $268 difference for two days of “luxury”.  If having a larger car is important to you, why not rent a Buick for $78?  And what are you in your rental car anyway?  You should be at the pool, or taking the money you didn’t spend on the car and booking a helicopter tour of the Grand Canyon, or even gambling if that is your thing.

Living Richly Caveat: If having the sweet ride is a key part of the experience for you, then go for it.  But, how do you know if it really is key?  Like everything it helps if you are well centered in what is important to you.  But ask – does it fit in your overall vacation budget?  Is there something you’d rather do either on the trip or with the extra money?  Odds are that if you asked yourself “if I could spend this $250 on anything, what would I buy?” you’ll find the answer, and it won’t be ‘rent a Corvette’.

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How not to blow your tax refund

Gawker is running a fun article on How to Blow Your Tax Refund.  With the average refund expected to be approximately $3070, author Brian Maylan provides a number of ways to blow it all on a spontaneous set of expenses including a trip to Paris and one of each bit of hardware Apple has to offer.

We here at BYM have never really understood the “found money” mentality when it comes to tax refunds.  Perhaps that is because through a lifestyle of saving and spending wisely… every single item on Brian’s list can be planned and purchased easily with a little bit of thought.

For those new to living below your means, a tax refund is anything but “found money” or a gift or anything of the sort.  In fact, it is money that you overpaid to the government that is being returned to you — without interest.  It is money that would have been in your pocket each month had it not gone to the government’s coffers.

May people that plan their taxes well actually end up owing a little bit of money at tax time.  Assuming you are below the threshold for penalties and interest, this is a good thing.  It means that money was with you where it could be saved, invested, or otherwise used by you, and not a interest-free loan to Uncle Sam.

From the BYM point of view, here are the top 3 things to consider doing with your refund:

  • Pay off high interest debt – While it may not be as fun as a trip to Paris, consider this.  If you owe $10k on a credit card at 20% and only make the minimum payments of $200, it will take you 9 years to pay off the card and you will have paid $11680 in interest!If instead, you used that $3,000 towards the same credit card, and then made the same $200 a month payment, you would pay off the debt in 4 1/2 years and pay just $3593 in interest.  That’s $8,087 in savings over 9 years.  Enough to cover 2 or 3 trips to Paris.

 

  • Save it! – It may make sense to not use all of the money to pay down debt.  Having some money set aside in savings or an emergency fund is always good advice.  May experts recommend that you should be able to live off savings without any income for at least 3 months and ideally at least 6 months.  Having an emergency fund can actually save you money later and in some cases .  Perhaps put $1000 into a savings account and $2000 into the credit card.The reason for this is that access (liquidity) to money (capital) has value in and of itself.  Assuming you are not continuing to spend on the credit card, the terms of that loan are a known quantity.  If an emergency does arise and you need more money, access to credit may not be available, or it may be at terms that are worse than the terms you already have. For example, if you have a 5 year car loan at 0.9% – paying it off early doesn’t really make sense, especially if you don’t have an emergency fund.   This is because your money can be earning more interest in a CD or Money Market Account than you are paying on your auto loan.  Plus, if you do have an emergency, you’ll be paying anywhere from 13%-20% or higher on the credit card debt you’d take on to handle the emergency.

 

  • Put the money into a self-insurance fund – We here at BYM are not fans of being over insured.  Buying “warranties” on products because you can’t afford to replace them later is never a good idea.  Put the money into a savings account and use it only to pay for the replacement of items that are out of warranty.  In addition, consider raising the deductibles on your homeowners and auto insurance policies.  Do not raise the deductible more than the amount you are putting away, because if you have to borrow money to pay the deductible all the benefit is gone.Consider, raising a deductible from $250 to $1000 will reduce the cost of collision and comprehensive coverage by 10 to 30% depending on your carrier.  This can be as little as $100 or as much as a few hundred in savings per year.

If you just have to do something with that three grand, maybe allocate 10% to something fun.  $307 can buy you a very nice evening out – or two.

Are diesel cars “worth it”

Having recently purchased a new diesel car, I am often asked “is it worth it”.  The question is based on some combination of three basic presumptions.   First, it is presumed that diesel cars cost more when compared to traditional gasoline automobiles.  Second, it is presumed that diesel fuel costs more than traditional unleaded gasoline. Finally, it is presumed that diesel cars in some way under perform gasoline automobiles. Thus the question is really: “Given the presumed problems with diesel cars, are they worth it?”

The short answer, for those that want to skip the article below, is Yes – at least in my opinion.   But please read on to understand why.

This post is based on my recent experience with the new BMW 335d.  Of course buying a BMW is not exactly a thrifty thing to do… but I assure you it was within my means.  Besides, if you can’t spend the money you save on things you want every now and again, what’s the point?  Anyway, I purchased a new 2011 BMW 335d in the fall of 2010.  I made my decision based on the premise that gasoline prices were sure to continue to rise (You can’t print trillions of dollars and not have the price of commodities not go up) and that by burning fuel more efficiently I would be not only saving some money, I would also be “helping the environment”.  That and my wife said I was too young for a 5 series.

Here is how things have broken down.

First, the 335d actually cost me about 10% less (~$4k) than a similarly equipped 335i.  Despite the fact that the 335d has a base MSRP of $2k more than the 335i.  This was the case for several reasons:

  • BMW provides a $2500 to $4500 “eco-credit” depending on the month (In my case I got $3500).
  • BMW provides generous finance between 0.9% and 4.9% (In my case I got 0.9% for 3 years and yes sometimes debt is “ok”)
  • The government provides a $900 Tax Credit for the purchase of a certain fuel-efficient vehicles.
  • I was able to get a very good deal by using the “Internet sales” division of several dealerships.

Worth It #1 – At least in my case, the diesel car actually cost less.

Second, while diesel fuel does cost more than unleaded, it doesn’t cost that much more.  Where I live at last check, a gallon of diesel goes for $4.05 while a gallon of premium unleaded (required by the 335i) goes for $3.99.  So the gas is indeed a full 2% more expensive and it is 8% more expensive than regular unleaded at $3.79.

But based on my driving experience for the last 2500 miles, I am getting an average of 31.3MPG with my car.  BMW advertises the 335d as getting 23MPG city and 36MPG highway… I am seeing about that.  If you assume a 50/50 mix this averages to 29.5MPG.  The 335i on the other hand is advertised as getting 17MPG city and 28MPG highway or assuming a 50/50 mix an average of 22.5MPG.  If we give the 335i the same mix as me, this would mean an average of ~24MPG.

This means that based on BMW’s numbers and some of my own experiences the 335d gets about 24% better gas mileage.  It doesn’t take a math wizard to see that if the fuel only costs 2% more and you get 24% more bang for the buck it the diesel is the way to go.  Base on my driving, this means I will save approximately $190 a year in fuel costs.

 

Worth It #1 – At least in my case, the diesel fuel actually cost less.

Finally, what do you sacrifice by getting a diesel?  Fortunately, the days of the old smoke bellowing diesels have long since past.  Today’s new “clean diesels” burn clean with no perceptible smoke from the tail pipe.  But the reality is that it depends on the diesel.  In the case of the 335i vs. 335d you do give up some 0-60 time (5.6s vs. 6.0s) so if I gun it of the line, it takes me an extra 4/10ths of a second to get there.  The 335d is also a little heavier (~250lb), so I imagine the handling may slightly hindered.  I will say the car is a BMW and with the M-suspension package I have not noticed any handling problems.  The one place the 335d spanks the 335i is in torque (125 pound-feet more than the 335i).  I find that this is most noticeable in the 60 to 80 range, where the car is a real sprinter.  The only other thing I will say I noticed was an occasional “burning” odor for the first 1500 miles or so, but that has now gone away… I have read this is normal as the car “burns in”.  No idea if this is related to it being new or a diesel.  So when it comes to sacrifices I don’t really see any.

Worth It #1 – At least in my case, the diesel performs just as well as a non-diesel so we can call this a wash.

Of course you don’t need to buy a new car to save on fuel costs.  Consider these tips instead.

Cheers,

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