Fail-operational systems are a prerequisite for autonomous driving. Without a driver who can act as a fallback solution in a critical failure scenario, the system has to be able to mitigate failures on its own and keep critical applications operational. To reduce redundancy cost, graceful degradation can be applied by repurposing hardware resources at run-time. Critical applications can be kept operational by starting passive backups and shutting down non-critical applications instead to make sufficient resources available. In order to design such systems efficiently, the degradation effects on reliability and cost savings have to be analyzed. In this paper we present our approach to formally analyze the impact of graceful degradation on the reliability of critical and non-critical applications. We then quantify the effect of graceful degradation on the reliability of both critical and non-critical applications in distributed automotive systems and compare the achieved cost reduction with conventional redundancy approaches. In our experiments redundancy overhead could be reduced by 80% compared to active redundancy in a scenario with a balanced mix of critical and non-critical applications using our graceful degradation approach Overall, we present a detailed reliability and cost analysis of graceful degradation in distributed automotive systems. Our findings confirm that using graceful degradation can tremendously reduce cost compared to conventional redundancy approaches with no negative impact on the redundancy of critical applications if a reliability reduction of non-critical applications can be accepted. Our results show that a trade-off between the impact of the degradation on the reliability of non-critical applications and cost reduction has to be made.