This is a guest post reader Anirudda Gore, who is a 20-something software professional who writes about getting the best value for money at LetsBeCurious.blogspot.com.
I reached my nearest gas station this morning and found $2.63 per gallon, not the cheapest price but it was the closest station. Because I had to get to work on time, I bought that costly gas. Since then I’ve been thinking:
- If the cheapest gas is not available at my nearest gas station, how far should I drive for a better price?
- Is a difference in 5 cents per gallon worth burning the fuel and time?
I created a formula to decide whether you should drive to a far away station to fill-up OR whether it makes sense to buy expensive gas at a nearby station.
When To Drive That “Extra Mile”?
There are two elements behind my motivation to drive to buy cheaper gas:
- Save money on gas
- I can buy more gas at a cheaper price, which means I will get more miles from that tank
Let’s calculate how much more “extra” distance you will travel if you buy cheap gas:
Your monthly/weekly fuel expenses = FE (constant)
Gas Price at the cheaper but far-away station = Pc
Gas Price at the expensive but nearby station = PE
Distance between the two stations = DIST
Your car’s average Miles Per Gallon = MPG
c = cheaper, E = expensive, v = volume
Volume of gas bought in gallons = Total money spent/Price of gas per gallon
Thus, the volume of gas bought at cheaper far-away station, VC = FE/Pc
Volume of gas bought at expensive nearby station: VE = FE/PE
Extra gas you would buy at cheaper gas station: VC – VE = FE/Pc– FE/PE = FE (1/Pc – 1/PE)
Extra miles you can drive if you buy at cheaper gas station:
ExtraMiles = Extra Gas * MPG
ExtraMiles = FE * Difference in Gas Prices at two stations * MPG / Pc*PE
Here’s How To Decide
Plug-in your values in formula above and calculate ExtraMiles.
- if ExtraMiles > DIST: you drive more miles while spending the same amount so consider driving to a cheaper station
- if ExtraMiles < or = DIST: it makes more sense to buy gas at the nearest station, even if more expensive
Application of formula: Case #1
FE = $30
Pc = $2.59 per gallon (3 miles from my apartment)
PE = $2.65 per gallon (1 mile from my apartment)
DIST = 2 miles
MPG = 25 miles per gallon
ExtraMiles = FE * Difference in Gas Prices at two stations * MPG / Pc*PE
= 30*0.05*25/(2.59*2.65) miles
= 5.46368 miles
I get to drive (5.46368 – 2 =) 3.46368 miles extra (one way to my work), thus I will certainly drive away to get that cheaper fuel.
Application of formula: Case #2
FE = $30
Pc = $2.55 per gallon (12 miles from my apartment)
PE = $2.65 per gallon (1 mile from my apartment)
DIST = 11 miles
ExtraMiles = FE * Difference in Gas Prices at two stations * MPG / Pc*PE
= 30*0.10*25/(2.55*2.65) miles
= 11.09878 miles
I only get to drive (11.09878 – 11 =) 0.09878 miles extra; definitely not a go-for option.
Conclusion
“The cheaper, the better” should not be the rule here. Cheaper gas costs $2.59 in Case #1 which is available 2 miles from my home while cheaper gas costs $2.55 but I need to (burn more fuel and) drive 12 miles from my home. Total money spent is $30 in both cases but gas purchased in Case #1 lets you drive (3.46368/0.09878=) 35 times more than that purchased in Case #2.
So the next time you plan to fill-up your car tanks, remember it’s not just how many dollars you save but also how many miles you drive to get that gas. The formula takes into consideration both these factors and thus gives practically guided numbers. Once you decide how much money you want to spend on gas this week/month, now just calculate the ExtraMiles and go from there.
Bargain Babe’s two cents: I like the concept of ExtraMiles, but think it is important to take into account time spent filling up and actual savings. How many people spend the same amount on gas each month? Not me. But I’m curious, what do you think of the ExtraMile approach?
Welcome to Bargain Babe! I’m Mara, and I’m so glad you’re here. I am an obsessive bargain hunter and penny pincher, and I am determined to live a full life without EVER paying full price.
I always fill up the tank, so I don’t think I can use the EM approach at all.
When I calculate items that save me less than a dollar (around here, the prices don’t fluctuate more than $0.05 in town), I also consider my time as a major consideration. Driving 5 miles out of my way in traffic on a stop light laden road can cost me 15-30 minutes depending on the time of day. That’s a pretty high opportunity cost for such a small chunk of change.
If I’m already going towards or past the cheaper gas station, I will stop. Otherwise I stick to my usual stop and make up the price difference elsewhere in my budget.
$2.63?! I went to my “cheap” gas station (on Abbot Kinney & Washington) last weekend and it was $2.83! $2.63 sounds like a bargain (unless it’s an Arco, in which case I don’t go to those…)!
@Maggie: $2.63 is an sub-urban Upstate NY gas price! 🙂
If you take the same route to work (or whatever you do all the time) chances are you pass by at least 6 gas stations on a daily basis. You should know which one consistently has the best price, so you just patronize that station. The off-brands are often cheaper, since gas is gas, why spend more at an Exxon or Gulf? As a bonus in New Jersey all stations are full service “Jersey Girls don’t pump their own gas”
Kathie, I like your approach. And I remember from my Jersey days that every station is full service. I believe Oregon is the same way (keeps folks employed!)
I am so mad I pay costco a yearly fee for cheap gas…i paid 2.7999 a gal. this morning!
This same thinking applies to grocery shopping and no one thinks to mention this (hint, hint BB). Just to start the car adds $$ to the cost of errands (I was told years ago it was ~$2.00/start). Does anyone truly save by buying meat at one store and dairy at another 3 miles away, and TP at a third, all because they’re “on sale”? The cost of your time, plus the wear and tear on your vehicle must ALWAYS be weighed when bargain hunting. Unless quality differs significantly, most of the time it is not worth it.
I agree that if you are far away from the absolute
cheapest gas price then you are actually wasting
gas just to get cheaper gas and probably not
getting a deal. But when I need to get gas enough to
make it to my appointment or school class on time
and have forgotten to put gas in last night, I sometimes
just go to the nearest station A. because I am on empty
and can’t even get to another station or B. I don’t
have time to go somewhere else. So if I am at
an expensive gas station I only put in what I need to
get where I am going and back. When I have the time
I will go to my station of choice for the lower price
and fill it up or as much as I can given whatever
is in my immediate budget. I would never willingly
fill up at a higher priced station. And hey I use Arco all the time. It’s usually the least expensive.
I’m curious about where your guest blogger got those gas prices… probably not in CA, which has among the highest prices in the country! I try to restrict my weekly/monthly driving to absolute necessities, and always keep my eyes open for competing gas prices. I usually buy my gas at Costco, which is very close to where I live, and I’ve rarely seen gas prices in L.A. cheaper, or even at least competitive.
@Ellie: Those prices are from Upstate NY and that too from the first week of June 🙂
We now buy gas with our credit card which also pays us 5% in cash rewards at gas stations. So we factor that in when we consider where to buy our gas. Arco, which doesn’t accept credit cards, is generally lower than the other stations in our area but NOT when that 5% is figured in.