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AskPablo: Should I buy a hybrid?

| Monday December 3rd, 2007 | 16 Comments

hybridpic.jpgThis week a frequent reader presented me with a common dilemma. “Does the fuel economy improvement of a hybrid really justify paying the price premium?” I’ll take a look at several different car models that are available in both hybrid and standard versions in order to come up with an answer.
I began by researching the prices and fuel economy of five hybrid vehicles and their non-hybrid counterparts: Ford Escape, Honda Civic, Nissan Altima, Saturn Aura, and the Toyota Camry. The Saturn Aura Hybrid is not priced much higher than the standard model but some research showed that this vehicle is a bit of a joke in the hybrid vehicle world. It’s mpg increase is not impressive, the electric motor is weak, and the vehicle can apparently only run in fully electric mode up to 3 miles per hour. For these reasons I have excluded the Saturn Auro from the results. The Toyota Prius is also notably absent, a decision made due to the fact that the Prius is a hybrid specific vehicle and there is no non-hybrid baseline vehicle to compare it to.


I gathered the city and highway mpg data for all four cars, both hybrid and non-hybrid. I averaged the numbers for each and compared the hybrid and the baseline models. Next I compared the price difference, which averaged to $4,662, the so-called “hybrid premium.” But the average fuel economy improvement over the non-hybrid model was 10 mpg. This comes out to a average surcharge of $466 per additional mpg. Keep in mind that keeping your tires inflated, driving less aggressively, slowing down, and keeping your vehicle maintained can all result in >1 mpg savings as well, but for FREE.
To look at the fuel economy improvement in terms of a payback period is difficult since vehicle usage varies widely from several thousand miles per year to 20,000+ miles per year. The cost of fuel is also constantly in flux and the future price is quite uncertain (the only thing that is certain is that it will go up). I have prepared a chart for these four vehicles that shows the payback period, in terms of years, based on a fuel price of $3.50. So, a person buying the Honda Civic Hybrid would need to drive their car for ten years at 15,000 miles per year before he/she would begin to realize savings from their purchase (assuming fuel costs stay around $3.50/gallon).

If you want to factor in the cost to society, like the climate impact, the health impact, or the cost of going to war for oil then simply add that amount to today’s price of gasoline. So if you assume that the true cost of gasoline is closer to $6.00/gallon, the same driver would need to drive only 6 years to justify the vehicle purchase to his or her great-grandchildren.

Even in this case, this represents a return on investment of over 15% (100%/6). Try getting that sort of risk-free return from a bank! Additional factors that were not included are tax incentives of around $2000 and the planet-saving (or at least less-damaging) über-cool factor.
Pablo Päster
Sustainability Engineer
www.AskPablo.org
12/04/07 A reader pointed out an error in my calculations. The article has been revised.


▼▼▼      16 Comments     ▼▼▼

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  • http://www.odograph.com odograph

    The old hybrid versus “conventional equivalent” is of limited value. There may be isolated cases in which a consumer weight only two “equivalent” cars in their purchasing decision, but I’d argue that most of us do not.
    Most of us have a rough dollar figure we want to spend, and then look around to see what we can get.
    For what it’s worth, the average new car in America sold for about $28K this year. Things like a Prius are significantly lower than that, with a $20K base.
    Most people are already spending well over the cost of the best hybrid available.
    So if you are talking to an “average” buyer, you can skip the equivalents, and tell them that they can save money on a Prius up-front, and in years ahead on gas and maintenance (the Prius is proving to a better-than-average car for maintenance costs as well).
    To tell you the truth, I sometimes get worked up and say that the “equivalent” argument is evil. It does more to disguise choices than to expose them.
    I won’t do that today. I’d just encourage shoppers to look at the “5 year cost to own” or the “true cost to own” services offered on the web. They’ll tell you what the cars you are actually considering will cost you, all told, over 5 years.

  • pdq1966

    Pablo,
    Their are some problems with the analysis and discusion of the “cost” gained from driving a hybrid vehicle. If the customer searching for a hybrid car looks beyond just payback period (which does not include battery life)and becomes more concerned with environmenal impact they may decide that the best decision is not a hybrid.
    The production cost (both financial and environmental) is much higher for hybrid vehicles. Battery life can cause the vehicle to be less efficient toward the end of its life (which by the way is much shorter then the standard ICE cars).
    I really think hybrids are a good idea for people that NEED them i.e. there is no mass transportation. City dwellers should use mass transportation and demand better services, not buy new cars. By purchasing new cars, consumers are supporting the “car” mentality, and that has to change.
    Great papers: http://www.its.ucdavis.edu/publications/2003/UCD-ITS-RR-03-01.pdf
    http://www.evworld.com/library/pacinst_hummerVprius.pdf

  • http://www.odograph.com odograph

    The production cost (both financial and environmental) is much higher for hybrid vehicles.
    That’s a perfect example of a misplaced argument, based on this will-o-the-wisp idea of “equivalents.”
    When a Prius costs $20K and the average new car costs $28K it takes some forceful blinders on our vision to think that costs must be “much higher” for the hybrid.
    It would only be “higher” if you forced yourself to consider a few cars at the bottom end of the US market.

  • http://www.odograph.com odograph

    BTW, I agree that if you can get those $28K+ car buyer to go to “no car” that would be the biggest environmental win.
    But until then, stepping down from a more expensive car (that $50K Hummer that never sees dirt) is a big improvement.

  • http://www.AskPablo.org Pablo

    pdq1966,
    Regarding the life-cycle impact of a hybrid vehicle, please see my previous column at: http://www.triplepundit.com/pages/askpablo-time-to-get-a-new-car-002538.php

  • Steven Bissell

    Odd that I stumble on this article on Environmental News Network (ENN). The point of hybrids, for some of us, are a reduction in pollution, not saving money. And this article, like almost every other one I’ve read, compares a top-of-the-line hybrid with bottom-of-the-barrel non-hybrids. Why not compare a standard hybrid with a standard non-hybrid and see?

  • http://www.AskPablo.org Pablo

    I did not use “bottom of the barrel” non-hybrids. I used models that are available in both hybrid and non-hybrid. I used the average price of the the non-hybrids vs. the MSRP for the hybrid. Price is not the only important factor and I am very aware of that. This is why I provided a chart so that you can use your own assumptions to put the various impacts of gasoline combustion in terms of the “true cost.”
    Pablo

  • Mike

    I’ve never seen a comparison of a hybrid versus not buying any new car at all, i.e., continuing to drive an older, well-maintained car (for those of us in rural or semi-rural areas) that gets fairly good fuel mileage and meets emissions standards, rather than using the energy (which term can be exchanged for carbon use/factory emissions, etc.) to build a new vehicle. If I drive my 2003 27 MPG car for three more years, don’t I save a lot more money/energy/carbon credits than if I were to purchase a new vehicle, even the very latest and best hybrid? And why isn’t this qquestion asked more often?

  • http://www.odograph.com odograph

    Mike, it is complicated by who you would sell your car to. If you sell it to someone coming from a poorer performing car, and somewhere down the line you bump an old truck or SUV off the road, it’s a win.
    If it doesn’t truly “bump” any bad performers off the road, it might be a loss, all told.
    (It’s easier accounting if we send our old car to the crusher … but we try not to do that in real life.)

  • http://www.AskPablo.org Pablo
  • Andrea

    Hello Pablo
    It’s evident that you’ve put some effort into making graphs to aid in the visual understanding, but the axes aren’t labelled so I’m having difficulty understanding what the graphs show. Perhaps it’s miles-driven-per-year vs. payback period in years? Could you please describe the data?
    Thanks

  • http://www.AskPablo.org Pablo

    The graphs are payback period (in years) on the Y-axis vs. miles per year in the x-axis. So find your miles per year and go up to the curve for a particular car to find the payback period.

  • joe

    Even if the pay back is 10 years on a hybrid that is roughly a 10% return on your money. That beats any C.D. rates at the bank. And the savings is non taxable.
    The bigger issue are every gallon of gas that I do not use provides the following benefits:
    Lowers the trade deficit.
    Lowers the demand for gas, thus keeping price in check.
    Lowers co2 levels in the atomospher.
    Lower the risk of sending my sons and daughter to war to fight for oil.
    Saves a gallon of gas for future use.
    Keep money out the hands of the oil mafia.
    Increases money in the bank.
    And makes me feel good when people are complaining about high gas prices.
    If you are driving an SUV for pleasure, you have lost the right to complain about gas prices!
    Why aren’t these drivers embarrased to put $100 in to the gas tank?

  • Michael

    On the hybrid question, you missed some very important considerations that you should rework into the article. I imagine many people asking themselves this question will read your column, so it is worth revising.
    Hybrid cars have much higher resale values than other vehicles. I routinely see 2 and 3 year old Priuses selling for almost $20,000 even though you can get new stripped down ones now starting at $20,900. Another option is that some insurance companies offer a discount for hybrids.
    A report by Intellichoice last year showed that every hybrid saves the owner money over a 5 year period http://www.intellichoice.com/press/Hybrid-Survey-2006

  • Michael

    On the hybrid question, you missed some very important considerations that you should rework into the article.
    Hybrid cars have much higher resale values than other vehicles. I routinely see 2 and 3 year old Priuses selling for almost $20,000 even though you can get new stripped down ones now starting at $20,900. Another option is that some insurance companies offer a discount for hybrids.
    A report by Intellichoice last year showed that every hybrid saves the owner money over a 5 year period http://www.intellichoice.com/press/Hybrid-Survey-2006

  • When To Go Green

    If you’re interested in knowing if it makes financial sense to trade in your current vehicle for one with better fuel economy, check out the free calculator at http://www.whentogogreen.net