Break-even analysis

**Epaphras** · 02-16-2009, 11:19 AM

This might be the wrong place for this, but here we go anyway:

I saw on the news today that some guy has installed a home-made hydrogen fuel generator to his Yukon, and it's increased his mileage from 18 to 24 miles per gallon. He uses water and baking soda. It works by raising the octane level of the fuel. He turned it into a cottage industry by manufacturing and installing the units for $600.

So my question is, how does one figure out how many miles (or gallons) it will be until the $600 upfront cost pays for itself? Even though you save 5 miles per gallon, with a $600 sunk cost how long does it take to break-even?

I tried figuring it out but got stuck. It's not for school or anything; I'm just curious.

I know things like a Prius aren't very cost-efffective because it works out to like 20 years until you break-even. Taking a paid-for car that gets 15 mpg versus taking out a loan on a $15,000 hybrid that gets 35 mpg.

jthomas1600 · 02-16-2009, 11:38 AM

Even if I were a mathematician I'm not sure I could answer this--there are too many variables I don't know. While water and baking soda are cheaper than gas, they are not free. How often do you have to add to/change out the water and baking soda. Also what is the life span/maintenance coast of the unit added to your vehicle. If very little baking soda and water are needed and the thing is expected to last 10+ years with no added expense then it might pay off fairly quickly. Lets say you have a 20 gallon tank (for the sake of round numbers) and you get 5 extra miles out of each gallon. You could 100 extra miles which would be saving you about 4 gallons of gas. Let's just call that $10. It would take 60 tanks of gas to pay for your $600 investment. A 20 gallon tank X 24 mpg = 480 miles X 60 tanks of gas = 28,800 miles. Like I said, I'm not a mathematician so maybe this only makes sense to me, but that would be 2 - 3 years of driving for most people--unless I made a fatal error somewhere which is entirely possible.

**Epaphras** · 02-16-2009, 05:34 PM

Makes sense, thanks.

I know Dave Ramsey does this on his show all the time, but I can never follow it. It was especially funny this last summer when people were calling in trying to rationalize going into debt for a $20,000 hybrid car to "save on gas" and he was showing them how it would take YEARS to just break-even, let alone make money. And he argued that by then, those cars would be impossible to sell because hybrid technology will be light years beyond the 2006 Prius by 2014.

**redbaron** · 05-14-2009, 10:34 AM

The truth is, there's very little proof that these devices actually do what they claim to do, and at best, most of the increased mileage is from improved driving habits, which if you focused, you could get for free. There have been quite a few threads about it in the cars forum.

Let's just go back to grade school and say that we obey the laws of thermodynamics.

Nate · 05-14-2009, 01:39 PM

Quote:

Originally Posted by Epaphras

So my question is, how does one figure out how many miles (or gallons) it will be until the $600 upfront cost pays for itself? Even though you save 5 miles per gallon, with a $600 sunk cost how long does it take to break-even?

From 18 to 24 makes the calculations convenient.

You're going 33% further, which is a savings of 25%.

(To go 72 miles before, you needed 4 gallons, now 3.)

Saving 1 out of every 4 gallons is really easy to work with.

At a savings of $2 (1 gallon) every 72 miles, you will need...

Approximately $600 x (72 mi / $2) = 21,600 mi to break even.