Sunday, June 15, 2008

Hybrids, the Real Deal or Flavor of the Month?

Gas is about $4.00 a gallon where I live, almost twice what it was a year ago. So what? If you are considering a hybrid, it is a pretty big so what. When I was considering the costs and benefits of hybrids a year ago, I came to the reasoned conclusion that there was little economic benefit to be had. The clear reason was that cost savings from using less fuel didn't cover the acquisition cost. Most hybrids tend to several thousand dollars more than their non-hybrid siblings.

The US government, as well as many state governments, decided they should lavish hybrid owners and manufacturers with tax payer money (a.k.a. subsidies), as well as certain privileges, such as driving in HOV lanes without other passengers. They did this to encourage the technology, ostensibly to reduce emissions as well as dependence on foreign oil. Arguably, those may be noble goals, but the number of potential vehicles wouldn't make a dent in either of the issues. ULEV (Ultra-low Emission Vehicles) are able to reduce vehicle emissions without having to worry about recycling or producing expensive battery packs needed for hybrids. Additionally, there are several models of inexpensive gasoline-powered cars that get similar mileage for less money, not to mention diesel-powered vehicles.

Back to the question at hand, will a hybrid save its owner enough money to justify the premium price? The answer is found by using a simple formula. Take the fuel economy of a non-hybrid and multiply by the average number of miles per tank to get price per mile. Do the same thing with the hybrid. Subtract the two results. Take the difference and multiply by tanks per year. So, if one saves $500 a year, and its a 5 year loan, the owner saves $2500 over the life of the car. Is that amount greater than or less than the premium to by the hybrid? That answer will determine generally whether owning a hybrid makes sense from an economic point of view. $4.00 gasoline has really changed the outcome of that equation, making them more attractive. I tell you what I am waiting for though, hydraulic diesel hybrids, as they don't require batteries to store power. UPS is running a pilot now. Details can be found here.

Don't forget to use the MPG calculator at

1 comment:

jg3 said...

Some guys over at the Rocky Mountain Institute put together some comparison numbers on this topic over on a blog at a couple of weeks ago. There are tax credits and incentives to consider. Along with the fact that locally, solo drivers in hybrids can be licensed to use HOV lanes. The time alone that would save a driver who commutes with the rush would make a hybrid worth considering.

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