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Diesel Engines: How Quickly Do They Pay Off?

American motorists almost seem to have forgotten the bad old days of 2008 when gas prices topped $4 a gallon. But national average prices for a gallon of regular jumped 5 cents in the last two weeks to $2.82. And diesel fuel is about 30 cents per gallon higher. With a broad range of clean, high mileage diesel cars now on sale, does this higher fuel price make them a less frugal choice?

Increasing sales of diesel models -- which make up only a tiny share of cars on the road -- is a large part of the strategy for meeting tightening government gas mileage standards. (See What You'll be Driving in 2016). That's especially true for German brands Audi, BMW, Mercedes-Benz and Volkswagen, which among them offer most of the diesel choices.

That diesel price premium hasn't kept diesel vehicles sales from growing. Diesel models, including pickups, captured 2.3% of all models this year through September compared with 2.0% a year earlier, says Michael Omotoso, chief powertrain forecaster for J.D. Power and Associates. Omotoso expects the diesel share to keep gaining and pass 7% by 2016.

Diesel fuel prices tend to fluctuate in their relationship to gas. "The cost now isn't a deterrent the way it was a couple of years ago when diesel was $1 a gallon more than gasoline," notes Omotoso. He adds that it is even less an issue for buyers of luxury brands Audi, BMW and Mercedes-Benz since the companies recommend that their gasoline engines use premium fuel. In fact, premium, at $3.09 this week, was roughly equal with diesel.

Because of the now-successful technology that meets air pollution emission standards, diesel models tend to cost more. But they average roughly 25% better fuel economy than their gas-engine corporate siblings. So if you are considering a diesel car, you need to look at how long it will take for your savings from the high mileage to make up the cost difference. Diesel payback times generally are much shorter than gas-electric hybrids. See Hybrids Costing the Same as Gas Cars (or Close).

While auto buyers in general still prefer gas-powered engines, diesel is popular with the subset who crave German engineering. For some of the cars that offer a diesel option, 40% or more of buyers choose it, according to J.D. Power statistics. Here's a look at three of those models with our calculations of the payback period compared with the gas model:

Audi A3 The A3 hatchback is praised by reviewers for its fun performance, top safety rating and sporty styling. Buyers select the diesel 55% of the time. The diesel version -- rated at 30 mpg in city driving, 42 mpg highway -- was named green car of the year for 2010 by Green Car Journal. (The 2011 nominees, just announced, run more to electrics and hybrids). The base model 2011 A3 TDI diesel lists for $29,950 or $2,680 more than the gasoline option. Using the diesel combined EPA rating of 34 mpg and the gasoline number of 24 mpg, you would save $568 a year with the diesel if you drove 15,000 miles a year compared with premium gasoline at current prices. Thus you would pay back the extra initial cost in 4.7 years.

Volkswagen Jetta SportWagen Buyers choose the diesel in 40% of cases for the Jetta overall, but more than 80% with the SportWagen wagon model. The 2011 Jetta sedan has had a complete redesign, but the wagon model will remain more like last year's -- a plus for some VW loyalists. The diesel wagon, rated at 30 mpg city, 42 highway, lists for $24,730 vs. $23,455 for the similarly equipped SE gasoline model, which can use regular gas. The payback period on the $1,275 difference would be 6.3 years in combined driving. But if most of your driving is highway cruising, the diesel advantage would be greater.

Volkswagen Touareg This SUV sold 48% diesels so far this year. But the 2011 Touareg sports a complete redesign. Reviewers like the sharp new look and luxurious cabin and say it is a worthy competitor to luxury SUVs like the BMW X5. VW has not yet announced pricing for the 2011. But based on 2010 prices, expect the diesel model, rated at 19 mpg city, 28 highway, to list for just under $45,000. In this case, the payback period based on 2010 pricing would be 10.5 years for the $3,500 premium over the gas version, rated at 16 mpg city, 23 highway. If you are going to pay this much for a Volkswagen, you might consider the new high-performance Touareg hybrid due next Spring. (See New Cars 2011: What to Look for in Hybrid and Electric Cars).

Photos courtesy of the manufacturers

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