Tuesday, July 17, 2012

Do you save money if you buy a hybrid car?

Some people think that they are saving the planet if they drive hybrids.  They are clearly silly.  If I thought driving a car was harming the planet, and I wanted to do something about it, I wouldn't drive a car at all.  Although there is a case to be made that the energy required for a person, food, costs more to make than the energy necessary to move a car.

In any case some other people think that they will save money on gas if they buy a hybrid car instead of a normal car.  Lets look at the numbers: (These figures are the MSRP and estimated mpg for Toyota cars from the Toyota website. And the gas price is from gasbuddy.com.) (I know that these numbers are not the numbers you would pay for a new car, and I know that the mpg numbers are estimate that you will not see, however we will be comparing numbers from the same source.)

For simplification of these numbers for comparable cars we will see how long it takes to save money on gas before you will make up the increased cost necessary to buy a new hybrid rather than a normal car.

We will ignore the usual maintenance and repair costs to simplify the numbers.  Note that this will bias the results in favor of the hybrids.  Because, for example, a new battery in a normal car costs around $60, a new hybrid battery will cost several thousands, and the two motors in a hybrid means more parts and more things to go wrong.  We will also bias the results in favor of the hybrids by using only the city mpg which will be the best hybrid number and the worse normal car number.  We will also be biasing the results in favor of the hybrids because a normal driver will approach the estimated mpg of a normal car, but that same normal driver will not be driving in the fashion necessary to approach the hybrid's estimated mpg.

Lets compare the numbers for comparable vehicles, with a gas price of $3.27 (the lowest price in Madison, Wisconsin on 7/17/2012):

3rd generation Prius MSRP: $21,000
Corolla MSRP: $16,130

cost difference: $4835 So, if we are going to save money with better mpg we will need to make up $4835 in gas savings.

Gas cost per mile for 3rd generation Prius: $0.06
Gas cost per mile for Corolla: $0.12

difference in gas cost per mile: $0.06 So, it costs a six cents more, in gas, to drive a normal car rather than a comparable hybrid.

Miles to cover the increased purchase price: 85,448 miles This means that until your hybrid has been driven 85,448 you will spend more money total than you would have had you bought a normal car.  This is a reasonable number as cars these days can go for 200,000.

Conclusion: If you buy a 3rd generation Prius, then you will be paying more for your car until you hit 85,448 miles, at which point you will begin to save money.

Prius C MSRP: $18,950
Yaris MSRP: $14,115

cost difference: $4835

gas cost per mile for Prius C: $0.06
gas cost per mile for Yaris: $0.10

difference in gas per mile: $0.04

Miles to cover the increased purchase price: 102,216 miles

Camary Hybrid MSRP: $25,990
Camary: $22,055

cost difference: $3935

gas cost per mile for Camary Hybrid: $0.08
gas cost per mile for Camary:$0.13

difference in gas per mile: $0.05

Miles to cover the increased purchased price: 71,868 miles

Highlander Hybrid MSRP: $38,715
Highlander: $28,240

cost difference: $10,475

gas cost per mile for Highlander Hybrid:$0.12
gas cost per mile for Highlander: $0.16

miles to cover the increased purchased price: 224,236 miles

Final conclusion: You will spend more money on a hybrid until you reach about half the car's usable life (except for SUVs) at which point you will save on gas.

Used cars are always another option.  For $10,000, in my area, there are dozens of Camarys and 1 Prius.

These numbers are a lot better than the first time I ran them a few years ago when you would've needed to drive your Prius about 485,000 miles before breaking even.

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