Fuel Economy: Break Even Time for Hybrids

[Tideland Prius]

"I'm so sick of the price of gas I'm going to buy a hybrid!"

I can't tell you how often I've heard this. And I want to tell these people that they are on the wrong track. If they merely want to save money, dumping the old gas guzzler and buying a hybrid will take years to save them money. That's because it costs more for the privledge of saving gas. This is the so-called "hybrid premium."

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I don't get it ---> " I can't tell you how often I've heard this. And I want to tell these people that they are on the wrong track" vs. "I'm not saying don't buy a hybrid"

huh?

[Rest]

I always tell people not to get rid of their current vehicle and buy a new hybrid, based soley on the current high fuel costs. You just won't save enough money in fuel savings to make up the difference for the cost of a new hybrid.

But if one is already market to buy a new vehicle, then a hybrid is the way to go.

[Turbogizzmo]

I bought my car because of the engineering piece, the toyota reliability, gas milage and travel savings.

[morpheusx]

Originally Posted by Rest

I always tell people not to get rid of their current vehicle and buy a new hybrid, based soley on the current high fuel costs. You just won't save enough money in fuel savings to make up the difference for the cost of a new hybrid.

But if one is already market to buy a new vehicle, then a hybrid is the way to go.

My previous car a 1997 Eagle Talon averaged 32 MPG. My lifetime average in my Prius is 53.3 MPG. In this first year I drove the Prius 30,000 miles.
Assuming I put the same miles on my Talon I would have used 938 gallons, in the Prius 563 gallons.
If I assume that I paid an average of $3 per gallon over the 12 months I saved $1125 (technically making my car payment $191)

But when it broke down last year (Eagle Talon) and would cost more then the vehicle was worth to fix I started driving our old garaged 1991 Ford Explorer 15 MPG (excellent condition just a gas hog) I mean it seemed like a good idea to just run it rather then get a new car. I drove it for 2 months before I had enough and traded it in for the Prius. If I compare my savings to driving that Beast I would have used 2000 gallons, so I could also say I saved $4312 (technically canceling out my payment and paying me $75)
Part of my main motivating factor wasn't the then $2.50 per gallon gas, but the obvious trend that fuel prices would continue to climb which they have. I couldn't justify buying a new vehicle that was too small to comfortably hold my family and buying a vehicle that didn't get my old daily driving car's MPG seemed like a major step back to me so the Prius was the obvious choice for me. Haven't looked back since. Excellent decision.

[MikeSF]

The honor for the shortest break-even period belonged to the Toyota Camry Hybrid at 1.6 years (mainly because of a low premium and respectable gas mileage).

I might be wrong here, but doesn't the Camry hybrid have a HUGE premium? Approx $19k for non-hybrid, vs Approx $27k for Hybrid version.


Either way you can make the same arguments with something like solar panels on your home. "It'll take 15 years to pay those off at current prices..." well for the next 15 years you won't pay for electricity, and after that, you'll still not be paying.

[sdtundra]

Originally Posted by MikeSF

I might be wrong here, but doesn't the Camry hybrid have a HUGE premium? Approx $19k for non-hybrid, vs Approx $27k for Hybrid version.


Either way you can make the same arguments with something like solar panels on your home. "It'll take 15 years to pay those off at current prices..." well for the next 15 years you won't pay for electricity, and after that, you'll still not be paying.

in regards to the Camry Hybrid Premium, here in San Diego they advertise the Camry Hybrid at $4,000 off MSRP....

[VaPrius]

If people are looking for economy then there are cheaper alternatives. But I think it's wrong to look at the hybrid premium just as a prepaid expense. No one throws their cars away after 3.5 years. They have value. Don't leather seats increase a cars resale value despite being used for 3.5 years? The way I look at it more like an investment. Using the article's numbers, spending an extra $3,489 returns $989 each year. That is a 28% rate of return -- tax free, each year, likely to increate, all but guaranteed. The only way I wouldn't get this return is if gas prices dropped. A stocks investment would need to generate a 37% rate of return to equal this. If this were an annuity, the present value of a $989 payment for ten years, at 8% (the average rate of return for stocks) would be $6,636. Five years would be $3,948. Add to this the fact that as gas prices increase, so does my rate of return. Then I also have the comfort factor in that I am well insulated against price increases, almost like insurance.

[donee]

Hi All,

Edmunds Prius Total Cost of Ownership for the Prius looks to be twice what the National Laboratories measured on two Generation II Prius.

In my zip code it came out to $.49/mile, versus the PNWL cars at $0.22/mile operated in Phoenix.

[Tideland Prius]

Originally Posted by MikeSF

I might be wrong here, but doesn't the Camry hybrid have a HUGE premium? Approx $19k for non-hybrid, vs Approx $27k for Hybrid version.


Either way you can make the same arguments with something like solar panels on your home. "It'll take 15 years to pay those off at current prices..." well for the next 15 years you won't pay for electricity, and after that, you'll still not be paying.

You're comparing a standard Camry to the Hybrid?!?! come on..at least some have tried to use the LE . You need to compare the Hybrid to the XLE model (around $25k base if I'm not mistaken).

[a priori]

Originally Posted by VaPrius

If people are looking for economy then there are cheaper alternatives. But I think it's wrong to look at the hybrid premium just as a prepaid expense. No one throws their cars away after 3.5 years. They have value. Don't leather seats increase a cars resale value despite being used for 3.5 years? The way I look at it more like an investment. Using the article's numbers, spending an extra $3,489 returns $989 each year. That is a 28% rate of return -- tax free, each year, likely to increate, all but guaranteed. The only way I wouldn't get this return is if gas prices dropped. A stocks investment would need to generate a 37% rate of return to equal this. If this were an annuity, the present value of a $989 payment for ten years, at 8% (the average rate of return for stocks) would be $6,636. Five years would be $3,948. Add to this the fact that as gas prices increase, so does my rate of return. Then I also have the comfort factor in that I am well insulated against price increases, almost like insurance.

I like your numbers, but I do not like the idea of considering a depreciating-value asset as an investment. In purely economic terms, I think you need to look at the total cost of ownership. There were pieces of this missing in the article, and the article's author acknowledged some of that in responding to messages on the blog.

On the investment end -- imaging how those folks feel who plopped down $50K + on Cadillac Escalades. If they had investment in mind, they may have figured those SUVs get more expensive each year so the owners could always trade it in soon with high resale value. Hmmm.