Drive or Fly?

A summer of hurricanes has left travelers facing rising costs for both driving and flying to chosen destinations. With increased costs for both modes of transportation, what really weighs on the decision to drive for that trip or to fly?

After the terrorist attacks on 9/11/2001, travelers were concerned about airline trips and safety. Driving instead of flying, where possible, was perceived a safer option. Now four years later, with fluctuating fuel costs, there is still concern about safety along with a greater focus on overall costs.

To gain a better understanding of the “drive or fly” decision, Runzheimer International reviewed costs for trips between three city pairs - Boston to Philadelphia, 318 miles one-way; Chicago to St. Louis, 300 miles one-way; and Los Angeles to San Francisco, 425 miles one-way.

The per-mile driving cost between Boston and Philadelphia is 61.10 cents-per-mile, using a newer mid-size vehicle. This includes operating costs for fuel, maintenance and tires, and ownership costs for insurance, license and registration fees, taxes and depreciation. Multiplying the per-mile cost by the roundtrip distance of 636 miles, the per-trip driving costs are $388.60. Add in two meals-on-the-road, and the total cost is $412.01.

This same trip by air would cost a total of $428.00, which includes airfare, airport parking for a three-day cycle, and taxi fare between airport and downtown. A last minute trip during mid-week could cost considerable more in airfare. Driving on the trip eliminates rental cars and any other forms of ground transportation at the destination location. If you drive to a larger city, you might also incur downtown parking charges.

Based on the same set of assumptions, here’s how the other trips compare in cost. Chicago to St. Louis roundtrip costs $380.48 if you drive, and $307.00 if you fly. Los Angeles to San Francisco roundtrip costs $617.90 by car, and $407.00 by plane. Cost flexibility is greater with the flying trips because of greater airfare choices. The driving trip costs, except for the on-the-road road lunches, are pretty much set in place.

In the end the cost differences, whether significant or not, may not be what helps make the "drive or fly" decision for the traveler. The decision may be based on travel time differences, convenience, comfort, and concerns for physical or mental readiness. Driving for six hours may be difficult, however, it can be just as wearing to get to, around and through today’s airports. It’s not always cost that matters, but with fuel prices rising, it pays to review all sides of the decision.

*Costs are based on a 2005 mid-size vehicle and include operating costs for fuel, maintenance and tires, and ownership costs for insurance, license and registration fees, taxes and depreciation. Costs are based on the originating city, except fuel costs which can occur during the trip. Meals include the cost of two lunches, one leaving and one on the return trip.

**Costs are based on a three-day trip and include roundtrip coach fare, seven-day advance, and Saturday night stay.  Airport parking is a daily rate (not remote parking) for three days. Taxi is for one passenger and assumes two trips between airport and downtown.

The Environmental Protection Agency (EPA) recently announced it will propose changes to the way it calculates fuel efficiency. These changes, which are expected to reduce the miles-per-gallon (MPG) estimates for most vehicles, largely result from noteable differences between the EPA’s estimates and those of other groups such as Consumer Reports and AAA. Recent testing by Consumer Reports showed an average drop of 9% in fuel economy for gas powered vehicles, and 18% less for diesels and hybrids as compared to EPA estimates. Since 2002, numerous consumer organizations have been petitioning the EPA to improve the accuracy of its fuel efficiency calculations. 

A key difference in the EPA’s current testing methodology as compared to other groups is that the EPA conducts its tests on a laboratory dynamometer, rather than on real roads or a test track. The EPA indicated the following three major changes are in the offering:

• Testing to reflect more aggressive and high-speed driving habits;
• Accounting for driving in cold climates; and
• Calculating the impact of accessories, such as air conditioners.

These changes should result in the EPA’s estimates more closely reflecting the actual experience of drivers.

Sources:  The Environmental Protection Agency, Boston Globe, Consumer Reports, and the Bluewater Network Petition.

Several of the world’s leading reinsurers, the companies that sell insurance to insurance companies, have voiced concerns that the cost of settling claims from recent hurricanes will put increased pressure on profits and result in increased premiums for both businesses and homeowners. 

Personal and commercial property losses from Katrina and Rita are estimated at over $30 billion. Some reports predict that Louisiana alone will generate nearly 900,000 claims and more than $20 billion in losses.

Uncertainty exists regarding the impact of lawsuits against insurers who are denying many homeowners claims for flooding, which is excluded from homeowner’s policies. At issue is whether the flooding was caused by man-made neglect of the levees protecting the area or the rising water caused by natural elements, normally exempted under the “Act of God” clause. Mississippi Attorney General Jim Hood and several prominent attorneys are among many who are fighting to get insurers to pay for more of the damage. 

Meanwhile, the insurance industry remains adamant that the losses were caused by flooding and are covered separately by the National Flood Insurance Program. Even without incurring the costs associated with flooding, claims from Katrina are expected to be the costliest U.S. natural disaster in history.

Here are some practical tips to help you save big on fuel:

Choose a more efficient vehicle. Selecting what vehicle you drive is the most important fuel economy decision you’ll make. Hybrid vehicles offer substantial savings at the gas pump as well as cleaner emissions. Potential Annual Savings: $534

Check your tires once a month. Consult your manual to find out how much tire pressure your car needs in both hot and cold weather. Correct tire pressure, as well as proper alignment, saves gas and can also save on the cost of tires. Potential Annual Savings: $120

Keep up regular maintenance. From routine tune-ups and oil changes to replacing dirty air filters that force your engine to work harder, proper maintenance helps your car to run more efficiently and conserve fuel. Potential Annual Savings: $75

Avoid waiting until you’re on empty to look at gas prices. There’s high competition among gas stations, so see who offers the best price the most often and go there when its time to fill up. Potential Annual Savings: $50

Go easy on that pedal. If you frequently accelerate and make abrupt stops, you could be decreasing your fuel economy by as much as 2 miles-per-gallon.  It takes 20%-30% more gas to drive at 70 mph than 50 mph. So accelerate gently, watch traffic ahead so you can anticipate slow-downs, and avoid abrupt stops. Potential Annual Savings: $390

Don’t top off the tank. Some of the gas may end up overflowing out of your tank when it expands in the sun or if you park on a hill. Potential Annual Savings: $33

Avoid idling. Don’t warm up your car by letting it idle. Your engine warms up quicker when driving than it does when idling, and idling wastes an average of a quart of gas every 15 minutes. Potential Annual Savings: $26

Hybrids are growing at the fastest pace of any vehicle class in America – up 97% in total sales from 2003. With gasoline prices hitting historic highs in both real and nominal terms in recent months, it isn’t surprising that consumers are looking to hybrids for relief from sticker shock at the pump. The allure of getting nearly 50 miles-per-gallon with little or no sacrifice in performance is attracting a lot of attention.

Let’s face it. Many of the hybrids we’ve seen on the road these past two years weren’t very attractive, and didn’t meet the size or utility requirements of today's busy families. But a lot has changed, and we’ve now got choices in hybrids that look and drive just like their fossil fuel counterparts. Take for example the Lexus RX400h sport utility vehicle. It’s practically identical in size, appearance, performance, and interior space to the venerable RX330. Were it not for the model number on the rear tail gate, it would be almost impossible to tell the two apart. From the standpoint of evaluating the benefits of hybrid technology, we thought it would make for an interesting case study to answer the question: If gasoline prices remain high and conceivably go higher, would we be better off buying the RX400h instead of the RX330 if we were in the market for a SUV?

The first major difference between the 2006 models of the RX330 and the RX400h is price. Being a far more technologically sophisticated vehicle and loaded with amenities, the RX400h commands a higher price: $48,410, as compared to $37,770 for the RX330. Fortunately for our comparison, the same options are available in the RX330 for roughly $9,000, which allows for a true “apples to apples” evaluation.

Based solely on gasoline savings, the payback model is as follows:

(*Market Adjustment: Currently, buyers are able to pay about $2,000 under MSRP for the 2006 RX330.  Conversely, dealers are earning a premium to MSRP on the 2006 RX400h of nearly $3,000. Buyers willing to pay this premium should expect to wait between one and six months for delivery of their RX400h, whereas RX330 buyers can drive their new SUV off the lot today).

Based on this analysis, the “hybrid premium” is slightly over $8,000 and would take almost 15 years to recover based solely on gasoline savings. Given the simplistic nature of our assumptions, it’s likely these costs are understated. Consider for a moment that you were going to finance this purchase for 48 months at 6.00% interest with 30% down on each car. You’d pay an additional $1,000 in interest to finance the RX400h over the RX330 during that 4-year period.  Insurance premiums are about 10% higher for the RX400h versus the RX330, and the true market depreciation on a 4-year-old RX400h is unknown because 2005 was the first model year. Current depreciation schedules (and lease residuals) between both automobiles share the same characteristics, however, no one knows what the true market environment will be in the future.

Also unknown are long-term maintenance costs. While Lexus is legendary for its quality and reliability, there is no long-term data to substantiate that the RX400h’s complicated hybrid architecture is as robust as the tried and true RX330. 

So at these high gas prices, are we better off buying the RX400h instead of the RX330? If you are seeking financial savings, the answer is "no." However, there are other factors that may motivate you to consider a hybrid vehicle.  First and foremost, hybrids are extremely low emission vehicles. If you want to do your part to keep air pollution down, hybrids fulfill their “green” promises.  Secondly, if you do most of your driving in urban areas and brake often, you’ll benefit more than someone who tends to drive more highway miles. The peculiar thing about hybrid vehicles is that the city MPG is always higher than the highway MPG. The braking charges the batteries, and the electric motors initiate your movement forward until you reach a level of speed or acceleration requiring the power of the gasoline engine. Since most city driving is slow speed start/stop, the gasoline engine isn’t utilized as much, therefore requiring less gasoline to operate.

Sometime over the next three years, it's expected that hybrid automobiles will represent 1% of all vehicles sold in the U.S. While we're waiting for the economics of hybrid technology to become more favorable, we thought it was worth noting that consumers purchased more than 19 million bicycles in 2004. (Author: Brett Remington, Director, Corporate Development, Runzheimer International)

Runzheimer International is pleased to welcome Vehicle Advantage as its newest strategic partner. With a strong reputation for outstanding service and value, Vehicle Advantage provides a one-stop, hassle-free service for purchasing new or used vehicles. This complimentary service for employees of Runzheimer customers – and their family members – offers an opportunity to save hundreds and even thousands of dollars on vehicle purchases/leases.

Due to its significant vehicle purchasing volume, Vehicle Advantage can provide individual drivers the same discount pricing that major corporations receive when purchasing vehicles for their corporate fleets. Perhaps even more important, Vehicle Advantage takes the stress and frustration out of buying a vehicle. Individuals wanting to purchase any type of vehicle (car, SUV, truck, motor home, motorcycle, etc.) communicate their selection criteria to Vehicle Advantage. The best price is then negotiated through the company's national network of dealerships. Once established, the driver is contacted and informed of the price, which can be accepted or rejected. Drivers using this service never have to perform any negotiations or even speak to the dealer until Vehicle Advantage has located the car and finalized the price. The buyer simply shows up at the dealership, pays for the vehicle, and drives away. Visit www.vehicleadvantage.com to experience hassle-free, low cost vehicle buying.