Driving green into greenbacks - East Valley Tribune: Living Green

Driving green into greenbacks

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Posted: Monday, June 6, 2011 8:15 am

American car buyers increasingly view the grass as being greener on the hybrid side of the fence. According to R.L. Polk & Company, registrations for new hybrid vehicles climbed by 38 percent in 2007 over the previous year. Led by the Toyota Prius, with 179,178 new registrations, total hybrid vehicle registrations soared to 350,289 last year.

A significant percentage of buyers chose hybrids for their “green” status rather than their potential for saving fuel costs. But according to a new study by Los Angeles-based Intellichoice.com, choosing some hybrid vehicles can be as good for buyers’ long-term financial outlook as they appear to be for the world’s environment.

Up until the Intellichoice report, released this past Earth Day, there seemed to be two trains of thought about hybrids.

One, which ignores the higher prices hybrid vehicles command, holds that purchasing a gas-electric vehicle is an instant ticket to big savings. Another is that buyers are better off with one of the new generation of conventionally powered subcompact vehicles, which also rate as fuel sippers but come without a hybrid’s steeper sticker price.

It turns out even with hybrids’ higher up-front charge, car buyers can recover the added expense in saved operating costs over the course of five years. In one case Intellichoice.com cites, the total savings are measured only in hundreds of dollars. But in two others, the savings reaped are at least $1,800 – even when the hybrid premium is factored in.

“The long-standing myth about hybrids is that they cost more to own and struggle to justify their higher sticker prices,” says James Bell, publisher and editor of Los Angeles-based Intellichoice, and a long-time champion of hybrid technology. “This is not true. In fact, half of the 24 hybrid models on the market for 2008 perform better than their non-hybrid counterparts in terms of overall cost of ownership.”

In its Hybrid Survey, Intellichoice.com examined 2008 model year hybrids, as well as the non-hybrid counterparts of the same models. It focused not only on gasoline costs but other cost components as well, in establishing a projected Total Cost of Ownership over five years or 70,000 miles of ownership.

“You have to look at all of the driving factors, like maintenance, repairs and resale value,” Bell says. “You have to look at the whole picture.”

The whole picture comprises “seven essential cost factors,” Intellichoice.com reports. They are depreciation, financing, fuel, insurance, maintenance, repairs and state fees. Intellichoice.com has tracked and analyzed these factors for every vehicle on the road over the past two decades in calculating its Total Cost of Ownership figures.

A look at the findings in the Hybrid Survey quickly put to rest any thought hybrids as a rule not only cost more to purchase, but more to own. As Bell said, half of the hybrids studied have lower five-year costs of ownership than their non-hybrid brethren. The only hybrid vehicle surveyed that actually cost more in the long run than its non-hybrid equivalent was the Lexus GS 450h, which is a high-end hybrid sports sedan that’s built more for added acceleration than gas savings.

With many of the models studied, the hybrid version was projected to cost hundreds or thousands of dollars less than its non-hybrid relation over half a decade of ownership, but with most models those savings only partially offset the premium paid at purchase. For instance, the Honda Civic Hybrid cost $3,090 more at purchase and $2,634 less to operate over five years when compared to a standard Civic.

However, in a few cases, the savings reaped in the “seven essential cost factors” outstripped the premium on the MSRP. For instance, the 2008 Toyota Prius costs $2,855 more than a Toyota Camry, but is projected to save $3,430 more over five years of ownership, for a total gain of $575. More impressive, the front-drive versions of the 2008 Ford Escape and Mercury Mariner Hybrids are projected to save $5,549 and $5,031, respectively, which far outstrips their MSRP premiums of $2,500 and $3,140.

That’s a gain of $3,049 for the Escape Hybrid and $1,891 for the Mariner Hybrid.

With gas prices escalating, such long-term savings will continue to grow, and it’s conceivable that additional hybrid vehicles will show total cost of ownership savings over five years that surpass the premiums paid at purchase.

Also worth noting is that the federal income tax credits the government grants hybrid-car buyers have run out on Toyota hybrid models (they diminish in stages, then disappear after an automaker has sold set numbers of hybrid vehicles). That might be seen as making Toyota hybrids less attractive to buyers. But that rationale is turned on its head by sales figures from 2007 showing the Prius sold almost as many units as all other hybrids combined.

One thing is clear though. As Bell says, “The bottom line is that hybrids are also a smart economic choice, and not just about ’going green’ anymore.”

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