Is Diesel Still a Good Deal?

Diesel-powered vehicles offer 20–40 percent better fuel economy than their gas-powered counterparts. This makes a compelling argument as a way to reduce our dependency on foreign oil. But when it comes to a straight lifecycle cost analysis, how does this mpg improvement affect the bottom line?

The picture has become cloudier in recent years.

Diesel fuel has traditionally cost less than gasoline, though that has changed since Ultra-Low Sulfur Diesel fuel began pumping on Jan. 1, 2007. As of Sept. 1, 2008, the national average pump price for gas stood at $3.68 a gallon, while diesel was $4.12 a gallon. This gap is not likely to shrink: Over the past five years, U.S. demand for highway diesel has risen at triple the rate of gasoline, according to the American Petroleum Institute.

The lifecycle cost experts at Vincentric performed a fleet-centric analysis on diesel models and their gas counterparts at five years and 100,000 miles. Vincentric analyzed currently available 2008 model diesel trucks, vans and passenger cars against their gas-powered equivalent models.

Diesel and gas models were paired as closely as possible in terms of specs, though models differ between engine types, most notably with the passenger car and SUV (non-work) models.

To achieve the totals, Vincentric measured eight cost factors: depreciation, fuel, insurance, opportunity cost, financing, maintenance, taxes and state fees and repairs. These costs were integrated with the Vincentric Fleet Price, which estimates the acquisition cost, which includes fleet incentives, for each vehicle in the study.

Findings

Despite a higher price per gallon, the diesels have lower overall fuel costs as a result of their better fuel economy. However, the lower fuel costs do not generally offset the higher depreciation, financing and fees/taxes, and as a result, diesels typically have a higher overall lifecycle cost.

• The average five-year fuel savings for a diesel is about $3,000, while average five-year depreciation increase is $3500. 
• However, these diesel models did fare better: the ¾-ton cargo vans from GM, the Jeep Grand Cherokee and the Mercedes sedans, SUVs and crossovers. Contributing to this is the fact that the Jeep and the four Mercedes models have the smallest upfront diesel cost premiums. (The capitalized cost of the Mercedes Benz GL320 CDI is in fact cheaper than the gas version, the GL450.) Note that the Mercedes models were calculated using Premium gas prices, shortening the gap between gas and diesel fuel cost.
• The Jeep Grand Cherokee Turbo Diesel had the lowest lifecycle cost of all the diesels analyzed.
• The gas-powered 1-ton cargo vans from GM had the lowest overall lifecycle costs of the models studied. Those gas-powered vans are also the only models to beat the diesel versions in overall fuel cost.
• The Volkswagen Touareg diesel had the highest overall lifecycle cost. The Touareg had the greatest discrepancy in lifecycle cost between the gas and diesel models, in favor of the gas, owed to the whopping $18,275 premium for the diesel.
• The Mercedes-Benz GL models had the greatest gap in lifecycle cost in favor the diesel. Note that the cap cost for the diesel is $2,325 less than the gas model, and that the gas model is equipped with a stronger V-8 engine and more horsepower.
• None of the diesel pickups fared better than gas, though this highlights diesel's advantages not calculated here: Diesel's better torque and more durable engines are well-suited for hauling and towing applications. As well, a diesel engine's longer life lowers depreciation cost substantially for pickups, which generally remain in service in a fleet application far longer than a car and the five-year time span of this analysis. BF