Gas vs. Diesel Vans: Which is Best for Your Expedite Business?

You've decided to purchase a van for expediting but want to know: gas or diesel?

If you ask other van expediters, you'll hear a wide range of opinions based on their personal experience.

"Gas all the way. I have had no issues with my gas-burner, but I used to have a diesel van that gave me all sorts of trouble."

Or...

"Diesel. I'm old school. My diesel vans are workhorses, and they last forever!"

Historically, diesel engines have held a significant advantage over their gas counterparts in terms of fuel economy, longevity, and resale value. But the regulatory emissions requirements on diesel engines have become much more stringent in the past decade, requiring after-treatment technologies that have driven up diesel's price tag.

And the recent innovation in gasoline engines has significantly improved their fuel efficiency, narrowing the mpg gap with diesel.

So, which engine type should you put in your next van?

While it's helpful to get opinions from other expediters, how can you look at your options more objectively to make an informed decision on which engine would be best for your business-whether you're an owner-operator or fleet owner?

Try these three steps.

Step #1. Find out the price premium for the diesel engine.
You already know that the diesel van will cost you more upfront than gas. But by how much?

If you're not ready to go to a dealer for a specific quote but want to get a general number to work with, then use the manufacturer's online van builder to find out the price premium for the diesel.

While the numbers online reflect the full list price and don't necessarily represent the actual amount you would pay, they do give you a reasonable frame of reference for you to begin your evaluation.

For example, suppose you're considering a Ford 350 Transit van.

As you build the van online (at https://www.ford.com/commercial-trucks/transit-cargo-van/), you'll notice that there are two gas engine options-the standard 3.7L V6 and the optional 3.5L EcoBoost ($2,000 upgrade). For this article, we'll use the standard 3.7L gas engine in the comparison.

When you're finished building the van, take note of the total vehicle price.

Now, change the engine selection by clicking on the 3.2L I-5 Power Stroke diesel engine.

How much did that change the price? By about $4,000.

Step #2. Estimate the fuel savings payback time frame.
Okay. What do we do with that $4,000 number from Step 1?

Traditionally, diesel offers anywhere from 20 to 30-percent better fuel efficiency than their gas counterparts. So, you want to run numbers to help you determine how long it would take-based on today's fuel prices-to recoup the $4,000 upfront investment for the diesel engine in fuel savings.

To formulate your calculations, here's what you want to know:

• What's the estimate fuel economy for the gas and diesel vans you're considering? Unfortunately, getting an accurate answer is more art than science because the EPA does not provide fuel economy ratings to vehicles above 8,500-lb GVWR. Also, the actual fuel economy in expedite applications depends on numerous variables, such as average load weight, driving behaviors, and terrain. So, you'll need to get estimates from vehicle users. You can talk directly with van owners or use an online resource like this one: http://www.fuelly.com/car/ford/transit-350/2017 to give you some real-world numbers to work with.
• How many miles per year do you plan to run the vehicle?
• What are the latest prices per gallon for both gas and diesel? For up-to-date fuel prices, see https://gasprices.aaa.com/.

With answers to these questions, you're ready to crunch the numbers.

Here's what the calculations look like with these assumptions:
Diesel Price Premium: $4,000
Est. MPG: 15 (gas), 18 (diesel)
Est. Annual Miles: 40,000
Price per Gallon: $2.83 (gas), $3.14 (diesel)

In this scenario, it would take a little over seven years to recoup the $4,000 diesel investment based on fuel economy alone. That's probably not a compelling enough business case to go with diesel if you're just looking at fuel cost savings.

But fuel prices fluctuate. What if the price per gallon for diesel fuel fell by 10 cents relative to gasoline-from $3.14 to $3.04-lowering the spread from 31 cents to 21 cents?

That seemingly small 10 cents per gallon change in the spread between gas and diesel, reduced the projected payback period by two years.

Now, what if you go back to the original gas and diesel price per gallon we used in the first example, but the diesel van performed 1 mpg better, relative to gas, bumping it up from 18 to 19 mpg. What's the impact on payback?

That 1 mpg improvement with diesel would accelerate the payback by almost three years-from 7.03 to 4.27 years.

So, would a four-year payback cycle be compelling enough to make the diesel van worth the higher upfront investment?

Maybe; maybe not. But keep in mind that fuel economy savings is just one part of the cost-benefit equation. And many variables can change the dynamics in favor of gas or diesel.

The point here is that it can be useful to test your assumptions. This way, you're thinking beyond purchase price to also consider the total cost of ownership and return on investment in your evaluation.

Step #3. Consider resale values.
Sure, you pay more upfront for the diesel. But what's the difference in the value of the vehicles on the backend-when you're ready to trade-in or sell?

All other things being equal, the diesel will traditionally fetch the higher price because those engines are built to last longer than their gasoline counterparts. So, if you're selling a gas van with 160,000 miles, that vehicle may be considered near the end of its life. But a diesel van with the same mileage might be considered to have another 125,000 to 150,000 or more miles left on it.

How much of a difference does that make in terms of resale values?

Although you can bet that the market dynamics will change by the time you're ready to sell your van, you can at least get an idea of the potential spread between gas and diesel at resale by using an online resource like Kelley Blue Book to estimate the "Trade-in & Private Party Values."

Let's take, for example, a 2015 Ford Transit 350 Van with the following:

• 120,000 miles total (40,000 miles per year)
• Extended length with sliding side door
• 9950-lb GVWR
• "Good" condition

Now, here's how engine selection impacts resale value:
3.7L V6 gas
Trade-in value: $12,900

3.2L Power Stroke diesel
Trade-in value: $16,490

The difference: +$3,590 in favor of the diesel.

Based on these numbers, it appears you would recoup about 90-percent of your $4,000 upfront investment in diesel on the backend after three years.

And, then, if you factor in potential fuel cost savings with the diesel option (based on the calculations in Step #2), there might be a compelling business case to consider the diesel in this instance.

The Bottom Line
Keep in mind that deciding between gas and diesel is not a perfect science. That's because there are many factors-such as fuel price fluctuations, used vehicle market dynamics, and driver behaviors-that could impact your numbers and swing the advantage from one engine to another. But these three steps will at least help you move beyond opinions and "gut feel" to bring more objectivity to your van selection process.