Study Find Hybrids Quickly Pay For Themselves
by Justin Thomas, Virginia on 08.28.06
A new study by Edmunds.Com finds that some hybrid cars will pay for themselves in 2 years, because high gas prices and tax credits from the U.S. government on the more fuel efficient vehicles. The cost is even more quickly recovered when hybrids are compared to less efficient cars. Also, the study assumes that gas prices will remain at $3 per gallon in the coming years.
Edmunds says the average hybrid car costs $1,200 and $7,000 more than traditional versions of the same vehicles.
The shift is significant because analysts have said that higher sticker prices were constraining hybrid sales. Hybrids currently account for 1 percent of new car sales in the United States. The consumer-focused Web site said that assuming vehicles were driven 15,000 miles per year and gas was priced at $3 per gallon, owners of the Toyota Prius and Ford Motor's Escape Hybrid would break even within three years.
Buyers of the Saturn Vue Green Line from General Motors, the Toyota Camry and the Civic Hybrid from Honda Motor would break even within six years, Edmunds.com said. But federal tax credits for hybrid buyers are being phased out on the most popular models. Under a provision of the tax code, buyers of a Toyota hybrid after Sept. 30 will only qualify for half of the tax credit for which they would have previously qualified.
Tax incentives will also be cut on other hybrids after auto makers sell 60,000 of the vehicles--a sales threshold Toyota has reached. The tax credit on Toyota and Lexus hybrids is scheduled to drop to 25 percent in April 2007 and then be eliminated in October 2007.
:: Via CNet
It's interesting that they say that they 'pay for themselves.' When I was looking for a new car my two top contenders were the Toyota Prius and Subaru Outback ... the prices were almost identical. I'm not quite sure what car they're comparing the Prius to that it costs "$1,200-$7,000" more ... it's certainly not like a Corolla though not quite a Camry.
"...hybrid cars will pay for themselves in 2 years, because high gas prices and tax credits from the U.S. government ..."
At what point do tax credits equal "paying for themselves"? By definition, tax-payers are subsidising the price of your hybrid vehicle.
That's rather the opposite of "paying for themselves".
I haven't read the study so I don't know if they address this specifically, however car dealerships use the "tax credit" as a way to hold full sticker price on hybrids or charge even more. Check out Edmund's own "TMV" pricing reports. A loaded Camry sells for about $1,500 UNDER MSRP (which is about $2,500 less than the Hybrid model). The same TMV report shows the Camry Hybrid sells for $2,000 OVER sticker. That's a $3,500 price differential. When you add the higher overall price of about $2,500, the Camry Hybrid will cost you about $5,500 more than a comparably equipped non-Hybrid. The tax credit right now is only $2,600. So, at least with the Camry right now, you need to save about 1,000 gallons of gas before it starts paying for itself. (I actually own this car and knew about the premium going in. Wanted one for other reasons than price.)
We must begin to understand that automobiles are expenses not investments. An auto can not pay for itself even if it ran on air. If the car ran on air and then was used in a business (such as a taxi) then the vehicle could possibly pay for itself in the form or income.
Automobiles are overpriced, overladen, inefficient, necessary expenditures. Don't be fooled by key phrases and terms. Buy small, light and efficient vehicles that use multiple fuels (they are out there).
"Hybrids pay for themselves" consider the source Edmunds,com was a great source for auto info until they began to rely (heavily) on advertising from the auto corps and dealers.
Wmax, I agree with you that cars are expenses and that nobody buys them to save money (or even to spend as little as possible - otherwise the Echo would have been a big hit in the US). Nobody expects their mag wheels and engine upgrades to be free, yet the money argument constantly comes up with hybrids.
But by "pay for itself" here they just meant "pays for the difference in price between a hybrid and non-hybrid", nothing more. It shouldn't really matter since you are getting what you pay for (a cleaner, more efficient, quieter and more technologically advanced car), but to many people it does.
"I haven't read the study so I don't know if they address this specifically, however car dealerships use the "tax credit" as a way to hold full sticker price on hybrids or charge even more."
That's certainly something to consider. But is it possible that they are charging more mostly because of the supply problems and not only because of the tax credit?
I think that once supply increases and waiting lists go away, prices will go down.
An upside to that that isn't often mentioned is that many people have sold their 2-3 years old hybrids for almost as much as they originally paid. That's a welcome change from the usual speedy depreciation.
Supply is certainly an issue. I our area, people want them for the HOV driving benefits and those priviledges are going to sunset for new cars "sometime in the future". That may have artificially spurred demand locally. Bottom line is Hybrid technology is desireable, but not as affordable right now. What's new? That's the way it is with all new technologies until they diffuse and production ramps to scale.
Complete aside, but I must say I love being able to buy the cheapo gas (87 octane) when I tank up. No more premium for me!
It is interesting to see how the Prius is fairly cost efficient but the Toyota Highlander Hybrid will take years to pay off its premium. We are discussing this fact on our hybrid car message board.
Tax credits are one of the best ways for the goverment, in rare moments of foresight, to direct consumer behavior.
Of course they are subsidies paid for by taxpayers, but so is the military, which is the only reason we pay less for gas than the rest of the world. If the U.S. paid world market prices for gasoline, these hybrids would still make up the difference in cost vs. a non-hybrid vehicle in quick order.
At what point do tax credits equal "paying for themselves"? By definition, tax-payers are subsidising the price of your hybrid vehicle.
That's rather the opposite of "paying for themselves".
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There is not a one to one mapping here, but if you look at the subsidies for oil companies and the real cost of oil, the subsidies for a hybrid are well worth it. Inversely, the tax subsidies for an SUV are costing a fortune. I agree that subsidies are a very bad idea iether way, lets remove them from hybrid vehicles, right after we do so for SUVs, airlines, and oil companies.
http://209.200.74.155/doc/Real%20Price%20of%20Gasoline.pdf
Thanks for the reminder Wmax that cars, no matter how well designed, are still a burden.