Does Buying a Hybrid Car Make Money Sense?

April 24, 2009

Toyota PriusBy John Newcomer:

Are Hybrids Worth the Premium Price?

The recent pain of $4 a gallon gas is still fresh, so fuel economy is an important factor in any car purchase. Everyone knows about hybrid cars and what great gas mileage they get.  So the question is — are they worth the premium price you must pay to own one?

A few years ago the Toyota Prius was the car to own. But a funny thing happened in the last three years.  The old internal combustion engine car improved.  Yes, the hybrid still gets better gas mileage, but not that much better.

The 2009 Prius gets an estimated 45 miles per gallon (combined city and highway) as does the Honda Civic Hybrid.  The Honda Insight Hybrid gets 43 MPG.  But comparable non hybrid cars such as the Toyota Corolla and the Ford Focus get a combined city/highway mileage of 35 MPG.

Gas Prices are a Key Factor

Leaving environmental concerns out of the equation, the question is how high must gas prices soar to justify paying the higher price a hybrid car commands?

Generally a hybrid car costs about $8,000 more than its comparable counterpart. A Prius lists for $22,700 and the Honda Hybrid Civic lists for $23,650.  A standard Toyota Corolla lists for $15,350 and the Ford Focus lists for $15,500.

Before doing the math three assumptions need to be made:

  • First is that you will keep the car for 5 years.
  • The second is that you will drive an average of 1,500 miles a month.
  • The last is that the hybrids will continue to hold their higher resale value.

This assumption may not hold true as electric and hydrogen fuel cars come to market. But for this exercise we will assume that the hybrid holds its higher resale value and that instead of having to overcome the $8,000 price difference you only will need to save $5,000 in gasoline prices to make the Hybrid a sound economical purchase.

So what is the answer?  Brace yourself. To off-set the premium price of a hybrid automobile the price of gasoline will have to increase to $8.75 a gallon just to break even!

Cost Benefit Analysis

Click here for the formula so you can compare your present car or any other vehicles to a hybrid.  Remember when you are working the equation, you have to use a common denominator (yes high school math was important).

Most people cannot justify the added cost of a hybrid.  Going green we will need government incentives like tax breaks or a more reasonable price tag to make the decision more reasonable for the average person.