As gasoline prices quickly approach an average of $4 a gallon across the country, many people are looking once again at hybrid cars as a way to cut expenditures from their budget and save money. However, before you trade-in your gas-guzzling sports utility vehicle, it is important to consider all the costs that are involved in purchasing an eco-friendly vehicle.
Gasoline and Hybrids
When people think about buying a hybrid car running on electricity, they think about all the savings from not having to buy gasoline. And since gasoline is usually the most explicit expenditure for car owners, each increase in its price leads people to automatically conclude that electric hybrid vehicles would save them lots of money.
However, there are many additional costs of an electric hybrid that many people fail to consider when thinking about buying such a car. The most obvious of such costs is simply its sticker price. The typical electric hybrid can cost as much as $5,000 more than the same car using just an internal combustion engine. This is an up-front cost that requires considerable savings over the life of the vehicle in order to justify that expense.
Consider the gasoline usage of a typical electric hybrid: 60 miles per gallon. This is roughly twice the average of a car using an internal combustion engine. With gasoline at $4 a gallon and assuming 10,000 miles of driving a year, you would save approximately $3,000 over five years. Of course, these savings would increase as gas prices move higher or if you put more miles on your car, but there are risks inherent in this as well. By purchasing a hybrid car, you are assuming the risk related to gasoline prices. If prices fall back to normal levels, you may never be able to recoup the costs of the hybrid vehicle.
Other Costs of a Hybrid
It is important to note that gasoline is not the only cost of a vehicle. Indeed, there are other increased costs of a hybrid, which many people fail to consider when buying a new car. For instance, since hybrid cars tend to cost more than their gasoline counterparts, auto insurance will cost more with a hybrid. Early evidence also indicates that hybrid cars depreciate faster than other cars. This will especially hurt if you are looking to trade-in your car at a later date to buy a newer model.
In the end, the savings of a hybrid electric car will hinge on the price of gasoline. If you believe that gasoline prices are only going higher, then a hybrid may indeed be the way to go. Otherwise, you may just want to stick with your current car and stomach those prices at the pump.
So, what do you think? Are you still going save for a hybrid?
Does anyone believe gas prices will recede? The oil companies have found our new cost threshold and will continue to raise prices as we approach and pass peak oil. Supply and demand – basic economics.
@ SPF. I totally agree. They will just keep pushing it to see how much people can handle. I am secretly hoping for a price jack so high where people will be forced to use other methods of transportation. It’s my secret desire to have the masses go green. At least we are taking advantage of other methods and saving ourselves money.
When discussing the purchase price oh hybrids the possibility of tax incentives should also be examined as a possible offset. Also in California there were toll road breaks in place for hybrids which really contributed to savings considering how car oriented the state is (I’m not sure if the toll road breaks are still in place as I’m in TX now).
@ Justin. I didn’t know you could get tax breaks from driving a hybrid in the states. Good to know. I don’t know much about the toll thing since we don’t have those where I live.
There are other incentives like Justin mentions, toll breaks, parking fee breaks (I know some cities in CA has this), car pool breaks (again CA, not sure about other states) plus tax credits.
If you are buying Prius, that car has a good resale value as well – you need to take that into consideration.
And finally, it is good for the environment!
@ Moneycone. Great points. I think they are a great idea myself. Too bad we don’t have these parking fee breaks where I live.
We still have two drivable cars at the moment but once we need to get a new one, an eco-friendly car is definitely the way we are going to go.
Although I have thought about hybrids, the replacement cost of batteries stops me. Recently, I have thought about natural gas powered vehicles. I believe the Honda Civic is the only one.
@ Krantcents. A natural gas powered car is an option but not for me. I prefer something that is greener and more sustainable.
I think most people buy hybrid not just because of gas price alone. They want to support alternative energy and be more sustainable right?
@RB40. I totally agree. Being sustainable is the most important; at least for me anyways.
Justin and Moneycone are right – there are several financial incentives for buying an eco-friendly car. Me, I would probably be willing to buy a hybrid even if there were no tax breaks just because it’s better for the environment. Are gas prices going to drop? Not anytime soon. We’re looking at a long summer of outrageous gas prices, and any sort of reprieve probably won’t come around until October. Even then, it probably won’t be much. This article presents some great, objective, well-researched information about the cost of electric cars. Right now, they cost more on the front end. We need to consider the long term. Supply and demand, right? If only we could convince everyone that the extra $5,000 on a hybrid was worth it, we just might be able to get our country over it’s addiction to oil.
@ Invest Smart Girl. I am with you. I feel the same way. A hybrid car is worth it and it would feel great to be helping out the environment. Considering what some people spend their money on, $5000 to me isn’t that much of a sacrifice. I think that as they get more popular, the price will go down since there will be more demand for them. Thanks for your great insight.
Buying a hybrid is one purchase that I’m going to allow to be driven mostly by my ethics, and not my wallet. I fully plan on buying a hybrid within the next five years – not because it makes the most financial sense (which, with the newer, cheaper, more efficient hybrids coming out these days, it does) but because it’s the right thing to do. Period.