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Is a Hybrid Worth It?

Introduction

The rampant complaining about gas prices is enough to put an army of Eeyores to shame. At last, however, it seems that Americans are starting to put their money where their mouth is. Some are forsaking everything you ever thought was cool for a scooter that gets 80 mpg.12 Others have established organizations offering incentives to car poolers3 or encouraging employer rewards for conscientious commuters.4 Mass transit systems are expanding. Hybrid vehicles are becoming more and more popular, with most manufacturers planning to significantly increase the number of available hybrid models in the near future,5 a figure that has already tripled since 2003.6 Various levels of government are beginning to offer incentives for hybrid ownership, a trend that will likely accelerate as alternative fuel and hybrid research continues to develop.7

Of all these new developments, the majority of the hype in 2005 centers on the gas-electric hybrid automobile. Ecologically, there is no question it is the best consistently available passenger vehicle out there, but what about what really matters to Americans? What about money? Is purchasing a gas-electric hybrid financially beneficial? Will you actually save enough money on gas to outweigh the incurred car payment? Might a hybrid be worth it even if you don’t?

Well, that depends. How much do you drive? What gas mileage do you get presently? What is the trade-in value of your present vehicle and how much do you still owe on it? Let’s explore those variables, along with many others, to determine if buying a hybrid is "worth it."

Gas Savings

People are obsessed with spending less money on gas. Websites have even been created to help the penny-pinching consumer find the cheapest option close to home.8 When prices are skyrocketing all over town and scouring for deals brings no relief, however, many look to better gas mileage for help. How much money can improved gas mileage put in your pocket every month? That depends on a few variables:

  • $gas – current cost of gas (U.S. dollars per gallon)
  • GMnow – gas mileage of current vehicle (miles per gallon)9
  • GMimp – gas mileage after vehicle improvement (miles per gallon)
  • Distance – monthly distance driven (miles per month)

After gathering this information, the amount saved each month on gas ($save, U.S. dollars per month) can be calculated using the formula shown in Figure 1.

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Figure 1. Calculation for money saved each month by improving gas mileage

Examples

To illustrate the above, let’s calculate the potential monthly gas savings of a 2006 Toyota Prius over a 1999 Honda Accord. The variables might be defined as follows:

  • $gas – $2.50 per gallon (assumed)
  • GMnow – 27 miles per gallon (1999 Honda Accord)10
  • GMimp – 55 miles per gallon (2006 Toyota Prius)11
  • Miles – 1,500 miles per month (assumed)

Plugging this into the equation in Figure 1 results in a monthly savings ($save) of $70.7,12 reducing the projected monthly gas cost from $139 to $68.2.

Gas price ($gas) fluctuations or changes in the gas mileage (GMimp) of the potential new ride will affect these savings – although not linearly. As the improved gas mileage increases, there are diminishing returns. For example, given a gas price of $2.50 and the base case assumptions, increasing your fuel efficiency from 27 mpg to 100 mpg will save you about $100 per month. If you tack on another 50 mpg, however, the additional savings are only about $10 per month. Figure 2 displays these trends for various gas prices using our specific case assumptions: 1,500 miles driven per month and looking to replace a 1999 Honda Accord.

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Figure 2. Monthly savings compared to a 1999 Honda Accord assuming 1,500 miles driven per month

Car Payments

Now that we know how much money can be saved by improving gas mileage, it’s time to look at where at least some of that saved money will be going: a car payment.
h3. Loan Amount

The first step in determining a monthly car payment is calculating the loan amount using the following:

  • $newcar – sticker price of the new vehicle to be purchased (U.S. dollars)
  • $oldcar – trade in value of your current vehicle (U.S. dollars)13
  • $owed – money still owed on your current vehicle (U.S. dollars)

Plug these variables into the equation in Figure 3 to determine the approximate loan amount ($loan, U.S. dollars). The 1.15 factor included in the equation is to account for typically incurred costs not included in the sale price.14

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Figure 3. Calculation to estimate loan amount

Examples

To illustrate this calculation, let’s continue with our previous example of buying a 2006 Toyota Prius to replace an existing 1999 Honda Accord. The variables could break down as follows:

  • $newcar – $21,27515
  • $oldcar – $4,10616
  • $owed – $0 (assumed)

Plugging these values into the equation in Figure 3 results in a loan amount ($loan) of $20,360.

Monthly Payment

The determined loan amount can best be compared with the monthly gas savings calculated earlier by converting it to monthly payments. These payments depend on the loan amount (calculated above), loan length (length, months_), and interest rate (_rate, percentage_). Using these variables, the monthly payment can be calculated and then compared to the current car payment17(_$nowpay, U.S. dollars per month_) to find the overall monthly impact (_$payment, U.S. dollars per month) as shown in Figure 4.49

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Figure 4. Calculation of monthly payment impact

Examples

Continuing the former example, the monthly payment can be calculated for the purchase of a 2006 Toyota Prius using the following variables and assumptions:

  • $loan – $20,360 (as previously calculated)
  • length – 60 months (assumed)
  • rate – 5.25% (assumed)
  • $nowpay – $0 (assumed)

Plugging these values into the equation in Figure 4 results in a monthly payment increase ($payment) of $387.18

Some examples of gross monthly payments resulting from different combinations of interest rates and loan amounts are shown in Figures 5, 6 & 7, reflecting 30, 60 & 120 month loan periods, respectively.

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Figure 5. Monthly payments for 30 month loans

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’’’Figure 6.‘’’ Monthly payments for 60 month loans | align: center

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’’’Figure 7.‘’’ Monthly payments for 120 month loans | align: center

As you can see, the length of the loan plays a large part in determining the monthly payment.19 The interest rate does have an impact, but it is much less significant.

Hybrid vs. Economy

At this point, the short road to answer to the question posed in the title of this article seems quite obvious. Isn’t the only remaining step to subtract the calculated monthly gas savings from the monthly payment increase and then go for it if the result is positive?20 If such was the case, you would be limited to "hybrid or nothing" and wouldn’t have considered the traditional method of gas savings, the economy car. Could this less expensive and less efficient option be more economically sound?

Prius vs. Corolla

Let’s investigate by continuing our example of looking to replace a paid-off 1999 Honda Accord with something more economical. We’ve already looked at the possibility of buying a 2006 Toyota Prius and found that it could save $70.7 per month in gas but would add $387 a month for the car payment. Now, let’s throw in the value-driven 2006 Corolla with a combined mileage of 36 mpg21 and a sticker price of $14,005.22 Applying the same equations with the same assumptions yields gas savings of $34.7 per month and a loan amount of $12,000, with a corresponding monthly payment of $228. Comparing the monthly expenses of each choice, the Prius would result in a net expense of $316 and the Corolla a net expense of $193. Thus, although neither option is economically advisable based purely on gas savings, the 2006 Prius would be $123 more expensive per month than a 2006 Corolla.

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Figure 8. Comparison of the switch to a Corolla or a Prius from a 1999 Accord

The same comparison could be done with various other hybrids and economy vehicles and the results are usually the same: the more expensive hybrids cost more on a monthly basis, even when considering their high gas mileage. Figure 9 lines up the leading economy cars with most of the presently available hybrids according to monthly savings over the same 1999 Honda Accord. It reveals that at least ten 2006 economy cars would be more economical than the most competitive hybrid, the Honda Insight, although none of the options keep you out of the red.

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Figure 9. Comparison of replacements for a 1999 Accord

Future Comparisons

The numbers involved in comparing these two vehicles will likely soon change. Automotive companies will eventually cover the extensive research costs that led to the first hybrids. Increased competition will drive down prices considerably and hybrid gas mileage is likely to continue to increase. How much change is enough change? How much would the hybrid price have to drop, fuel efficiency increase, or gas prices skyrocket before a hybrid becomes economically viable?

Future Hybrid vs. Existing Vehicle

For streamlined analysis, the above equations can be combined into various inequalities. For example, given the current vehicle information, the loan information and the gas prices, the maximum sticker price can be determined for a corresponding gas mileage (Figure 10). Alternatively, the equation could be manipulated to show the opposite relationship, the minimum gas mileage for a corresponding sticker price (Figure 11).

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Figure 10. Maximum sticker price given all other variables

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Figure 11. Minimum gas mileage given all other variables

Future Hybrid vs. Future Economy

Before a new hybrid becomes economically the best option, it will have to first beat out a new economy car. By making a few minor assumptions, some basic graphs can be generated to easily determine just how much things would have to change for this to be the case. And when they do, you can be first in line at the dealership.

The assumptions:

  • Economy car efficiency – With all of the research going towards hybrid technology and alternative fuels, it is reasonably safe to assume that the economy car is close to its peak performance. Therefore, we will go with a sticker price and gas mileage at or better than the best of the current industry: $12,000 and 40 mpg.23
  • Loan characteristics – As long as the rate and length are kept consistent within the comparison, what rate and length is used will not affect the relative results. This analysis will assume a loan length of 60 months at a rate of 5.25%.
  • Driving habits – While driving more will increase the impact of improved gas mileage, this analysis will assume 1,500 miles are driven each month.24

After making these assumptions, the maximum price of a new vehicle can be plotted against its fuel efficiency for various gas prices using the previously explained equations. Find the gas mileage along the X axis and follow it up to gauge how "cheap" the hybrid (or other more-expensive vehicle with better gas mileage) will need to be to give it an economical advantage when compared to purchasing a $12,000/40mpg economy car. For example, if the 2009 Honda Civic hybrid ran at 80 mpg and gas was $3.50, we can see from the graph that it would need to be less than $15,000 to be economically preferable over the assumed 2009 economy car.

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Figure 12. Maximum economically justified hypothetical hybrid sticker price vs hypothetical hybrid gas mileages for various gas prices

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’’’Figure 13.‘’’ Zoomed in on Figure 12 | border | align: center

Other Factors

There are several other factors that are worth serious investigation before deciding for or against a hybrid purchase.

Advertised vs Actual Gas Mileages

Many cars are criticized for not living up to their advertised efficiency. Hybrids, especially, have come under recent criticism for this very issue. Excited new hybrid owners expecting to breach the half-century mark of gas mileage may end up disappointed when their Prius manages an average of only 44mpg or their Honda Civic Hybrid a meager 36mpg. Don’t blame the hybrid manufacturers, however; non-hybrids fall short of advertised efficiency in similar fashion.25 The cause for this lies in the EPA testing method, which has been in use since 1985. The test is consistent, but the critics say it is consistently inaccurate as it does not account for modern highway speeds and congested city traffic.26 Thus, the ratings will usually work well for comparative purposes, but you will have to look elsewhere for real-world fuel efficiencies. Two such places are Greenhybrid.com, where a Real Hybrid Mileage Database is set up,27 and Fueleconomy.gov, where users are allowed to share Your MPG.28

Government Incentives

There are various government incentives for hybrid owners at the federal, state and sometimes local level. In 2005, the U.S. federal government offered tax breaks29 that will switch over to "tax credits" starting in 2006, the value of which depends on the hybrid model.30 Tax refunds can be used to offset some of the hybrid expense and might even become the determining factor in a close decision. A $284 billion highway bill was also passed into law that includes a provision allowing states to open HOV lanes to all hybrid cars rated at least 45 miles per gallon – even with just one passenger.31 State incentives range from free hybrid parking to various tax rebates and credits.32 At the local level, cities such as Baltimore have begun to offer incentives such as hefty parking discounts.33

Performance

The first concern that pops up for many power-hungry Americans when they hear the word "hybrid" is a perceived drop in performance. While performance vehicles will always need more energy than economy vehicles, hybrid technology is actually making increased power less "energy expensive." There are still issues preventing a hybrid from being a total performance vehicle, but hybrids are not the weak alternative by any means.34 Hybrid technology is even being investigated by several Formula One teams as the "next step" in engine evolution performance and small hybrids such as the Lexus RX use the hybrid system like an "electric supercharger."35

Maintenance

While there are some inherent fears in buying an "unproven" technology, a hybrid isn’t a technologically risky purchase. As of late 2005, both Honda and Toyota hybrids come with long warranties. The Insight has an 8yr/80,000mi warranty on the powertrain (including batteries) and a 3yr/36,000mi warranty on the rest of the car. The Prius has a 8yr/100,000mi powertrain warranty and a 3yr/36,000mi warranty on the rest.36

Hybrid regular recommended maintenance is much like that of a typical ICE vehicle: oil changes, filter changes, engine coolant level checks, brake inspections, tire rotation and inflation, etc.37 Some are concerned about the availability of properly trained and knowledgeable hybrid mechanics, but it is reasonable to assume that these will materialize as the demand increases. The warranties also counter this concern by effectively providing a cushion before the need to find a mechanic outside the dealer.38

Hybrids have batteries that will need to be replaced in eight to ten years,39 but they also have the benefit of longer lasting brakes due to regenerative braking.40 Hybrids have more electric systems to break down,41 but non-hybrids have more mechanical systems to break down.42 The maintenance concerns seem to balance out.

Value Retention

Value retention is another area not considered in the above calculations. The Prius debuted in 2001 for $19,99543 and the same year model is now worth $15,058,44 a 75.3% retention of value over the five year period. The Corolla retailed at about $12,568 in 200145 and now sells for about $7,496,46 a 59.6% value retention over the same period.

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Figure 14. Summary of value retention for various vehicles from 2001-2006

Looking at the values in Figure 14, it seems that comparing the Corolla to the Prius is fairly representative of the hybrid advantage in this area. The Prius is holding its value better than any other vehicle and the Honda Insight (the only other hybrid that has been around long enough to include) is among the best of the economy cars.

Alternative Fuels

Many think hybrids are a temporary fad before alternative fuels replace them. Alternative fuels such as liquified petroleum gas (LPG), liquified natural gas (LNG), hydrogen, alcohol, fuel cells, solar power and bio-diesel are in various stages of development and availability. It will most likely be a while before any of them are able to achieve the prominence level of gas-electric hybrids, so even if you are one who always wants the "greenest" car available, the hybrid is your pick for the next five to ten years.47

Personal Taste

There are many other issues related to personal taste that might sway you one way or the other. Some feel attracted to the "hype" around hybrids and others are comforted by the proven economy vehicles. Hybrids are being introduced as the high end trims for many models, such as the Honda Accord, so the accompanying luxury features may be convincing. Others might be turned off by the lack of hybrid selection now available. There’s no getting around the effect of personal taste on the decision; if the monthly gas budget was the only concern, everyone would be riding bikes or walking.

Conclusion

While no "green" person would ever advocate buying a hybrid for purely economic reasons,48 it is painfully obvious that existing hybrids lack the ability to make up for their steep prices with gas savings. While a hybrid would present significant savings over something like a new Ford Super Duty, you would always save more with any of a number of economy cars.

Hybrid technology is just entering the mainstream, however. As gas prices rise and hybrid technology improves and cheapens, don’t be surprised to find hybrid owners in the green.

Notes

1 Vespa USA. VespaUsa.com. Vespa. 2005. Accessed November 2005 at http://www.vespausa.com/.

2 Motor scooters gain in popularity. MSNBC.MSN.com. The Associated Press. 2005. Accessed November 25 at http://www.msnbc.msn.com/id/9041933/.

3 NuRide – Ride the Network. NuRide Homepage. NuRide Inc. 2005. Accessed November 2005 at https://www.nuride.com/nuride/main/main.jsp. NuRide is one such organization.

4 CommuterChoice.com: America’s Way to Work: Employer Resources. CommuterChoice.com. 2005. Accessed November 2005 at http://www.commuterchoice.com/index.php?page=employers. CommuterChoice is a nationwide partnership to help employers reward their employees through addressing their commuting needs.

5 News and Information about Hybrid Vehicles_. FuelEconomy.gov. US Department of Energy & US Environmental Protection Agency. Accessed November 2005 at http://www.fueleconomy.gov/feg/hybrid_news.shtmlnews.shtml. See table entitled More Hybrids Coming Soon.

6 Available Hybrid Models Triple Since 2003, According to Autobytel. TheAutoChannel.com. The Auto Channel. 2005. Accessed November 2005 at http://www.theautochannel.com/news/2005/06/29/136225.html.

7 Funding Alternative Fuel Activities. NREL.gov. US Department of Energy Office of Energy Efficiency and Renewable Energy. 2003. Accessed November 2005 at http://www.nrel.gov/docs/fy03osti/33442.pdf.

8 Gasbuddy.com, GasPriceWatch.com, and FuelMeUp.com are three examples of such websites. The Federal Government and MSN= also provide similar services.

9 The gas mileage on the sticker is often not accurate, but it can be a good way to compare vehicles. See the section on Advertised vs Actual Gas Mileages.

10 Gas Mileage of 1999 Honda Accord. FuelEconomy.com. US Department of Energy & US Environmental Protection Agency. Accessed November 2005 at http://www.fueleconomy.gov/feg/noframes/15104.shtml. The combined mileage listed on FuelEconomy.com will be considered the official reference gas efficiency within this article.

11 Gas Mileage of 2006 Toyota Prius. FuelEconomy.com. US Department of Energy & US Environmental Protection Agency. Accessed November 2005 at http://www.fueleconomy.gov/feg/noframes/22016.shtml.

12 The exact value of $70.7071 was rounded to three significant digits. Future values are also rounded appropriately.

13 The cost of the new car and the amount owed on the old car are easily determined, but the trade in value may vary depending on the market and location. Edmunds Used Car Appraiser.* and Blue Book are great resources for determining the worth of your used vehicle.

14 AmeriCU’s Loan Rates_. AmeriCU.org. AmeriCU Credit Union. 2005. Accessed November 2005 at http://www.americu.org/loan_rates.htmlrates.html. The average loan amount for new cars purchased after 2003 is 115% of the sale amount and has an interest rate of 5.25%.

15 Prius_. Toyota.com. Toyota Motor Sales, U.S.A., Inc. 2005. Accessed November 2005 at http://www.toyota.com/prius/index.html?s_van=GM_TN_PRIUS_INDEXINDEX. The Manufacturer’s Suggested Retail Price (MSRP) will be used to compare all new cars within this article, as retail prices vary.

16 Edmunds used Honda Accord car appraisal. Used Honda car pricing. Edmunds.com. Edmunds.com, Inc. 2005. Accessed November 2005 at http://www.edmunds.com/used/1999/honda/accord/11976/options.html. Used car values within this article are determined using Edmunds Used Car Appraiser, which features True Market Value Pricing. In all cases, the default options are left and the most inexpensive trim is used. Other trim, options, areas and vehicle conditions may result in varying values. The "Trade-In" value is used to reflect the worth of the currently owned vehicle, the "Dealer Retail" value is used later when analyzing Value Retention.

17 Be careful when comparing your current monthly payment to a new payment, however. The short-term monthly budgeting may be the same, but the remaining length of the payments should also be considered. For example, it would seem to make sense to sell a car with a $300/month payment in favor of a new one with a $200/month payment, but that would not be so (holding all other factors economically equal) if the new payment was going to continue for a few years and the old payment had only a couple of months remaining.

18 This is not necessarily the total payment of the new car, as the existing car payment is subtracted off in the calculation. If you were currently paying $200 per month on a car, for example, the net monthly payment increase would be $200 less than the gross new car payment.

19 Shorter loans have significantly higher monthly payments, but some may still choose to go this route as the total amount paid over the life of the loan is smaller.

20 One should also realize this kind of monthly analysis is only accurate over the life of the loan. Once the loan payments are removed from the equation, the only remaining factor is the gas savings, putting the hybrid at a distinct advantage. To determine how long it would be before the gas savings after the loan made up for the net loss during the loan would require a much more involved economical analysis.

21 Gas Mileage of 2006 Toyota Corolla. FuelEconomy.com. US Department of Energy & US Environmental Protection Agency. Accessed November 2005 at http://www.fueleconomy.gov/feg/noframes/21882.shtml.

22 Corolla_. Toyota.com. Toyota Motor Sales, U.S.A., Inc. 2005. Accessed November 2005 at http://www.toyota.com/corolla/index.html?s_van=GM_TN_COROLLA_INDEXINDEX.

23 A MSRP of $12,000 and a gas mileage of 40 mpg are conservative assumptions with respect to the car information listed in Figure 9.

24 Household Transportation Report: Household Vehicles Energy Use: Latest Data & Trends_. EIA.DOE.gov. Energy Information Administration. 2001. Accessed November 2005 at [http://www.eia.doe.gov/…table-a03.pdfsurvey/2001/tablefiles/table-a03.pdf. Based on the information given in this report, 1500 miles per year is a conservative estimate.

25 Surprising Facts About Gas Mileage. ConsumerReports.com. Consumers Union of U.S., Inc. October 2005. Accessed November 2005 at http://www.consumerreports.org…surprising-facts-about-gas-mileage.

26 Gertner, John. Hybrid Mileage Comes Up Short. Wired.com. 11 May 2004. Accessed November 2005 at http://www.wired.com/news/autotech/0,2554,63413,00.html.

27 Hybrid Mileage Database. GreenHybrid.com. Greenhybrid. Accessed November 2005 at http://www.greenhybrid.com/compare/mileage/.

28 Your MPG. FuelEconomy.com. US Department of Energy & US Environmental Protection Agency. Accessed November 2005 at http://www.fueleconomy.gov/mpg/MPG.do?action=browse.

29 Tax Incentives for Hybrid Vehicles_. FuelEconomy.com. US Department of Energy & US Environmental Protection Agency. Accessed November 2005 at http://www.fueleconomy.gov/feg/tax_hybrid.shtmlhybrid.shtml.

30 Tax Deductions on Hybrid Car Purchases. HybridCars.com. hybridcars.com. 2005. Accessed November 2005 at http://www.hybridcars.com/tax-deductions.html.

31 Safe, Accountable, Flexible Efficient Transportation Equity Act: A Legacy for Users_. Public Law 109-59. 109th United States Congress. 10 August 2005. Section 1121: HOV Facilities. pp50-54. Accessed November 2005 at http://frwebgate.access.gpo.gov/…publ059.109.pdflaws&docid=f:publ059.109.pdf.

32 Hybrid Incentives. USCUSA.org. Union of Concerned Scientists. 2005. Accessed November 2005 at http://go.ucsusa.org/hybridcenter/incentives.cfm.

33 New hybrid incentive: parking discount. Associated Press Release. MSNBC.com. 28 October 2005. Accessed November 2005 at http://msnbc.msn.com/id/9849414/.

34 Can a Hybrid be a "performance vehicle? Town Hall Talk, Edmunds.com. Edmunds.com, Inc. 2005. Accessed November 2005 at http://townhall-talk.edmunds.com/direct/view/.ef79071/0.

35 Lexus Hybrid Performance. Lexus.com. Lexus. 2005. Accessed November 2005 at http://www.lexus.com/models/hybrid/overview/performance.html.

36 How Hybrid Cars Work. HowStuffWorks.com. HowStuffWorks, Inc. 2005. Accessed November 2005 at http://auto.howstuffworks.com/hybrid-car18.htm.

37 Weber, Bob. Hybrid Maintenance Should Look Familiar. Cars.com. 20 June 2005. Accessed November 2005 at http://www.cars.com/go/crp/buyingGuides….

38 Frequently Asked Questions: Is maintenance more expensive with a hybrid? HybridCars.com. hybridcars.com. 2005. Accessed November 2005 at http://www.hybridcars.com/faq.html#maintain.

39 How Long Will Hybrid Car Batteries Last? About.com. About, Inc. 2005. Accessed November 2005 at http://hybridcars.about.com/od/hybridcarfaq/f/batterieslast.htm.

40 Regenerative Braking. RMI.org. Rocky Mountain Institute. 2005. Accessed on November 2005 at http://www.rmi.org/sitepages/pid433.php.

41 Peltx, James F. Software Glitch Triggers Toyota Prius Recall_. LATimes.com. Los Angeles Times. 13 October 2005. Accessed November 2005 at http://www.latimes.com/business/la-101305prius…lat,0,3868869.story?coll=la-home-headlines. One example of a hybrid-only electrical problem resulting in the first known hybrid recall.

42 Auto Recalls, Truck Recalls and Free Car Reports for 1990-2005 Model Cars: Main Menu for All Car Manufacturers_. MyCarStats.com. 2005. Accessed November 2005 at http://www.mycarstats.com/auto_recalls/auto_recalls.asprecalls.asp. The automotive industry has an established history of recalls.

43 Compare Prices and Read Reviews on 2001 Toyota Prius at Epinions.com_. Epinions.com. Epinions, Inc. 2005. Accessed November 2005 at http://www.epinions.com/auto_Make-2001_Toyota_Prius/display_~full_specsspecs.

44 2001 Toyota Prius used car prices, trade in value at Edmunds. Edmunds.com. Edmunds.com, Inc. 2005. Accessed November 2005 at http://www.edmunds.com/used/2001/toyota/prius/100001870/options.html.

45 Compare Prices and Read Reviews on 2001 Toyota Corolla at Epinions.com. Epinions.com. Epinions, Inc. 2005. Accessed November 2005 at http://www.edmunds.com/used/2001/toyota/corolla/100001855/options.html.

46 2001 Toyota Corolla used car prices, trade in value at Edmunds. Edmunds.com. Edmunds.com, Inc. 2005. Accessed November 2005 at http://www.edmunds.com/used/2001/toyota/corolla/100001855/prices.html.

47 Unless you live in California, where the natural-gas powered 2005 Honda Civic GX NGV is currently available.

48 Reasons Not To Buy a Hybrid. HybridCars.com. hybridcars.com. 2005. Accessed November 2005 at http://www.hybridcars.com/dont-buy-hybrid.html.

49 The equation shown assumes a future value (cash balance you want to attain after the last payment is made) of zero and that payments are made at the end of the period (month).

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The VW Jetta and Beetle Diesel vehicles actually get more (real-world) miles per gallon than any hybrid currently on the market. Check Consumer Reports for the exact details.

0 Votes  - +
Tax Benefits by tealgm

Brandon,

Very interesting article. Thank You.

One item you seemed to leave out of the equation is the tax benefits to owning a hybrid (both federal, state and local).

The federal tax deduction for 2005 of $1500 (a $420 savings in the 28% bracket) turns into a credit in 2006.

Washington DC currently waives all sales tax on the hybrid vehicles (a $1400 value).

With a hybrid vehicle, one is allowed to drive in the HOV lanes in both Virginia and California, which definitely increases your gas mileage when compared to an economical car (the Corolla) in the non-HOV lanes sitting in traffic at the same time.

0 Votes  - +
Amenities by Anonymous

Another aspect not mentioned is the amenities. I drive a civic hybrid, and yes, it has a price differential from a base civic of a couple thousand, but the base civic doesn’t come standard with power locks, windows, CD player, AC, etc… The hybrids, I believe, (I haven’t comparison shopped all of them) are all typically in the middle class of the model choices. They want people to be comfortable in their hybrids, so they typically have been built with a few more added options and better overall build quality, including matching trim, etc. In the civic’s case, it would be like buying an EX versus buying a bare base model civic.

I would gather that the corolla used in the comparison has hand-rolled windows, a cassette tape, no AC, no key-fob for the locks, etc…but the prius has all of that, I believe.

When comparing costs of ownership you must also include insurance, which I found is higher for the hybrid, unproven technology, etc, if in accident and battery damaged, more likely to be considered entire loss, versus repairable, so the insurance reflects that.

I love my Honda, it has all the features I really wanted in a car. I went from a plush Lexus Sportcross, and my milage in usage went from about 18 to 38, so I’m doing quite well.

My options under consideration were purchase the Lexus out of the lease, for nearly the same price as the new Civic hybrid or the hybrid, new. So, my payments would have been nearly identical. The Lexus would have been slightly cheaper, but the interest rate on a used car would have been higher. The tax write-off for 2003 was nice and the increase in insurance was nominal. Averaging 1000 miles per month, I am saving 73/month in gas and paying about 15 per month more in insurance…so, overall, I estimate, with loans/gas prices/insurance considerations, I am saving money each month and keeping the air cleaner than driving a 4-5 year old lexus getting 18mpg…and I am now covered under warranty. Good deal overall!

Greetings,

Brandon’s post was interesting and really well documented. Actually, this site as a whole seems to be really nice ! Anyway, The price drop necessary for the adoption of hybrid vehicles was calculated with a basic model and gave good "insight" (:-D) for the availability of hybrid vehicles. However, there’s a new trend in economy that says that whenever you want to calculate the costs of a product, you should add to your income whatever the environment gives you by it’s own. For example, if nature is able to absorb an amount of carbon monoxide produced by cars, then it’s saving you all the money you would need to clean it from the air. You are getting clean air and you are not spending money for it. More simply, whenever you polute over the amount that could be naturally absorbed, you would need to spend money to clean it up (at least you should :-)). There are further ways to lower the calculated price of a hybrid. Not only the cost of lowering the gas emissions would be accountable, but also the lowering of health problems and the slower climbing of the gas costs. Those savings are usually expressed in a lowering of society costs (eg. taxes), or maybe the money saved could be used to increase overall quality of life. The net result would still make a hybrid a little more expensive, because taxes and cost of living is distributed among everybody, but this would actually be good, because it could reduce social discrepancies because people who can’t afford to buy cars wouldn’t need to pay for their pollution (people who has money would buy it’s car and automagically pay for keeping things clean :-)). In a global view the social inequalities could also be lowered, because since the polution is mostly caused by developed countries it would become more of a local expense than if we allowed for the polution to spread over larger areas. It’s because of the intrincate consequences that global / environmental / social matters are subject to much controversy instead of just being objectivelly modelled. Our scientific reasoning (and machines :-)) haven’t come to the point that it’s possible to calculate it and right now we can only listen to a lot of non proven global-warming-and-the-like theories both from scientific geologists and not-so-scientific eco-somethings :-) Henrique Dante de Almeida hdante@gmail.com
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Irrelevant by Anonymous

Irrelevant.
There is plenty of oil.
You are being scammed.
Oil insiders say we will run out of air before we run out of oil.

http://www.gasresources.net/DisposalBioClaims.htm

http://home.earthlink.net/~root.man/sci.html

http://www.prisonplanet.com/archives/peak_oil/index.htm

The article concludes (not unexpectedly IMHO) that hybrids are not cost-effective – but that they are good for the environment.

I’m not even convinced of that.

Current hybrids have a finite battery life. Opinions range between a few years and as little as 70,000 miles (Prius). Aside from the cost of replacement batteries (which may or may not be covered under warranty depending on the vehicle) – consider the damage to the environment from dumping all of those acids and heavy-metal residues.

There is a claim that the batteries can be recycled – but are they in practice? I suspect that any small-scale recyc program for hybrid batteries would quickly be overwhelmed if these vehicles become as popular as it seems they might.

It’s hard to measure the costs of heavy metal pollution versus the benefits to saved CO2 emissions and such – but things certainly aren’t as rosey as you might hope.

Buying a Prius puts money into the hands of Toyota and its investors. Buying gas puts money into the hands of Saudi Arabian fanatics.

Difficulties in assessing the costs of externalities does not mean that they don’t exist.

In your article "Is a Hybrid Worth It" you state that "Hybrids have batteries that will need to be replaced in eight to ten years" along with a footnote (40) referencing a page on About.com which states nothing of the kind.

Toyota has stated that they fully expect the battery to last the life of the vehicle… you know, like an engine or a transmission. When you review other cars, do you state, "This vehicle has a transmission that will need to be replaced in eight to ten years?"

http://hardware.slashdot.org/hardware/05/11/14/0623227.shtml?tid=228&tid=137

Hi Brandon
I really enjoyed your article on hybrids. I have a 04 Prius since 3 years, and now a Hybrid Highlander.
On the Prius, I am clearly in the green. So here are some points you left out in your calculation.
1: You need to compare the Prius to a Camry (I also have a Corolla, and thy do NOT compare)
2: Insurance cost (It was 20% less then my old RAV4)
3: License fees (A minimal $213 HP count, not KW’s)

Now on the hybrid Highlander, the picture is somewhat different. I compared it to the BMW X5. I used exactly the same comparison as you, the HH was over 24% cheaper to operate per year.
So it all depends on comparing apples to apples, and like by the fruit, there are many types of apples, and many different tastes. But in the end, customer satisfaction counts the most, and there, the Toyota hybrids shine with over 95% excellent! (Consumer report) And yes, I have 35K miles on mine, and not a thing wrong.

Urs Steiner

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Maintenance by TMKelley

I think everyone is letting you off easy in regards to your contention that the maintenance costs of a Hybrid and a traditional internal combustion engine (ICE) car will more or less even out.

Computer systems are much more expensive to repair and maintain, and unlike mechanical systems, often require specialized training to work on. If you don’t believe me, next time you take your car in for an oil change, ask the technician to go ahead and reconfigure the motherboard on your laptop. My guess is he won’t be able to do it, and certainly not as part of their $19.99 oil change special.

My local computer shop charges $125 to restore the system settings on a computer. That consists literally of inserting the system disk into the CD-Rom drive and clicking "yes." They have people lined up waiting to get their machines done!!! And you want to tell me that a car with all sorts of electronic gadetry would be cheaper somehow?!?

The fact is, all Hybrids really on their onboard computer systems. The Prius owners on here can attest to the fact that if their computer goes out, they can’t even put the darn thing into drive.

So, while I don’t have statistics to back this up, my guess would be that the long term maintenance costs of a hybrid will be much greater than those of a traditional vehicle. Furthermore, the hybrid will be far more susceptible to a catastrophic event, i.e. that computer gets fried, you’re not going anywhere, and the repairs will be far more expensive than typical mechanical repairs.

How can you possibly compare the cost of a new car to an old one? Why not do a comparison with your 1999 accord vs. my bike? I’ll leave it to the reader to work out the numbers but suffice to say I have enough left over for a couple of pints after biking to work each day.

Wouldn’t a more realistic comparison be buying a hybrid versus buying a similarily priced new car?

The use of stupid formulas does not make your point any more clear. This article would have been better written as an opinion piece instead of this mathematical abomination.

Another poster alluded to this new way of thinking about economics. Your article reaches a valid conclusion; it is cheaper to buy and operate a Corolla than a Prius. You went through a heck of a lot of research to prove what is common sense. I think a more indepth understanding of the topic could be reached by putting your time into researching what True Cost Economics means and why people are buying the Prius in the first place. The super ultra low emissions (SULEV) is probably the best reason to purchase this car. Also, the lower gas consumption is a step in the right direction.

Until we all start thinking about true cost economics, we are going to continue to mindlessly consume natural resources. Change your paradigm from thinking about how much money is in your pocket to thinking about how we are going to leave this world for our children. There is a great Cree Indian Cree Proverb that I will post for your consideration: Only after the last tree has been cut down, only after the last river has been poisoned, only after the last fish has been caught, only then will you find, that money cannot be eaten.

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formula by Anonymous

doesnt anybody notice that (1/GMnow – 1/GMimp) is incorrect? it should be 1/(GMnow – GMimp).

I read a commentary recently in Car_and_Driver (sorry, couldn’t find a link) that seemed to imply that the reason there aren’t more hybrids on the road is because the manufacturer takes a loss on each one built and can only afford to produce so many. This along with higher than anticipated demand results in the long waiting list to get one. Why would they sell them for a loss? CAFE (Corporate Average Fuel Economy) for one, although I would be surprised if all those Camrys they sell don’t do the job for them… Basically, for every Corvette and Suburban GM can sell, they have to sell a butt-load of Aveos and other high mileage cars so that the average fuel economy of all the cars they sell is higher than the standards set by the US government. I guess if they sell a lot of Camrys and Priuses, they can sell a lot more of their higher profit margin 4Runners and take a higher marketshare in that segement, resulting in selling a lot more volume all around.

Another reason for selling them at a loss is to get the ball rolling on the technology. Yet another is to draw more people to your brand with something very unusual that grabs attention and gets a lot of publicity, like the Prius. Walmart uses the "loss leader" a lot to get people in the door. The $2.25 you saved on that DVD player you saw advertised there gets you in the door and you end up buying $225 worth of other stuff as long as you were there.

I found the article by Brandon very well written and I liked the neat and well explained diagrams and formulae. There is a very interesting Op-Ed piece in the WSJ today (Nov. 30, 2005) that is a tongue-in-cheek fictitious letter from The Toyota Corporation. The article is titled "Dear Valued Hybrid Customer..", by Holman W. Jenkins Jr. I read it in the hardcopy, and I don’t think a link can be made for non-subscribers to the WSJ electronic edition. The figures on the cost savings from reduced gasoline consumption seem to match the OmniNerd article. The WSJ article is quite funny, but there are at least three points in the article that may be worth discussing.

First, it mentions "the regrettable truth that driving a fuel-efficient car does not yield any substantial benefits for society if it doesn’t save the owner money." I would think that this argument can easily be countered – monetary savings (if any) to the individual represent only a part of the sum total of benefits and costs, to the individual as well as to society. In fact, it would seem very difficult to use actual money in this calculation. Assuming it is true what the article says, that the Toyota Prius costs $9,500 more than a comparable car, would it not matter how that $9,500 is spent in terms of it’s marginal environmental impact, even if the opposite were true, i.e, the Prius were $9,500 cheaper? In other words, like John Maynard Keynes’ concept of Marginal Propensity to Consume out of income, which holds that redistribution of income away from the rich to the poor would lead to an overall increase in consumption because the poor tend to consume more, if there is a transfer of the dollar from an individual with a high ‘marginal propensity to pollute’ to another individual with a low marginal propensity to pollute, the same dollar would end up being beneficial to society, even though only an exchange of ownership of the dollar has taken place. And it would be too speculative even to begin saying anything worthwhile about the relative marginal propensities to pollute of the Toyota shareholder as compared to the car-buying individual.

Then the WSJ piece makes the point that the petroleum not consumed by the Prius owner (or the Civic owner, I would say, following Brandon’s calulation, as compared to a gas guzzling car)is not saved but is consumed by someone else. I am not sure that I am convinced by this argument. If 10% of the population switches from more towards less fuel efficient cars, then from a finite quantity of gasoline, the use would be extended over a longer time. While it is true that the gasoline would be consumed by someone else, spreading the consumption over time could bring environmental benefits, and it also buys more time for better, more energy-efficient and sustainable means of locomotion to be developed.

This is the third and last point I wished to make about the issue of Hybrid cars. It seems to be common sense that when the cost-benefit equation changes, more people would start buying Hybrids or other alternatives to the traditional gasoline burning car. Technology would always change in fits and starts, there is no seamless movement from one regime to another. And similarily, users (in this case car-buyers) would always belong to a distribution of things like their willingness and ability to adopt new technologies, their concern about the environment in relative terms, the degree of their aversion to risk, etc. Just as some people would buy hardcover books and others would wait for the cheaper paper-back version, or the same person would spend $8 for a ticket to a certain movie, and wait two years to watch another movie only 2 years after its release, there are some who would buy hybrids now, and some who would prefer to wait. Just as the smart looking concave curves in Brandon’s article, the switch to Hybrid and other cars would not be linear, just the shape of the curve would be flipped, ie, only a few people gradually increasing in proportion to begin with, but as episodes such as the recent Katrina-induced price hike become more frequent and longer-lasting and deeper, more and more people would change sides. And just as people moved from horse-driven carriages to cars, we would move on to the next thing, it seems to me to be just a natural process.


Previewing my comment before submitting it, I am not sure that it is nerdy enough, I guess it is good luck that there is not a series of tests to gain membership to OmniNerd, as I would probably not have made it – I read the Wall Street Journal in print, and for the record, my own car is a Chevy Malibu Maxx (I have no idea what mileage it gives me), and sometimes I get to drive my wife’s Audi A6.
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Mid-Sized Prius by Anonymous

You compared the Prius to a Corolla. The Prius is a mid-sized car based on interior volume. Also, there is more leg room in my Prius than in my wife’s Cadillac SLS (measure for yourself). Your equations look good, but when you apply them to a comparison with the Corolla, the result is meaningless. Use a comparably equipped Camry instead and tell us the answer…

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Hybrid Myths by tomtolman

Business Week is running an interesting article about the top Hybrid Myths. They are:

  • You need to plug in a hybrid car.
  • Hybrid batteries need to be replaced.
  • Hybrids are a new phenomenon.
  • People buy hybrids only to save money on gas.
  • Hybrids are expensive.
  • Hybrids are small and underpowered.
  • Only liberals buy hybrids.
  • Hybrids pose a threat to first responders.
  • Hybrids will solve all our transportation, energy, and environmental problems.
  • Hybrid technology is only a fad.

Hi Brandon,

Thank You for the very interesting article. I have purchased a Prius and figured that the break even for me was right around 10 years, not figuring resale advantages, but including the federal tax advantage. I would not have purchased the car if the break even was shorter than the expected life of the car. My estimation left out debt service but included investment lost, as I bought the car cash. I would be interested on your mathematical take on this tactic. Based on the mechanical simplicity and demonstrated high-reliability of the Prius motor/generator/transmission configuration, in competition with a starter/alternator/automatic transmission my estimate factored in these repair costs. I see the traditional starter or alternator being replaced at least every 60 K miles. I see the transmission requiring rebuilding every 80 K miles. These are based on my personal vehicle owning experiences. The Prius planetary drive combiner (power sharing device in Toyota parlance) is 1/4 the gears and has none of the clutching mechanisms in comparison to a standard automatic transmission. I also compared traditional battery costs (3 replacements in a 120 K mile lifetime in the midwest USA as typical)with the hybrid drive battery costs (1 battery in 100K). I also estimated brake service for the Prius at 300 Kmiles and for traditional vehicle at 40 Kmiles (personal experience), with the first traditional vehicle brake maintanence reusing the rotors, and the second replacing the rotors. The mechanical brakes are used so little in the Prius that owners have found that shifting into neutral (no regeneration) and braking to a stop is required to keep rust cleaned off the rotors in coastal areas. Both the Prius and a standard modern car have multiple computers – which is a wash reliability wise. My previous $15K 2000 year car had a computer in the transmission let alone an engine control computer. I also used present gas prices ($2.29) and a 45 MPG fuel economy. The mileage is what I expect to get in the north-central metropolitan driving enviorment. The Prius was compared to a hypothetical standard car with automatic climate control and alloy wheels and traction control, electric door controls/security system and side impact air bags (standard Prius features, except the air bags which are included in the Package 1 I bought). I estimated an equivalent car at costing $17000. I do not think there is an actual car that actually fits this. As the Prius hybrid system makes the climate control simpler to implement than in a standard car configuration, and thus cars that are much more up-market would have this feature. Alloy wheels are typically included with many additional features, while they are standard on the Prius. This is another reason its difficult to match a car that is not hybrid to the Prius. Gas prices peaked here in Chicagoland this summer in the low $3 range. The $2.29 estimate I think is quite conservative. My estimations also included sales tax, which of course is factored from the purchase cost. I think this was left out of your article. In Illinois here, there is no break for hybrid vehicles on state sales tax. In other states, Connecticut for example, there are vehicle property taxes that would be needed in addition to sales tax to make a purchase decision. Again, Thank You for your article. Respectifully, I believe your article left out some the cost effects of many praciticalities of car ownership however. A 2006 Corrola might be comparable to a 2000 Prius, the 2004 – 2006 generation Prius is a somewhat larger car than the 2006 Corrola. Your article also assumed purchase tactics while common are not universal. These oversites, and miscomparison are responsible for the results that are negative with respect to a Prius purchase.

The author mentions in the latter part of the article that the residual value of the Prius is substantially higher than the Corolla (a poor comparison as noted by many others previously). This fact, however, is not included in the overall economic evaluation. The value of the investment at the end of the considered life cycle (often referred to as salvage value) absolutely must be considered in order to complete the picture. If this component is considered in the equation, I believe that the investment becomes a "no-brainer".

One other note: Consumer Reports, after issuing a report stating that NO hybrids will save the consumer money, issued a retraction to correct itself. Both the Prius and the Civic hybrids were found to offer a net savings over 5 years of ownership compared to the non-hybird comparable model. The savings WAS small, but there just the same. Your results may vary.

I received the following email inquiry:

How about doing an analysis of buying a new hybrid vs. buying other new cars? Americans tend to replace their cars about every 2 years, so there are a number of opportunities to make car choices along the line.

I’ve been pondering an update for this article. Although the current one allows someone to take current information (gas price, car price, gas mileage) and to compare the costs of two new vehicles (which is what you requested), I think it would be interesting to look at a cost analysis over a given time period (i.e., given you will keep a car for five years, what is the most cost efficient option?). Do you have further ideas for an article along these lines? Also, you may want to consider writing an article of your own; OmniNerd has an online writing tool you can use which includes the ability to get feedback from moderators.

I would also love to see the formula for how much driving to do with Vehicle1 (Subaru Outback) and how much to do with Vehicle2 (Vespa) to get my net mpg down to 40 mpg. Thanks!

I don’t think an article is necessary; I’ll lay out that calculation for you right here:

Variables

  • mls1 – Miles driven in vehicle 1
  • mls2 – Miles driven in vehicle 2
  • mpg1 – Gas mileage (mpg) of vehicle 1
  • mpg2 – Gas mileage (mpg) of vehicle 2
  • mpgTotal – Cumulative gas mileage (mpg)

Calculation
mpgTotal = (mls1 + mls2_) / (_mls1 / mpg1 + mls2 / mpg2)

The numerator of the formula is the total number of miles and the denominator is the total fuel used.

I received the following inquiry via email:
bq. I read your article "Should I buy a Hybrid?" and followed your logic, however I’m not sure the constraints apply to us. We are both in our late sixties and have been retired for a few years now. We dont have a lot of money but are relatively secure in that we dont owe much and have our basic necessities adequately covered. We both expect to be around another decade and with luck could carry on into our eighties. We currently have a 97 Mercury Villager (Nissan Minivan) that has 190000 miles but is well maintained and in good condition. I also drive my old 1990Toyota 2WD pickup and probably will keep it forever. Both vehicles are long paid for and perfectly reliable 4 cylinders and get gas mileage in the high 20’s. In total we drive well under 1000 mi/mo. We will probably drive a bit more to visit our kids and grandchildren in the future but our rural lakeside lifestyle will likely be six or fewer daily trips/wk of 25-30 mile in mostly non-stop-and-go driving.
bq. Obviously this doesnt make us very good candidates for a Prius at this point, but we are very politically inclined, moderately liberal, and quite green in our environmental views.
bq. I think that the Villager won’t serve us until we are through driving for ourselves even though it is ok for now. Unless we win the lottery I dont see how it will be easier to replace it in the future than now so I’m proposing we bite the bullet and buy a new car now rather than wait. I would sell the Villager outright, maybe putting $10 thou down on a vehicle that doesnt exceed $25k and financing the $15k balance through our bank. I have an annuity but dont want to touch it and payments of $250/mo are ‘do-able’. I’m a retired engineer and have been intrigued by the Prius. I see this as the last car we should ever have to buy but my guts and wife think a new small car like a Toyota Corolla or Honda Accord makes more sense. Is there any logic to our buying a prius?
bq. Ben [last name withheld]
Hauser,ID

I think my article is a very applicable tool to your situation, at least as far as money is concerned (how much of an impact your "green" tendencies come into play is up to you). I’ll step you through the process, as I think this will serve as a great example for others with similar questions:

2007 Prius Analysis
Calculate how much money you stand to save on gas by switching to a Prius using the equation in Figure 1:

  • $gas ~ $2.30 (as of 8 Jan, 2007)
  • Distance ~ 1000 miles/month (under 1000 mi/mo now, could increase in future)
  • GMnow ~ 27 mpg (average MPG in high 20s)
  • GMimp ~ 55 mpg
    This results in a monthly savings ($save) of about $43.

Calculate how much it would cost per month to replace your vehicle using the equation in Figure 3: (I selected your minivan to be sold, as you seem to be attached to your truck.)

  • $newcar = $22,175
  • $oldcar = $3,115 (assuming a private sale)
  • $owed = $0
    This results in a loan amount ($loan) of about $22,390. Given that you have cash on hand to be able to put $10,000 down, the figure drops to $12,390.

Calculate the monthly loan payment using the equation show in Figure 4:

  • $loan = $12,390 (as previously calculated)
  • length = 60 months (assumed)
  • rate = 5.25% (assumed)
  • $nowpay = $0
    This results in a monthly payment of about $235. (Checking the table provided in Figure 6 shows this number to be legitimate.)

Thus, the net monthly impact of the purchase of a Prius would be -$192. Let’s compare this to your wife’s (and your gut’s) choices.

2007 Accord Cost Analysis
The GMimp changes to be approximately 28 mpg, resulting in a $save of about $3. $newcar also changes to be about $21,000, resulting in a $loan of about $21,040, which reduces to $11,040 with your down payment. This translates to a monthly payment of $210 and a net impact of -$207.

2007 Toyota Carolla Analysis
The GMimp changes to be approximately
33 mpg, resulting in a $save of about $15. $newcar also changes to be about $15,000, resulting in a $loan of about $14,140, which reduces to $4,140 with your down payment. This translates to a monthly payment of $79 and a net impact of -$64.

It appears like the Corolla is your obvious best choice, cost wise. Just for fun, though, let’s throw in a true-blooded economy car, such as the Toyota Yaris.

2007 Yaris Cost Analysis
The GMimp changes to be approximately 37 mpg, resulting in a $save of about $23. $newcar also changes to be about $12,000, resulting in a $loan of about $10,685, which reduces to $685 with your down payment. This translates to a monthly payment of $13 and a net impact of $10 (although I’m sure you’d probably be able to scrounge up the additional $685 and buy the car outright, leaving you the full $23).

The Yaris seems to be the clear choice of these options, in my opinion. It’s the only option that will actually save you money (given your $10,000 down payment, of course).

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What about Time? by davidsr32

Thanks for the analysis Brandon!

I’ll qualify my question before asking it: I scanned your article 2-3 times before deciding I didn’t see a reference to time and a potential "break-even" threshold. Same for readers’ comments in this forum.

So… Isn’t there a "break-even" threshold at some point after the note is paid-off to be considered? I’m thinking some snazzy math is in order to show the enhanced importance of the gas-savings after that point would be pretty cool.

Assuming you compare the hybrid with an equivalent non-hybrid (comparable in terms of basic model and amenities), and that you own either one after you’ve paid-off the note, wouldn’t dollars-saved on the cost of gasoline take on an ever-increasing importance over time until you hit some threshold at which the higher-priced hybrid is now starting to pay for itself?

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prius analysis by Brandon

I received this inquiry and made the following reply via email:

Would love to see you update pricing/performance based on the changes in the last 16 months or so.

I had a conversation with a friend earlier today regarding economics of a slightly different model — continuing with my penchant for a truck or going with a Prius. Your analysis, in my opinion, isn’t entirely fair as the Corolla was lesser of a car than the Prius. Granted, the Prius was/is no Camry, it’s a lot closer to a Camry than a Corolla, even in 2005. Still, I love the models you’ve posted. Hope you have the inclination and time to update it this year. Thanks for your work.

I’ve been toying with the idea of updating my article this year. However, this update wouldn’t add much to what currently exists, as it was all done using variables. The equations, for example, would all remain the same, although the examples could be switched out for current models. Because of that, I’ve thought about changing the analysis slightly to look at the total cost involved in 5 years of ownership (rather than on a monthly basis). This analysis could include resale value and other factors not directly included in the previous evaluation.

In any case, the existing information is enough to compare any two vehicles – whether they be trucks, luxury, economy, or otherwise. The reason is the analysis only includes cost. Other factors, such as how you really like the way car X drives or truck Y looks, are beyond that scope.


From a follow up email:

You’re right that the math doesn’t change too much, ‘though I’m not the kind to finance my purchase of a car. So an analysis of TOC based on outright purchase (vs. financed purchase) might be appropriate. And I see that your current article financed the Prius with all but about $900 down whereas you put over twice that down for the Corolla — seems that skews things a bit in the favor of the Corolla. I didn’t see a reason for this. Most all of the hybrids were financed at significantly more of their sticker price than comparable non-hybrids. Why?

The reason for the dollar discrepancy shown in Figure 8 of the article is the equation in Figure 3. In essence, because the average price paid for a vehicle is 115% of the "sale" price, less of the money down comes off of the sale price for a more expensive car. This explains the seeming discrepancy, as the hybrid cars are generally more expensive than the economy cars.

The TOC analysis for 5 years (or another at 10, including a battery replacement, and showing a 5 year financing payoff as part of it) might be a reasonable series of tables. Many folks do not trade in their vehicles in 2-3 years, but would like to see the payback period over a longer haul than if they simple jump from vehicle to vehicle feeding the bank financing industry. Not very American of me, perhaps, but Bushenomics hasn’t really been an easy pill to swallow.

I agree it would be interesting to see at what point the hybrid "pays for itself." I think the best method to do this would be to come up with a "standard" option (a Carrolla or a Civic, perhaps?) and then indicate how long it takes for car X to become financially advantageous in comparison – considering sales price, maintenance costs (including gas), and resale value.

I think you might have inspired me.

All you perspective toyota hybrid buyers:
One word of advice: Don’t buy it.
We bought a 2001 Toyota Prius Hybrid new, and our maintenance and repair costs have been through the roof. First of all every scheduled maintenance is about 150% higher than a standard car. Second of all, our repair costs have not only been frequent, but expensive. We spent over $2200 on a brake job. Then we spent about $3000 on a new battery system. Then we spent $4800 on a new transmission. Then we spent $1800 on a catalytic converter! In between these repair jobs we got hit with smaller repairs $500-$1000 each. In total, we’ve spent over $12000 in repairs on this car. Every repair cost 2x-10x what a similar repair would have cost with another car. The catalytic converter part costs $62 for the Toyota Camry. For the Toyota Prius, the part costs $1579. Are they ripping off innocent customers who just want to be good to the environment? You tell me. The repair costs have outweighed ANY cost-savings associated with fuel costs.

When you decide to do an efficiency rating of vehicles, instead of dollars, give a call.

But actually, when talking about tre dollars, why don’t you factor in the price it costs for pollution legislation, environmental problems, and the cost of all products that are inflated because of the higher cost of oil. All of these factors are more than those outlined in a simple "price, loan, gas model".

It seems the author of this article is more a EHM, helping grease the Bush admin, than an environmentalist.

Did anyone here even think to ask, what if we eliminate the laon cost and buy the car outright? Try thinking responsibly, for maybe the first time. Or, maybe in conjunction with your beliefs. Not everything has to be bought on credit. Try earning the money first, like when you were a kid, looking to buy your first car. Hard work and desire. You make more now, so revise your household expenditures, and add to the solution, not the problem.

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my 2 bits by iamian

First I would like to say.

The article was very well done congratulations.

And like the author says economic reasons are not the only reason to buy a car or to buy anything… heck TV is never economical… you pay more because you want something not because you’ll get a profit from the investment…. and this article is focused on the economical reasons…. which is a fine thing to look at.

The only thing I saw that was a minor error is the $ of gas… the equation given would only seem to work if the $ of gas used is the average price over the period in question.

If the price of gasoline is averaged from the first users say back in 2000 to 2007… it is very different from 2007 to 2014… the same 7 year time period but the average $ of gas will be very different….

according to the US government numbers:
This site has tons of Government numbers on tons of thing… have fun :)
http://www.eia.doe.gov

National Average Price of Regular Gasoline in 2000 was $1.543
National Average Price of Regular Gasoline in 2007 was $2.857

So the first users are not likely to see the $2.50 per gallon as a average cost of the gasoline they used from 2000 to 2007… it is likely to be much lower… thus making it even less economical.

The Price $ of gasoline is not a linear increase… the rate of increase is increasing …

I made a chart that makes the trend easier to see:

http://www.geocities.com/ian_p_george/USGas90to07.jpg

the chart is from data from the above US government site.

y = (1.1834 * x^2 ) – (14.278 * x ) + 144.91

The R value of the equation is only 0.9451 … so it is far from a perfect match to the data which would be an R value of 1.0 for those not into statistics…. where y is cents… x is years … x starts in 1990 as year 1.

Given the equation and its limited accuracy the price of National Average Gasoline from 2007 to 2014 should increase to about ~$4.84 per gallon…. and the average price $ per gallon will be much higher… which will make the improved fuel economy / MPG of the HEV more economical…. while at the same time the Batteries and electronics in them will become less expensive…. so over time they become more economical…. which the author does go into in his article a bit… but I thought the numbers and data might also be useful.

Instead of shelling out hundreds a month to get a more fuel efficient car, consume less – be willing to make a real change in your driving habits. I haven’t plugged my numbers into DeepBlue or anything, but I think it’s pretty obvious.

I buy a late eighties Integra, EPA combined rating of 28 mpg, I paid $850. I tune up the car for around $150. So now I’m buried into it for $1000 or about 3 months of hybrid owning. I change my driving. I am nearing 40 mpg. Which is in the ballpark with what hybrid owners get.

The point isn’t for everyone to drive around a 19 year old compact car; it’s that you can significantly improve your current mileage if you are willing to give up a little of your time – you can even leave money in your pocket, avoid debt, and still help out the environment.

I’m hoping to continue improving my mileage towards 50 mpg, come watch me struggle!

I found a good calculator at www.shouldigohybrid.com that quickly calculates the costs and benefits of a hybrid car based on your unique driving profile and other factors. The economics are different for each unique situation, and I hybrid car might make sense for one person and not another.

0 Votes  - +
electric car by Anonymous

Thank you for sharing this information. I hope to see more in the future.

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