When Nissan (OTC: NSANY) announced that it would launch its "Leaf" electric car in the U.S. in 2010, the media was abuzz with renewed interest in a zero-emissions car. Nissan's new car, along with the proposed introduction of other all-electric cars such as the Mitsubishi (OTC:MMTOF) MiEV and the Volvo C30 in the near future, it looks like electric cars may be becoming a more practical reality. However, although experts predict the tipping point toward zero-emissions vehicles may be approaching, there are some practical considerations that are keeping these cars on the margins, including low top speeds, slow acceleration, limited range and the time it takes to recharge them. (For more on the hybrid debate, see Reduce Your Carbon Tire Print.)
In Pictures: Top 10 Green Industries
For those who want a greener commute, the most practical existing option is still hybrid vehicles, which combine gas with electric battery power. There are a number of these vehicles on the market and most of them use significantly less fuel than a comparable non-hybrid car. Unfortunately, at their elevated cost, that doesn't make them cheaper to drive in most cases. Oil and gas industry analysts aren't predicting a rise in oil prices just yet, but if you're set on buying a hybrid, whether for the environment, your pocketbook or as a hip accessory, read on to find out which cars will provide the most value over a comparable non-hybrid model and how long it will take before you start getting more value out of your hybrid at current national average gas prices.
Nissan Altima Hybrid – Years to Break Even on Fuel Savings: 21
Car testers approve of the Nissan Altima nearly unanimously; Consumer Reports named it one of its top picks for 2010 and JD Power & Associates named it the highest-ranked mid-sized car in initial quality. Testers noted that the Altima hybrid was similar – but they didn't fail to note that most consumers would have a hard time getting one (they're only available in eight states) and the fuel savings were less-than-spectacular considering its premium price.
With an average yearly fuel cost of about $1,587 at current gas prices, the hybrid version only saves an Altima driver $326 per year. With a more than $6,000 discrepancy between the Altima Hybrid sticker price and the price for a comparable four-cylinder gas-powered Altima, it will take an owner 21 years to recoup the difference on gas prices alone.
Toyota Prius – Years to Break Even on Fuel Savings: 20
There's little doubt that this darling of the hybrid industry is a great car. Consumer Reports chose the Toyota (NYSE:TM) as one of the best picks for environmentally friendly vehicles and one of the best value vehicles for 2010. A lot of this value stems from its outstanding reliability, however the price of the Prius has been a sticking point for true value-oriented buyers, who can get more value out of other small, non-hybrid vehicles. For our purposes, we compared the Prius in price and fuel efficiency to the Toyota Yaris. Although the Prius is certainly a more luxurious car than the Yaris and tends to get higher scores for performance, if you want to drive the most cost-effective Toyota, the Prius just isn't it.
Although the Prius does use more than $500 less gas than a Yaris at current prices, it also costs between $22,000 and $28,000, far more than the Yaris' $12,605 base-model price – and far more than most other similar sized, fuel-efficient sedans and hatchbacks.
Honda Civic Hybrid - Years to Break Even on Fuel Savings: 17
The Honda (NYSE:HMC) Civic Hybrid can't boast the outstanding 51 mile per gallon fuel economy the Toyota Prius gets in the city, but it costs nearly as much, retailing for $23,800. That's a long way from its non-hybrid counterpart, which starts at $16,000. US News & World Report may have ranked Honda's hybrid as No.4 on its list of most affordable cars for 2010, but that still put this fuel-efficient version two spots behind its fuel-burning sibling, the Honda Civic, which ranked higher as a result of its much lower price. The hybrid version will save the average driver about $460 per year, which means it'll take 17 years to recoup the nearly $8,000 premium for the hybrid model.
Honda Insight – Years to Break Even on Fuel Savings: 16.5
The Honda Insight was groundbreaking in that it was the first hybrid to hit the North American market in 1999, beating the Prius by several months. But although it's probably the least expensive hybrid out there – it retails for $21,300 – most reviews of the car noted that comfort and refinement were sacrificed. Consumer Reports called it one of the worst Hondas it had rated in a long time, and notoriously outspoken U.K. auto journalist Jeremy Clarkson called it "biblically awful".
The Insight's engine produces a paltry 98 horsepower but uses slightly more fuel than the Prius, which delivers considerably more pep with its 134-horsepower engine. With a $5,600 premium over the Honda Fit, it would take an Insight driver 16.5 years to break even on the gas savings alone. Plus, most testers much preferred the Fit's driveability, style and versatility.
Toyota Camry Hybrid – Years to Breakeven: 15
The non-hybrid Camry has been one of the best-selling and highest-rated cars in its class for years and by most accounts, the hybrid is pretty good too. U.S. News & World Reports described it as more comfortable and refined than the Prius – it's also roomier and has considerably more power (187 horsepower to the Prius' 134 horses). That said, at $26,400 the hybrid Camry costs nearly $6,000 more than a comparable non-hybrid, and only provides about $300 per year savings on gas (at current prices). As such, it would take you 15 years to break even on this car over the cost of its non-hybrid counterpart. However, if you're looking to buy a hybrid for its cachet, rather than for cost-effectiveness, the Camry Hybrid looks to be a sensible choice.
Mercury Milan Hybrid – Years to Breakeven: 13
The Milan Hybrid is new for 2010 and reviewers are loving its combination of luxury, fuel efficiency and performance, which apparently is nearly indistinguishable from a non-hybrid. It's a practical mid-sized car that provides entry-level luxury features, such as leather seats and satellite navigation systems. And, although it cost $6,300 more than a comparable non-hybrid Milan, the hybrid's ability to get 41 miles per gallon in the city far surpasses its gas-greedy counterpart's 22 mpg rating, allowing a typical driver to save nearly $500 per year on gas and break even on those savings within 13 years.
Ford Fusion Hybrid – Years to Breakeven: 5.6
What do you get when you combine a Ford (NYSE:F) Fusion with an electric motor and nickel hydride battery pack? According to Consumer Reports, the answer is the "crown jewel" of the Fusion family and a very cost-effective hybrid vehicle. This could account for why it took home top honors as the North American Car of Year at the Detroit Auto Show. It provides a similar look and driving experience as the non-hybrid Fusion, but because the price discrepancy between the two models is relatively slim (about $3,200), drivers are likely to break even with the money they save in gas within six years. If fuel prices go up, the Ford Fusion hybrid is likely to be a very cost-effective choice. (Learn about the founder of the Ford Motor Company and how he influenced the auto industry in Henry Ford: Industry Mogul And Industrial Innovator.)
The Bottom Line
Although most hybrid cars can get you around on considerably less gas, at current gas prices, most of them just aren't cheap enough to make this the sole consideration when deciding between a traditional or hybrid model. If you're betting that oil prices will go up – or you just want to reduce your carbon footprint regardless of the cost - you might want to take the plunge to hybrid driving. If you don't have the extra cash, consider choosing a small, fuel-efficient car. It won't have the hybrid cachet, but it'll get you around at a much lower price.
Read up on this week's most interesting financial news in Water Cooler Finance: My iPad Beats Your Toyota.
Note: All car prices used in this article are manufacturer's suggested retail prices. Average fuel consumption estimates were derived from fueleconomy.gov and are based on average driving habits and fuel prices of approximately $2.86 per gallon, the national average for April 2010.
Home & AutoAutos rarely appreciate in value. But if you want a set of wheels that'll least hold its value over time, these cars can go the distance.
BudgetingMoving doesn't have to be as expensive as you think. Here are some great ways to save money on moving costs.
Stock AnalysisLearn about Whole Foods Market, Inc., and discover how Whole Foods pricing actually compares to that of other grocery store operations.
Stock AnalysisLearn about the four quick service restaurants with attractive investment theses and growth prospects that can be valuable additions to your portfolio.
Stock AnalysisUnderstand how Coca-Cola implemented the successful "Share a Coke" campaign. Learn about the top three reasons why the campaign was successful.
Stock AnalysisIf you're not sure where Ford and General Motors are going, you might want to look at this auto investment option instead.
Stock AnalysisLearn about the top six companies that make an attractive investment for investors looking for stocks for dividend income investing.
Mutual Funds & ETFsObtain information on, and analysis of, some of the best performing mutual funds that offer exposure to the consumer cyclicals sector.
InvestingSavings is as crucial as ever, as we deal with life changes and our needs for the future. Here are some essential steps to get started, now.
Investing BasicsFind out how you could potentially earn hundreds of thousands of dollars by just investing $100 a month in stocks during your working years.
While your auto insurance company cannot pull your full motor vehicle report, or MVR, it does pull a record summary that ... Read Full Answer >>
In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
Once a revocable trust is created, a trust maker transfers funds or property into the trust by including them in a list with ... Read Full Answer >>
An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the ... Read Full Answer >>