Defender vs Energy Saver, or Math vs Intuition

Oh no, not another Defender vs Energy Saver thread?

Yes, I admit I may be beating a dead horse.

But, I would like to present what I think is a true business case, with
real numbers, instead of relying on intuition. The objective function
in this business case is lowest total life cycle cost. This analysis changed
my mind as to which tire I am going to buy.

My tire history is that I swapped OEM Goodyear Integrities at 37K miles
for a set of Michelin Energy Savers. These have lasted 65K miles, and
probably have enough tread life to go another 10K miles. I've been
pleased with their handling, especially in wet weather, and how quiet they
are. Nevertheless, I plan on replacing them within the next few months
since they are nearing end of expected life.

My original belief, also held by many other Prius owners, was that
I would take a 2-3 mpg hit with Defenders, but that the Defenders'
longer life (90K vs 65K for ES) would outweigh this relative deficiency.
Consumer Reports also ranks Defender as their top all season tire, and
their rating system gives Defender a 10% advantage over ES, based on
10 different criteria. Thus, in spite of my positive experience with ES,
Defender seems like a possibly better choice than ES.

Being the analytical type, I researched by reading Priuschat threads on
this topic, plus read the Consumer Reports tires test report and their Prius
Owner reader reviews for both the Defender and ES. The most important
data I was looking to extract was the mpg loss that Defender buyers
experience due to the tire's lesser LRR. I'll warn you that this is the
least rigorous part of my analysis, since tire reviewers who provided this data
didn't typically give a full listing of their before and after environments. For
the record, the lowest loss was 1 mpg, the highest 10 mpg, and the most
typical was 5 mpg.

For benchmark pricing, I used Sams and Costco (Consumer Reports
also listed pricing that was on par with Sams and Costco).

When I modeled the data and assumptions in an Excel spreadsheet,
I came to a conclusion that surprised me. In virtually every case, ES
costs less than Defender. The numbers were so compelling that I
decided to go with Energy Saver even though I was at the time 90%
sure I was going to buy Defenders.

So, here's how I analyzed this...

Part 1...Capital Cost...basically fixed cost

While both tires cost roughly the same, $125/tire, the nominal
big advantage for Defender is that it has a 90,000 mile warranty
(=expected life) vs ES' 65K mile expected life. On a per mile basis,
the Defender's capital cost is 38% less than that of ES. [Now, 38%
is a sizeable advantage, and intuitively, you'd think this MUST
make Defender cheaper in the long haul.]

Thus, normalizing the cost of each tire over their expected life, you
get, for Defender: $125 / 90K = .138 cents per mile; and for
ES: $125 / 65K = .192 cents per mile. You then have to multiply
by four to reflect that you have four tires.

Note that normalizing the capital cost does ignore the fact that
tires purchases follow a step function, i.e., we can theoretically
compare normalized capital cost for any varying number of miles, but
in real life you can't buy, say, 50,000 miles worth of tires.

Part 2...Operational Cost due to mpg difference...varying cost by mile

I sense from the various reviewers' posts that the average mpg loss
for the Defender was 5 mpg, so that's what I started with. I also
ran the numbers using a low of 2 mpg loss and a high of 10 mpg loss.
My 2009 Prius Gen 2 gets 53 mpg, and that's what I used as a
starting point. In other words, I modeled my Prius mileage as 53 mpg
with Energy Savers and 48 mpg for Defender.

I used $4 per gallon as the assumed price of gas over the expected
life into the future of the tires. I also tried this using $3.50 per gallon
as well.

Part 3...Now let's crunch the numbers for three different expected tire
lives. [note - approximately $1 of rounding error in calculations]

Scenario 1: Total life cycle cost over 50,000 miles, gas $4/gallon:

Defender = Capital cost [ (.138 cents per mile * 50,000) * 4 tires ] +
Operational cost [ (50,000 miles / net mileage (53 mpg - 5 mpg loss) * $4/gal ]
= $278 + $4167
= $4667

ES = Capital cost [ (.192 cents per mile * 50,000) * 4 tires ] +
Operational cost [ (50,000 miles / net mileage (53 mpg - 0 mpg loss) * $4/gal ]
= $385 + $3774
= $4466

ES life cycle savings = $4668 - $4467= $201

--

Scenario 2: Total life cycle cost over 65,000 miles, gas $4/gallon:

Defender = Capital cost [ (.138 cents per mile * 65,000) * 4 tires ] +
Operational cost [ (65,000 miles / net mileage (53 mpg - 5 mpg loss) * $4/gal ]
= $361 + $5417
= $5917

ES = Capital cost [ (.192 cents per mile * 65,000) * 4 tires ] +
Operational cost [ (65,000 miles / net mileage (53 mpg - 0 mpg loss) * $4/gal ]
= $500 + $4906
= $5406

ES life cycle savings = $5917 - $5406 = $511

Scenario 3: Total life cycle cost over 90,000 miles, gas $4/gallon:

Defender = Capital cost [ (.138 cents per mile * 90,000) * 4 tires ] +
Operational cost [ (90,000 miles / net mileage (53 mpg - 5 mpg loss) * $4/gal ]
= $500 + $7500
= $8000

ES = Capital cost [ (.192 cents per mile * 90,000) * 4 tires ] +
Operational cost [ (90,000 miles / net mileage (53 mpg - 0 mpg loss) * $4/gal ]
= $692 + $6792
= $7485

ES life cycle savings = $8000 - $7485= $515

--

The first major finding of the analysis is that the cost of mpg loss over
a large number of miles is by far the most significant factor. What this
is saying is that a small percentage (mpg loss of 5 mpg or ~10%) times
a big number (cost of gas over 50-90K miles) is more impactful than a
big percentage (Defender's 38% price advantage) times a relatively small
number (tire purchase price).

The second finding is that the ES's lifecycle cost advantage holds true
for virtually all reasonable scenarios, including Defender mileage loss
of as little as 2 mpg and gas only $3.50. The only scenario I found
where Defender has a lifecycle cost advantage is if its mileage loss
is only 2 mpg and you only drive 50,000 miles on them, which doesn't
seem like a reasonable, real life scenario. Even then, the advantage is
only about $50.

--

I know this won't put "Defender vs Energy Savers" to rest. My hope
is that actually quantifying the numbers, rather than relying on
intuition about Defender costing less due to its longer expected life,
is a useful tool for those who are still struggling with the decision.

Disclaimers: my model doesn't attempt to factor in inflation, gas
price variation due to external factors (like a Middle East war), net
present value, etc.; I don't think doing so would change the results.
And, there's more to judging a tire than just cost; indeed, other
factors may be more important to you, say, traction in snow if you
live in Minnesota.

 

I currently pump up my ES to 42/40 psi.

Whether you believe it or not, 5 mpg loss seems typical. Feel free to
peruse the other posts in Prius Chat on this topic. Here's an example:

And here's another from Consumer Reports:

I purchased them because tires are advertised by Michelin as Low Rolling Resistance. ... Four new Defender XT tires were installed on well maintained 2011 Prius II, real fuel mpg went from avg of 55 / tank to 47 / tank. I expected a 2-3 mpg loss that happens when ever a new tire is installed but not 7-8 mpg lost. Miles driven were accurately measured using GPS and gallons were measured at the same gas station on the same pump that is calibrated yearly so the mpg loss is real. Prius display was reporting a solid 10 mpg less. Tire pressure cold was 39 psig front 36 psig rear, alignment was checked by Toyota and in spec, wheel bearing in normal condition.

-- end quote --

And, yes, I am going to buy ES...once Michelin re-instates their $70
rebate again!

 

Consumer Reports' tire tests do include quantified results for six different
types of handling. They use icons of filled/semi-filled red and black circles to
represent the results, but in effect, it's a scale of from 1 to 5. On four of
the six criteria, the two tires come out even. Defender edges ES on two
criteria by one point. Interestingly, while they rate Defender as their top
A/S tire, Continental ProContact EcoPlus is actually rated slightly better
for handling than Defender (even in five categories, ahead by a point in
one category). For the full results, please consult the latest Consumer
Reports tire ratings article.

Disclaimer: I have no affiliation with Consumer Reports magazine, I'm just
a subscriber.

 

What kind of mileage do you get?