Woodstock wrote about the Green Dilemma earlier this week. I thought I’d pick off a couple of cases and work through the math parts to determine if savings would really be economic savings.
Case 1: consider my 15 year-old Kitchenaid top-freezer with an ice maker. The Kitchenaid Marketing Literature says the technology has improved:
if you’re still using a refrigerator manufactured before 1993, you could save nearly $100 a year in utility bills by buying a KitchenAid built-in refrigerator.
The problem: this spectacular built-in appliance starts at $4,500, making the economic incentive a non-starter.
Let’s look at something comparable, a 20.6 cubic foot Sears Kenmore with an ice maker, available about $30 less than I paid for my existing refrigerator in 1993. According to the Energy Star Calculator, the annual cost of electricity for my existing refrigerator is $97.93, assuming it uses 933KWh per year. The brand new Kenmore uses an estimated 432KWh per year, which would cost $45.34 for the electricity. Its annual savings is $52.59. The return on investment:
$839.99 / $52.59 savings/year = 15.97 years
And for comparison: 2008 New Refrigerator – 1993 Old Refrigerator = 15 years.
Conclusion: it’s not worth replacing until my existing refrigerator gives up the ghost. I would first try fixing my fridgeif I could find the parts at a price I was willing to pay.
Case 2: Consider the options for a more efficient car. My 2002 Subaru Impreza station wagon has an estimated fuel economy of 19 – 25 mpg. In practice, it’s more like 22 (city) to 30 (highway). A 2008 Toyota Prius fares 48 (city)/45 (highway). Let’s assume the average rating and calculate the annual cost in gasoline, using today’s price:
Prius: 5,300 miles/year / 46 miles/gallon = 115 gallons/year
Subaru: 5,300 miles/year / 22 miles/gallon (we’re being pessimistic) = 241 gallons/year
Savings = (241 g/y – 115 g/y) * $4.399/g = $553/year
If someone were to give me a Prius, I would drive it. But as that’s not likely to happen, I’d need to buy one. They’re in high demand, so dealers are applying ADP onto the price. The cheapest I found (and probably sold by now) was $24,234. On top of that would be tax (8.9%), title, license, rust undercoating, muffler bearings, digital radiator, flux capacitor and sound proofing. Let’s just round up to $27,000.
Assuming the annual gas savings of $553 holds, it would take 47 years to break even:
$27,000 / $553/year = 48.82 years
It’s easy to consider some other assumptions:
- I get $10,000 trade-in value on my car (sold to a Hummer driver): break even is 30.7 years.
- I drove the national average of 12,000 miles per year instead of my paltry 5,300 (which is, like, five Susan Dennis years). Annual savings is now $1,252/year. Break-even for scenario 1 is 21.5 years. Break-even for the trade-in scenario is 13.58 years.
- I buy the used 2003 Prius model with 65,147 miles on it for $18,995 and sell my existing car for $10k. At the original mileage rate, it’s 16.2 years to break even. ($18995-$10000)/$553 = 16.26.
- Same case, but I drive the national average of 12,000 miles per year. Breakeven is now 7.18 years.
Conclusion: it’s not worth replacing until my existing car gives up the ghost. And even then, the Prius is difficult to justify with my assumptions. (Ted: I also tried the beauteous Honda Goldwing Touring motorcycle at 37mpg. Any other recommendations?) One option that makes sense is a Vespa. At about $5k new — and tricked out with leftover flame decals — it gets 75 mpg. I can take the $5k leftover and buy another couple of bicycles and a tandem.