The Clean Diesel Alternative: NMA E-Newsletter #340

With the advent of ever more stringent Corporate Average Fuel Efficiency requirements, many automakers are turning to clean diesel powered vehicles to improve fuel economy. If you’re in the market for a new car or truck, a diesel vehicle could save you money down the road. This is because diesel vehicles cost less to own and operate than comparable gas-powered vehicles, even though they cost more to buy up front.

That’s the primary finding of a recently released study from the University of Michigan Transportation Research Institute (UMTRI). Researchers compared the fuel efficiency of gas-powered vehicles with diesel versions of the same vehicle. They also analyzed the total cost of ownership (TCO) for each type of vehicle.

A sample of 28,239 vehicles sold at auction during 2012 and 2013 was analyzed. Auction pricing was used as a standardized gauge for resale value and to aid with depreciation calculations. For purposes of comparison, all dollar values were converted to 2013 dollars. Researchers tapped into a wide variety of data sources to determine the following costs for each vehicle:

  • Resale value
  • Depreciation
  • Fuel costs
  • Maintenance and repair costs
  • Insurance
  • Fees and taxes

They then calculated the TCO for each vehicle and sorted by vehicle type (passenger car, SUV, medium duty truck, etc.). The study found that diesel vehicles provide a positive return on investment at both the three-year mark and five-year mark, though the return depends on the model and type of vehicle. After three years, all the diesel vehicles studied, except the Volkswagen Golf, are estimated to have a lower TCO than their gasoline counterparts, with savings ranging from $949 to $7,319. This means that diesel buyers more than offset their initial higher purchase price within the first three years of ownership.

After five years, all the diesel vehicles, except the Volkswagen Golf and the Ford F-250, are estimated to have lower a TCO than their gasoline counterparts, with savings ranging from $1,102 to $19,505.

Depreciation and fuel costs are the primary factors leading to the savings in both the three- and five-year timeframes. The analysis shows that the gap in depreciation between the gas and diesel version of the same vehicle can either decrease or increase over time, depending on the vehicle. The study includes lots of comparative data for specific vehicle makes. If you have your eye on a specific model, check the study to see if yours is covered.

The study authors are careful to point out that the relative savings between vehicles will change as the market fluctuates. For example, rising diesel fuel prices relative to gasoline will decrease the diesel fuel cost advantage. And if carmakers pump enough diesel alternatives into the marketplace, resale values for diesel vehicles will fall, thus affecting TCO.

A couple other thoughts on diesel vehicles: Some drivers are concerned about the availability of diesel fuel. The Diesel Technology Forum estimates that 55 percent of gas stations now carry diesel fuel and provides these resources for tracking down a station near you.

Also, diesel vehicles require a little extra maintenance in the form of adding diesel exhaust fluid (DEF). DEF is required for emissions purposes and needs to be replenished routinely. It’s not a big deal in terms of cost or effort, but it is something to be aware of.

The UMTRI study also makes a point relevant to the debate over vehicle miles traveled (VMT) taxing schemes. VMT supporters argue that gas tax revenues are waning due to the increased numbers of hybrid and alternative vehicles on the road. But according to the UMTRI study, hybrid and alternative fuel vehicles constituted less than 3.5 percent of all passenger vehicle sales in 2014. This means that the total percentage of such vehicles on the road is even less and therefore not much of a factor in declining gas tax revenues. Check here to learn why VMT taxes are not an acceptable alternative for highway funding.

Not an NMA Member yet?

Join today and get these great benefits!