Strategies for Smart Car Buyers^SM

This monthly column presents crucial, stand-alone car-buying strategies to help you avoid dealership tricks and traps and get the best price on your next car or truck.

With a new crop of diesel vehicles poised to invade the U.S., Edmunds.com has discovered that diesels present an even better choice for fuel-economy-minded consumers than hybrids.

Diesels cost more than their gas-powered equivalent vehicles, but this higher purchase price is quickly offset by fuel-economy savings. With hybrid vehicles, this so-called break-even period is longer — in some cases as much as eight years longer.

With high fuel prices, consumers are steering their car purchases toward vehicles that get better fuel economy. For many shoppers, this means their first thought is to buy a hybrid vehicle. But in light of this new data, they should also consider a diesel vehicle, said Alex Rosten, Edmunds.com analyst.

"Diesel engines produce a greater fuel-economy boost over their gasoline counterparts than do most hybrid powertrains," said Rosten. "This makes it a great choice for anyone tired of rising oil prices."

Case in point: The Mercedes-Benz M-Class diesel costs more to buy than its gas-powered counterpart, but the improved fuel economy it delivers pays for this higher cost differential in only 3.2 years. Compare this to the scenario where a car shopper chooses the Lexus RX 400h (hybrid) over the Lexus RX 350 gas-powered car. In that case the better fuel economy of the RX 400h takes 10.2 years to pay for the cost difference (see chart below).

In another example, the Jeep Grand Cherokee with a diesel engine gets 27.3 percent better fuel economy than its gas counterpart. This saves $437 a year in fuel costs and pays for the higher-priced Cherokee in 5.8 years.

Turning to hybrids, the Toyota Highlander Hybrid only saves $455 a year in gas and thus takes 6.5 years to justify its extra cost.

So if diesels are so thrifty, why don't more people choose them?

"In the past, diesels have gotten a bad rap in this country," said Director of Vehicle Testing Dan Edmunds. "The diesels that were sold here were slow, noisy and smelly. But all that's about to change."

Breakthroughs in diesel technology by Honda will mean that they can again be sold in states with tough air quality restrictions. The new diesels, with impressive fuel-economy benefits, may steal some of the fuel-economy market share from hybrids.

Additionally, diesels are a good option for consumers who want to cut their use of foreign oil and show their support for energy independence. Diesels can run on biodiesel, produced in the U.S. from crops such as soybeans, with little or no modification. Biodiesel is often more expensive than "petro-diesel" but there is little drop-off in fuel economy between the petroleum-based fuel and the biofuel. This is not the case with E85 (85 percent ethanol and 15 percent gasoline), which costs less to buy but because of a steep decline in fuel economy is ultimately more expensive to operate.

"Another point in diesel's favor is that it offers a better 'well-to-wheels picture than a gasoline-powered car,'" said Edmunds, referring to the entire environmental impact of drilling, refining and shipping the fuel to the filling station. "Diesel requires less energy to refine and then provides more fuel economy when it's burned — that's a double win for environmentally minded consumers."

There are, however, drawbacks to diesel vehicles, Rosten cautioned. Few models are currently available and new diesels are not sold at all in five states — California, Maine, Massachusetts, New York and Vermont. The 2008 Chrysler, Mercedes-Benz and Volkswagen diesels are expected to be legal in all 50 states.

Still, many experts believe that the benefits far outweigh the drawbacks. And for anyone looking for a new option to hybrids, diesels are definitely worth consideration. Eventually diesels will be combined with hybrid powertrains, making it the best of both worlds.

For this, and other buying and leasing strategies, pick up a copy of Strategies for Smart Car Buyers, by the editors at Edmunds.com.

Make/Model	True Market Value (TMV)*	Premium Paid for Alternative Fuel Vehicle**	Average Miles Per Gallon (Alternative Vehicle)	Average Miles Per Gallon (Gasoline Powered Vehicle)	Percentage Savings of Fuel Economy vs. Gas Powered Engine***	Annual Fuel Savings****	Years To Break Even*****
2007 Mercedes Benz E-Class BLUETEC Diesel	$50,248	$294	32.0	23.7	35.2%	$422	0.7
2007 Lexus GS 450h (hybrid)	$53,390	$520	27.0	22.6	19.3%	$329	1.6
2007 Mercedes-Benz M-Class CDI (diesel)	$42,764	$1,298	25.0	19.7	27.1%	$405	3.2
2007 RX 400h (hybrid)	$39,991	$4,334	29.7	23.3	27.5%	$426	10.2
2007 Jeep Grand Cherokee Diesel	$31,642	$2,534	23.3	18.3	27.3%	$437	5.8
2007 Toyota Highlander Hybrid	$31,449	$2,954	29.7	23.0	29.4%	$455	6.5

*Edmunds' True Market Value (TMV) provides current transaction price for new and used vehicles. The data used in the chart above is transaction price for a typically equipped vehicle in June 2007.
** The premium paid for alternative fuel vehicle is the difference between the typically equipped TMV alternative fuel vehicle versus the TMV of its gasoline powered counterpart.
*** Percentage saved by using alternative fuel vehicle versus gasoline powered counterpart.
**** Fuel Priced on August 13, 2007 -- Unleaded Gasoline ($2.77) and Diesel ($2.85) per gallon
***** Years it takes to recoup the addition premium paid for alternative vehicle versus similar gasoline counterpart.