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Cost Benefit Analysis of GPS Units

Before talk of $4 gasoline (and airlines going bankrupt and charging you to check luggage) dominated the nation’s transportation attention, global positioning system units were all the rage. Now it sounds like GPS units have become more of a luxury good, something you only get it if you are hard pressed to spend your stimulus check [3] (perhaps there’s a second stimulus check [4] coming?). However, I argue that GPS units might be a good investment because it makes your driving more efficient (hopefully). Let’s see, shall we?

Fuel Cost Per Mile

If you drive a 30 mile per gallon car, $4 a gallon for gas means that each mile costs you approximately 13.3 cents. If your car only gets 20 miles per gallon, $4 gas equates to 20 cents a mile. This gives you a baseline for comparison, how many miles do you need to save in order to make one of those units “worth it?” We don’t consider other costs per mile, such as car depreciation and maintenance, because that would introduce far too many factors for our simplistic calculation. If you went through the exercise of calculating the cost per mile of your car [5], use that figure instead of 13.3/20 cents/mile as calculated above.

Breakeven Analysis

If you get the Magellan Maestro 3200 3.5-Inch Portable GPS Navigator [6] for $131 at Amazon, the unit pays for itself if you can save 985 miles (at 30 MPG, 750 miles at 20 MPG) over the lifetime of the unit. If you assume that the lifespan of the unit is a conservative five years, that’s 197 miles a year, or, 1.31% if you drive 15,000 miles year.

Is it really possible to save 197 miles a year? I think that if you do a lot of driving in areas you don’t know very well, it’s very possible. The class of users that I believe benefit the most from GPS units are real estate agents. What about someone who drives the same commute every day five days a week? Chances are you won’t benefit greatly from a GPS on weekdays but you might benefit on the weekend. If your GPS has integrated traffic, which the 3200 doesn’t (I just picked the cheapest unit on Amazon at the time), you could save more by avoiding traffic trouble spots.

Or, for those who are fans of The Office, strict adherence to the units could leave your car in a lake (after the jump). 🙂