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Hybrids vs. Nonhybrids: The 5-Year Equation

February 24, 2011

Here is a very good quick read into the main issue that I believe exists with hybrid cars as replacements for non-hybrids.  The underlying fact is that hybrid cars (and trucks)  are more expensive to purchase than for non-hybrids; often by several thousands of dollars.  To recoup the additional cost, gasoline (and diesel) fuel costs would have to be significantly higher that any projected short-term future price (say…within the next 10 years).  Some might refer to the federal (and sometimes state) tax breaks given to first time purchasers that can make this price difference less of an issue, but what really is happening with these “incentives” is taking money (taxes) from one person and giving it(a gift) to another to make what is really a bad deal look better.   I don’t think that most Americans believe that it is a good thing to give their hard earned money to help support what is essentially a product that would be produced at a loss.  When looked at at the rate of replacement (called market penetration) of non-hybrid  with hybrids, the Toyota Prius – the most successful and longest marketed hybrid has taken 10 years to put 1 million cars in the US market (US car/truck ownership exceeds 200 million) . There is no doubt that these hybrids are, and will remain for the foreseeable future, essentially a “boutique” item, purchased mostly for that “hybrid” badge, by well-to-do folks that the additional cost is justified in the prestige of owning these expensive cars.  Like those people that spend $100s on a Louis Vuitton handbag that is actually a cheap $25  plastic bag; its all in the appearance, having the right label. This type of “keeping up with the Jones” doesn’t make sound economic thinking and, unfortunately, will only lead to more subsidies (and tax money squandered) for a market that cannot be supported.

By MATTHEW L. WALD –  NYT -February 23, 2011, 7:45 AM

A car buyer who lays out an extra $6,200 extra to buy the hybrid version of the Lexus RX will get the money back in gas savings within five years, according to Consumer Reports magazine, but only if gasoline averages $8.77 a gallon. Otherwise, the nonhybrid RX 350 is a better buy than the Hybrid 450h, the magazine says. The hybrid gets 26 miles per gallon, and the nonhybrid, 21, in the magazine’s calculation.

The magazine’s annual New Car Buying Guide includes a table that compares several hybrid cars with their nonhybrid versions, or, in the case of cars that come only in hybrid models, to similar cars by the same manufacturer that are not hybrids.

For example, the Honda Insight comes only in a hybrid version, so it was compared with the nonhybrid Honda Fit; gasoline would have to rise to $10.08 to even out the extra expense, Consumer Reports said. The Insight sells for $22,010 and the Fit for $16,260.

The researchers use a five-year payback period because that is a typical duration for car ownership. It assumed that the driver would log 12,000 miles a year and pay $2.80 a gallon, a price that now looks a bit on the low side.

The Toyota Prius, the most popular hybrid, did far better in the magazine’s comparison. Consumer Reports paired it with the Toyota Corolla LE, comparing the hybrid’s 44 miles per gallon and purchase price of $22,950 with the Corolla’s $17,950 list price and 32 miles per gallon. The Prius will cost less over a five-year period as long as the price of gasoline averages only 80 cents a gallon, the magazine calculated.

For some models, the choice is close to neutral from a financial point of view. The Ford Escape hybrid would cost $500 more over five years, but would break even if gasoline prices averaged $3.60. The Toyota Camry hybrid would save $500 over five years by comparison with the Camry LE 4-cylinder and remains a better deal if the price of gasoline averages just $1.92.

The magazine also compared diesel and gasoline versions of some models. The Mercedes-Benz GL350 BlueTec diesel, at $66,925 and 19 miles per gallon, will save $8,000 over five years compared with the gasoline GL450 version, which sells for $69,035 and gets 15 miles per gallon. It is cheaper than gasoline at any price, the magazine said.

Some people who bought last year will see different economics because of tax breaks that were still in place then. And some states offer access to HOV lanes, special parking or other perks for hybrids.

But of course, money might not be the major motivator when it comes to hybrids, said Jonathan D. Linkov, the managing editor of the magazine’s auto section. There’s also “that green feeling,” he said.

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