How Long Until Your Hybrid Pays Off?
There are many things to consider when buying a hybrid car. One is the payback period, or how long it will take to recoup the higher purchase price by saving on fuel. There are other more intangible considerations,such as how hybrids help the environment and the benefits you may receive for driving a hybrid. For example, in California you can use the carpool lane even if you are driving alone. In congested areas, this provides significant savings since a hybrid burns no energy when "idling." Other benefits may include special parking spaces at work and some cities are beginning to offer preferred parking for hybrids. (Find out whether you should buy new, buy used or just make your machine a bit more green. See Reduce Your Carbon Tire Print.)

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Since the intangible benefits of buying a hybrid are difficult to quantify, calculating the payback usually focuses on the specific hybrid you buy, sales price differential to a standard car, projected gas costs, maintenance costs and tax rebates. Because these data vary depending on where you live and when the analysis is done, there is no single answer for how long it will take for your hybrid to pay off. Since conventional hybrids are not plugged in to recharge the batteries, the most important assumptions are gas mileage and the cost of gasoline, which has been subject to wide fluctuations over the past several years.

Toyota Camry
Edmunds.com performed an analysis for USA Today that evaluated the payback for the Camry. It was based on a price differential of $889 between the gasoline version and the hybrid version. For combined city/highway driving, government statistics rate the gasoline Camry at 25 MPG and the hybrid Camry at 34 MPG.

Assuming both cars are driven 15,000 miles per year and gasoline costs $3.67 per gallon, it takes 1.7 years to recover the price differential. This does not factor in possible differences in maintenance costs or government rebates.

While higher gas prices make hybrids even more attractive, this can be a two-edged sword. Higher gas prices will also create more demand for hybrids and could push their purchase prices higher, changing the dynamics of the calculation.

Other Vehicles
Using the same assumptions as the Camry, Edmunds.com also evaluated several other hybrids based on their individual purchase price and performance parameters. The results show a fairly wide spectrum of payback periods (in years): Toyota Prius (2.6), Nissan Altima (3.4), Mercury Mariner (4.4), GMC Yukon (4.9). There are some hybrids that don't fare nearly as well from a cost trade-off standpoint, but may be attractive for other reasons: Toyota Highlander (12.7) and Lexus LS600h (102.6).

Price Sensitivity
The following examples illustrate the sensitivity of percentage changes of gas prices and gas mileage. In the base case, it's assumed that the vehicle is driven 15,000 miles, gets 25 MPG, and gas costs $3.67 per gallon.

If the price of gas increases by 20% to $4.40 per gallon, that adds $440 to the annual fuel cost. However, if the gas mileage of the vehicle is reduced by 20% to 20 MPG, that adds $550 to the annual fuel cost. This illustrates that, all other factors being equal, the payback responds more dramatically to changes in gas mileage than it does to the price of gas.

Other Factors
With more and more hybrids hitting the road every year, the maintenance costs for a hybrid shouldn't be measurably different than a standard car. The battery packs are designed to last as long as the vehicle, and warranties typically range between eight and 10 years. For the average driver, replacement of the batteries is not likely.

Since electric motors are relatively benign and rarely need expensive maintenance, a hybrid could actually save money due to reduced wear on the gasoline engine. In addition, more private mechanics are now working on hybrids as they have become more prevalent on the roads. You can also check with your insurance company to see if any discounts are offered.

The Energy Policy Act of 2005 introduced several tax incentives for alternative energy vehicles that were extended by the American Recovery and Reinvestment Act of 2009. The tax credit for the lease or purchase of a hybrid car expired on December 31, 2010. The credit was based primarily on the weight of the hybrid and its fuel economy rating compared to a gasoline-powered vehicle of similar weight. For new plug-in vehicles bought after December 31, 2009, a tax credit of between $2,500 and $7,500 is available.

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The Bottom Line
The above comparative analyses do not apply to plug-in hybrids like the Chevrolet Volt or all-electric cars like the Tesla. If you are considering such a vehicle, you should obtain relevant data from the manufacturer to validate the expected savings.

Conventional hybrids have onboard computer systems that decide when to use the gasoline and electric motors based on maximizing fuel efficiency. Until the battery technology becomes vastly improved, it's likely that hybrids will coexist with all-electric cars for years to come.

Beyond the horizon, hydrogen fuel cell technology, which is probably 10 to 20 years away, is gaining interest. In the meantime, more and more car models offering optional power systems are becoming available every year. (Being environmentally conscious is great ... if you can afford. Check out Hybrids: Financial Friends Or Foes?)




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