July 13, 2008: Driving A Better Deal On Energy With An SUV and Hedged Investments
I was having a silent conversation with myself on the way back from a delightful East European-centric picnic late this afternoon. As with many folks - and I am confident that includes readers of this article - there is a quandary on what to do to mitigate the cost of fuel in the tank of your vehicle(s).
All of the automotive vehicle manufacturers claim that hybrid vehicles are sold out, and that production for 2009 looks to under serve demand as well. Not being stupid, dealers will likely not give a penny off the MSRP. Plan on paying a modest premium over the MSRP to get your hands on one of these gas misers.
I have another plan to ponder since the retail and used vehicle markets for SUV's have collapsed. Don't pay $28g or more for a hybrid. Purchase an almost new SUV for about half the cost and invest the remaining $13g or more. Hedge against your comfort car!
For instance, I looked at a few Hybrids that would not contort my body into a pretzel and leave the family playing musical chairs for seats. The 2009 Ford Escape Hybrid starts at about $29g with 28/30 mpg. The 2009 Toyota Camry Hybrid starts at about $26g with 33/34 mpg. The 2008 Toyota Highlander Hybrid starts at about $34.3g with 25/27 mpg.
Used SUV's are I located within twenty miles from my home were plentiful. Lots are over run with them, in fact. Prices I found and verified were as follows: 2007 Jeep Grand Cherokee Laredo 4x4 with 10,500 miles at $17.4 with 15/19 mpg. 2006 Jeep Grand Cherokee Laredo 4x4 with 18,100 miles at $15.4 with 15/19 mpg. 2005 GMC Envoy 4x4 with 41,000 miles at $16.2 with 15/20 mpg. 2006 GMC Envoy 4x4 with 26,000 miles at $16.1 with 15/20 mpg. Deals as good or better on other SUVs are all over the place. It looks like a Priceline "name your price" moment out there in used SUV land.
Look at the numbers if you drive a used almost new, confortable SUV:
15,000/year divided by 16mpg times $4.00/gallon gas=$3750.00 fuel per year
Look at the numbers if you drive a hybrid that (importantly) you can fit into:
15,000/year divided by 30mpg times $4.00/gallon gas=$2000.00 fuel per year
It will take years of driving to recoup the cost of the hybrid. Astute capitalists investing the initial cost savings should more than earn the cost of fuel differential through dividends and capital appreciation. Depreciation of the hybrid vs. SUV is a wash since SUVS are discounted for extinction already.
Take the estimated $13,000.00 plus in savings from buying a large, comfortable almost new SUV and invest it in an energy fund, such as PowerShares' DB Oil Fund (DBO), ProShares' Dynamic Oil and Gas Services Portfolio (PXJ), ProShares' Ultra Oil and Gas Fund (DIG), or for the contrarian, the ProShares' Short Oil and Gas Fund (DDG). For that matter, any well-selected energy ETF or small basket of income MLPs in the oil and gas transmission business or in Canadian energy trusts with a large dividend will pay for potential increases at the pump through capital appreciation and/or dividends. I predict you will be better off financially using this method than with purchasing a fully priced hybrid.
I believe the deals will get only better with the almost-new SUV giveaways in progress at a dealer near you. Do your math and discover if it adds up.
All of the automotive vehicle manufacturers claim that hybrid vehicles are sold out, and that production for 2009 looks to under serve demand as well. Not being stupid, dealers will likely not give a penny off the MSRP. Plan on paying a modest premium over the MSRP to get your hands on one of these gas misers.
I have another plan to ponder since the retail and used vehicle markets for SUV's have collapsed. Don't pay $28g or more for a hybrid. Purchase an almost new SUV for about half the cost and invest the remaining $13g or more. Hedge against your comfort car!
For instance, I looked at a few Hybrids that would not contort my body into a pretzel and leave the family playing musical chairs for seats. The 2009 Ford Escape Hybrid starts at about $29g with 28/30 mpg. The 2009 Toyota Camry Hybrid starts at about $26g with 33/34 mpg. The 2008 Toyota Highlander Hybrid starts at about $34.3g with 25/27 mpg.
Used SUV's are I located within twenty miles from my home were plentiful. Lots are over run with them, in fact. Prices I found and verified were as follows: 2007 Jeep Grand Cherokee Laredo 4x4 with 10,500 miles at $17.4 with 15/19 mpg. 2006 Jeep Grand Cherokee Laredo 4x4 with 18,100 miles at $15.4 with 15/19 mpg. 2005 GMC Envoy 4x4 with 41,000 miles at $16.2 with 15/20 mpg. 2006 GMC Envoy 4x4 with 26,000 miles at $16.1 with 15/20 mpg. Deals as good or better on other SUVs are all over the place. It looks like a Priceline "name your price" moment out there in used SUV land.
Look at the numbers if you drive a used almost new, confortable SUV:
15,000/year divided by 16mpg times $4.00/gallon gas=$3750.00 fuel per year
Look at the numbers if you drive a hybrid that (importantly) you can fit into:
15,000/year divided by 30mpg times $4.00/gallon gas=$2000.00 fuel per year
It will take years of driving to recoup the cost of the hybrid. Astute capitalists investing the initial cost savings should more than earn the cost of fuel differential through dividends and capital appreciation. Depreciation of the hybrid vs. SUV is a wash since SUVS are discounted for extinction already.
Take the estimated $13,000.00 plus in savings from buying a large, comfortable almost new SUV and invest it in an energy fund, such as PowerShares' DB Oil Fund (DBO), ProShares' Dynamic Oil and Gas Services Portfolio (PXJ), ProShares' Ultra Oil and Gas Fund (DIG), or for the contrarian, the ProShares' Short Oil and Gas Fund (DDG). For that matter, any well-selected energy ETF or small basket of income MLPs in the oil and gas transmission business or in Canadian energy trusts with a large dividend will pay for potential increases at the pump through capital appreciation and/or dividends. I predict you will be better off financially using this method than with purchasing a fully priced hybrid.
I believe the deals will get only better with the almost-new SUV giveaways in progress at a dealer near you. Do your math and discover if it adds up.
posted by T @ 7/13/2008 11:20:00 PM
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