Will A Hybrid Car Save You Money?
As gasoline prices hover around $3 a gallon, you might start wondering about how much you could save with a new high-mileage gas-electric hybrid vehicle. Indeed, the right hybrid will save you hundreds of dollars a year at the gas pump.
But whether you really will save money overall after paying a higher price for that hybrid is a calculation you need to work through carefully—taking into account all your costs. "Too often this discussion focuses only on the hybrid price premium offset by fuel cost savings," says James Bell, editor and publisher of Intellichoice.com, which specializes in auto cost data. "The right way to consider it is total ownership cost—including such items as resale value."
List prices for hybrids run $1,500 to $4,000 (and occasionally even more) above prices for comparable gas-only models. And the real-world difference may be even greater; hybrids tend to command at or near Manufacturers Suggested Retail Price (MSRP) while ordinary cars' prices almost always can be negotiated downward. Depending on what model you buy, federal tax credits may offset some of that difference. But those credits—based on the volume of hybrids sold—already have expired for models from hybrid pioneer Toyota.
Even without the tax breaks, however, hybrids such as Toyota's popular Prius can hold their own economically. That results in part from real-world experience with hybrid repairs and resale value. Contrary to expectations, maintenance and repair costs have been no higher than for regular models. And resale value for hybrids as used cars has proved substantially higher than other vehicles.
Take the case of the 2007 Ford Escape Hybrid. Intellichoice compared the ownership costs of the small SUV with that of the gas-only Escape in the Limited version. The hybrid list price of $26,940 is about $2,300 more than that of the regular model. But Intellichoice computes that five-year fuel savings would be $2,350 with the hybrid. And selling or trading the vehicles after five years, the hybrid would retain an estimated 48% of its value compared with 42.5% for the gas-only model. That amounts to a difference of nearly $2,500. (For more data on hybrid costs from Intellichoice.com, see its survey about hybrids.)
The decision is even easier if you want a hybrid not only for cost savings but out of personal conviction. If it's important to you to use less imported oil and to limit the greenhouse gases from your vehicle that contribute to global warming, hybrids will accomplish those goals. "People are looking at greener cars for ethical as well as economic reasons," says John DeCicco, automotive specialist with the organization Environmental Defense. "It is what the car stands for about your personal beliefs." If you can feel you are doing the right thing while at least nearly breaking even economically, you may well be happy with your hybrid choice.
Make sure you're getting a big mileage boost
"When it comes to hybrid economics, look carefully at the mileage difference between the hybrid version and the regular model, advises Dan Edmunds, test-drive editor and alternative fuels specialist for the automotive Web site Edmunds.com. "Make sure you are getting a big improvement."
For instance, the Honda Accord hybrid, now phased out by Honda, got only about 2 mpg more than the gas-only Accord, according to Consumer Reports testing. But the Toyota Camry Hybrid is EPA-rated at 33 mpg in city driving and 34 mpg on the highway—compared with 21 mpg in the city and 31 mpg on the highway for the regular Camry. The Honda Civic Hybrid is EPA-rated for 40 mpg in the city and 45 on the highway compared to 25 mpg city/36 highway for the regular Civic. For the latest on hybrids and other green cars, visit Edmunds.com and click on Tips and Advice.
Look at the tax creditGetting a federal tax credit (which is worth more than a deduction because it comes right off your tax bill, not your income) surely can make a difference to hybrid economics. Congress set these tax credits to first shrink and then vanish as a car company approached and then reached sales of 60,000 hybrids. With its fast start on the Prius and other models, Toyota already has reached that point. But the Honda Civic still carries a $1,050 credit if purchased before June 30, 2008. Among SUVs, the Ford Escape two-wheel drive hybrid has a $3,000 credit and the Saturn Vue Green Line $1,550. To see a list of credits for all models, visit the IRS Web site.
Consider when you might sell your hybridIf you tend to get a new car every two to three years, resale value will be especially important to you. Thus a higher resale value for a Toyota Prius compared with its closest gas-only family counterpart, the Toyota Corolla, will mean money in your pocket. And you will realize that value whether you sell the car yourself or trade it in on a new one.
Look for hybrids in some unusual places
During the 2008 model year, General Motors will be offering a new hybrid system in its big SUVs like Chevrolet Tahoe and Cadillac Escalade as well as the mainstream sedan Chevrolet Malibu. None of these will exude environmental rectitude like a Toyota Prius. But as James Bell of Intellichoice points out: "The Tahoe is still not a high-mileage vehicle. But the hybrid version gets a 40% to 50% gain in mileage over the regular model." Bell notes that at least six new hybrids will be on the market sometime during this model year.
Only you can decide if paying more for a hybrid makes economic sense for you. But don't forget the environmental dividend. One way hybrids boost mileage and reduce emissions is by shutting off the engine when you halt for a stoplight, then restarting with the electric motor. Says Bell, who owns a Prius himself: "When you hear that engine shut off, you know you are not spewing out pollutants from an idling engine like those other cars around you."
Jerry Edgerton is an automotive writer whose work has appeared in Money and other national magazines. He also is the author of "Car Shopping Made Easy."
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