Hybrids Don't Make Sense Financially
Posted by Nick Niesen on October 27th, 2010
Hybrid vehicles are becoming more and more popular as the cost of gas continues to rise. The problem is, they really are not the best decision financially. Hybrids do provide a benefit to the environment in that they do not use as much gas as a conventional vehicle, but they do not save you money in most cases.
Most people that buy hybrids do so for the gas savings. They assume that because they are using less gas that they are saving money. On the surface they are correct. The may be able to stretch a tank of gas out twice as long so they are only going to the gas station half as much but they are still not saving.
Let me give you a couple of examples. I am going to use Toyotas to prove my point because they have probably the best made hybrids on the road right now and they also have excellent conventional vehicles as well. Toyota?s best known hybrid is the Prius. A base model Prius sells for $21,725. I chose to use base model prices because I have no way of knowing what each person out there would add for options and how much it would change the prices. Someone buying a Prius is looking to save money on gas so for the comparison I will use the Toyota Corolla. A base model Corolla ranges in price from roughly $14,000-$18,000 depending on the model you chose. So, that is a savings of roughly $3,000 to $7,000.
I based the on comparison on 20,000 miles a year put on the vehicle at $3.00 for an average gallon of gas. The reason for these numbers is because anyone that buys a Hybrid vehicle probably has a decent commute and does a lot of driving each year. The Prius averages 60 miles per gallon on the highway and the Corolla averages 38 miles per gallon.
Prius: 20,000 miles/ 60 mpg = 333 gallons of gas a year X $3/gallon = $999 in fuel expenses for the year.
Corolla: 20,000/38 mpg = 526 gallons of gas X $3 = $1578 in fuel expenses for the year.
This makes a difference of $579 in fuel savings per year for the Prius over the Corolla. So, in order to make up the added expense of buying the Prius over the Corolla you need to own the Prius for at least 5.2 years just for the $3000 end of the scale. If you buy the $14,000 Corolla and save $7,000 on the initial purchase you need to keep the Prius for 12 years. This does not include other factors such as what are probably more expensive maintenance and repair costs for the Prius because of the newer technology.
Taking a deeper look you can compare the Camry. If you compare the 6 cylinder model to the hybrid it makes sense to buy the hybrid because some of the V6 models are more expensive to purchase than the hybrid in addition to the gas savings. But, anyone looking to buy a Hybrid is probably going to buy a 4 cylinder Camry for the additional gas savings so I will compare those two models. A hybrid Camry costs roughly $25,000 and gets 40 mpg on the highway. The 4 cylinder model costs roughly $18,000 and gets 34 mpg on the highway. So, the savings is roughly $7,000 to buy the 4 cylinder model rather than the hybrid.
Hybrid: 20,000 miles/40 mpg = 500 gallons of gas X $3/gallon = $1,500 in fuel expenses for the year.
4 cyl.: 20,000/ 34 mpg = 588 gallons X $3/gallon = $1,764 in fuel expenses for the year.
In order to make up the $7,000 extra you spent on your hybrid model you will need to keep your car for 27 years.
If you currently own a huge pick up truck then a hybrid probably makes sense. If you are are comparing similar cars, like the ones I discussed in this article, I think the numbers show if you are looking at it from a financial standpoint you need to go with the conventional vehicle. If you are looking at it from an environmental standpoint then obviously the hybrid vehicle is the only decision.
If you look at things on a bigger scale then the hybrids are the best choice. If hybrids were garaged in the majority of the households across America then the gas prices would eventually get lower because the oil producing countries would suffer financially. It is the old theory of supply and demand at its best. Right now there is a huge demand for oil and the oil producing countries can basically name their price. If the demand was cut in half then they do not have as much power over their price. Technically they could reduce their production and still command a nice price for the oil they do produce but either way they are making less money.
About the AuthorNick Niesen
Joined: April 29th, 2015
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