Check out how roomy the Element's trunk area is. Your dog can stand up there, but it may not be long enough or wide enough for him to be comfortable. You may just have to suck up the gas cost. A lot of people are facing the pinch, and if you have no other options, then sometimes you just have to bite the bullet.
Whatever car you decide on, immediately buy a new K&N drop-in air filter and NGK iridium spark plugs for your new car. Both are very easy to install and may should be able to net you another 2 mpg. Just make sure those parts don't void any warranties. Dealers usually don't like people messing around with their own cars. Takes money out fo their pockets.

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When life gives you lemons...you go racing!!!

There is a fine line between hobby and mental illness. NASCAR fans are proof of this. So are competitiors in the 24 Hours Of Lemons.