Is money saved when you buy on sale?
(Note: This calculator automatically calculates a round trip)
- In the first field, enter in the miles per gallon that your car gets.
- In the second field, enter the amount you pay for a gallon of gas.
- In the third field, enter in the amount you will save on the purchase if you make the trip.
- In the fourth field enter distance to the store with the savings.
- Click the "Compute" button and the total savings will be displayed. If the savings is negative that means you will spend more on gas for the trip than you will save on the purchase.
MapQuest.com - Use to find the distance to the store.
The Total Savings on a Purchase
by Joseph Ganem
In a famous study* on behavioral finance, people were asked whether they would be willing to drive 20 minutes to another store to get a sale price for an item. In one scenario, the item was a $15 calculator on sale for $10 at the other store and the majority of respondents said that they would make the trip. But when the item was a $125 jacket on sale for $120, most respondents answered that they would not make the trip. Of course a mathematically equivalent question would be: “Are you willing to drive 20 minutes to another store to save $5 on a purchase?” Presumably, if all dollars are equal in value, the answer to that question should not depend on the item being purchased.
With the price of gas today this study takes on a whole new meaning. If 20 minutes corresponds to 15 miles in a car that gets 20 miles per gallon, the 30-mile round trip burns 1.5 gallons of gas. At $4 per gallon, that means $6 is spent on gas in order to save $5 on the purchase. The consumer has lost $1 not to mention 40 minutes of time.
It is wise to shop for the best prices on goods but how much do you save by driving around to make the purchase? Use the calculator on this page to compute the total savings. As in the example given, the number might be negative.*A. Tversky and D. Kahneman, “The Framing of Decisions and the Psychology of Choice,” Science vol. 211 (1981) pp. 452-458.
Joseph Ganem is author of the award-winning book: The Two Headed Quarter: How to See Through Deceptive Numbers and Save Money on Everything You Buy. Hear him talk about the book below.