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Is Going Green a Sure Money-Saver with Hybrids?

Doug
  • On June 13, 2011

As gas prices continue to hover around the $4-per-gallon mark, more people are thinking about buying a hybrid car to become more fuel efficient and save money.
The environmental benefits of being less reliant on gas and driving a car that uses clean energy are obvious. And, unlike the first wave of hybrids that were more like glorified go-karts, today’s models come with more powerful engines and durable batteries. But the big question is whether a hybrid will save you money and produce a return on investment.
The short answer is “yes, no, and maybe.”
A recent story in the U.K. newspaper The Telegraph falls in the “yes’ category and suggests driving a hybrid will save you about 500 British pounds per year (about $750 in American dollars). The story attributes the estimated savings to declining hybrid car prices – which are still more expensive than conventional cars but now only by a few thousand dollars – and soaring gas prices. Of course, you have to take into account that it’s based on cost-savings in the U.K., where gas prices are 85% higher than in the U.S. at more than $7 per gallon.
For U.S. consumers, a better view is provided by the Hybrid Car Calculator available on Money-Zine.com. It bases estimates on the original purchase price of a hybrid to a comparable car with a standard gas engine and breaks down the fuel savings per year compared to the higher start-up costs.

The Calculator compares a new Hybrid with a purchase price of $30,635 to a comparable car with a standard gas engine selling for $25,195. After factoring in a $3,000 government rebate for buying a hybrid, it assumes a hybrid buyer will pay about $2,440 more for their vehicle and takes it from there.

Assuming the owner drives 12,000 miles per year and pays $3.99 per gallon of gas over a four-year period, it estimates they’ll save only $1,380 during those four years (based on annual fuel savings of $345 per year) before they trade it in. And with lower trade-in values factored in, the final tally for the hybrid owner is a loss of $1,513.

But those numbers could be misleading. If a hybrid owner has a long commute and drives 24,000 miles per year (not unusual out here in California), those cost savings per year would double. And if they keep their hybrid for longer than four years, they would end up saving money after the four-year mark.

And those cost-savings are subject to change every year. As car manufacturers continue to create more hybrid models and sell more cars each year, increased demand will drive down costs. And based on the calculations above, prices won’t have to come down much further to reach a point where hybrids are money-savers.

There are also the intangibles of driving a car that’s good for the environment and sending a message to oil companies that the long reign of the internal combustion engine is coming to an end. But, if you’re interested only in the bottom line, you’re better off waiting a few years for hybrid prices to come down to ensure you’ll save money and the environment.

Comments

  1. Tia

    It's interesting to hear about savings when it comes to hybrid cars, I always hear about how much you save on gas but people hardly point the price tag and fees. It'll probably be 5 years before people start seeing a great deal of saving from hybrids.

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