Hybrid Vehicles: Benefits Beyond Gas Savings
As gasoline prices have plunged, so have sales of once hot high-mileage hybrid vehicles. Between April and November 2008, hybrid sales nose-dived by 62%—even more than the extraordinary drop in the overall auto market. Clearly, buyers concluded that the gas savings on hybrids would not recoup their premium prices.
But if you have a secure job and think you might buy a car now, a combination of federal and state tax credits can make a hybrid choice more attractive. In addition, in many places hybrids get other perks such as using car-pool lanes and free or reduced-cost parking.
Tax credits don't help as much as they once did in buying all hybrids. You no longer can get federal tax credits for Honda or Toyota vehicles. Those two companies have passed the 60,000 hybrid vehicles sales cutoff Congress set for the tax credits.
But other companies' hybrids still command credits. The Ford Escape and Mercury Mariner hybrids each get a $3,000 credit on the two-wheel drive models and $1,950 on the lower-mileage four-wheel drives. Mazda Tribute small SUVs carry similar credits.
Credits certified for 2008 models for General Motors hybrids Chevrolet Malibu ($1,300), Tahoe ($2,200), Saturn Aura ($1,300), and Vue Green Line ($1,550) likely will carry over to 2009. (Tax credits, unlike deductions, come directly off your tax bill.)
Talk to a credit union loan officer to discuss your vehicle loan options.
Some states also have acted to encourage car buyers to choose hybrids. And most of those incentives have not expired as quickly as the Federal credits. For instance, Oregon gives a credit of up to $1,500, while Colorado and West Virginia give credits based on the premium consumers pay for a hybrid over a comparable conventional gas vehicle. Some states—including Connecticut and New Mexico—forgive sales tax on new hybrid purchases that can amount to serious money. For instance, the 6% Connecticut tax on a $22,000 Toyota Prius would be $1,320. Numerous states—including California, Florida, and New York—allow hybrids with the appropriate sticker to use so-called high-occupancy vehicle (HOV) or car-pool lanes even when the driver is alone. And cities from New Haven, Conn., to San Jose, Calif., provide free or reduced-rate parking for hybrids with stickers.
Along with their sales volume, the selling prices of hybrids have fallen as well. As late as summer 2008, Toyota dealers were getting $3,000 more than the manufacturer's suggested retail price (MSRP) for the hybrid Prius, notes Jesse Toprak, executive director of industry analysis for automotive Web site Edmunds.com, Santa Monica, Calif. If these trends hold up, by year's end, some buyers could get a Prius below MSRP at about $21,370a reduction of about $4,300. "If you are the kind of buyer who wants to get a hybrid for environmental reasons rather than only the cost savings, this is probably the best time in a long time to buy one," says Toprak.
Some insurance companies offer discounts on auto insurance for owners of gas-electric hybrid vehicles.
Check out trade-offs
Depending on what vehicle you choose and where you live, cost comparisons may change. Take the case of the 2008 Ford Escape Hybrid front-wheel-drive model—still available recently at many dealers. Intellichoice.com, a Web site specializing in auto ownership costs, cited it as a recent best value. Intellichoice's target price for that model is $26,409, compared with $21,373 for a comparable gas-only Escape—a premium of $5,036 for the hybrid. But the federal tax credit of $3,000 plus the $1,500 tax credit in Oregon, or the $1,584 a Connecticut resident would save on sales tax, would come close to eliminating that differential. Gas savings would make up the difference in less than two years.
Additionally, Intellichoice projects that, if you wanted to sell after five years, the hybrid Escape would be worth about $12,600 compared with $8,337 for the conventional model. To check out the situation in your state go to hybridcenter.org maintained by the Union of Concerned Scientists. Web sites of your state motor vehicles, energy, or tax departments also may list such incentives.
Along with their sales volume, the selling prices of hybrids have fallen as well.
Look for traffic and parking breaksThe Union of Concerned Scientists Web site cited above also lists these advantages state by state, including cities that provide free or cut-rate parking for hybrids. Depending on where you live, being able to drive in the car-pool lanes can be a major advantage. The state of California issued 80,000 stickers allowing such hybrid access, then cut off further issuance. Edmunds.com's Toprak notes that used hybrids that already had the transferable sticker were selling for $3,000 to $5,000 more than comparable vehicles with no sticker. "For commuters, it might mean saving half an hour a day," he said. "That shows you how much people value their time."
Check for insurance savingsInsurance companies Travelers, Farmers, and GEICO are offering 5% to 10% discounts on auto insurance for owners of gas-electric hybrid vehicles. That alone is no reason to buy a hybrid, but it's one more savings number to figure into your overall cost comparisons.
In many places hybrid drivers get perks such as using car-pool lanes and free or reduced-cost parking.
Don't assume gas will stay cheap foreverAfter plunging from its $4-plus per gallon level to around less than $2 on average nationally, gas prices headed up again in January along with crude oil that had bottomed out just below $40 a barrel. No energy experts are forecasting a return to recent peaks. But crude oil futures contracts predict oil at $60 by December 2009. And the government's Energy Information Administration, Washington, D.C., projects that gasoline will average about $2 a gallon over all of 2009. As gas prices rise, so do the weekly savings from high-mileage hybrids.
If you're lucky enough to afford the hybrid premium, you might want to buy one to help cut energy consumption and spew out less climate-changing gases. Then while feeling you are helping the planet, you also can enjoy stopping less often at the gas station.
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."
Home & Family Finance® Resource Center