Recent headlines have claimed that GM's Chevy Volt will get 230 MPG. Great headline, and if it comes anywhere close to that in reality, Chevy must have done something right. However, those numbers need to be looked at in more detail to determine if you would be financially better off buying the new Volt. Holding other things equal, such as styling, features and environmental impact, let's look at some cost comparisons to see where you might be if you bought a Volt. (Learn more about buying a car in Pros And Cons of Leasing Vs Buying A Vehicle.)
Costs Per kWh
If you have a 100-watt light bulb that is on for four hours a day for 30 days, which is 120 hours or 12,000 watt hours or 12 kWh, then that light bulb would cost 12 kWh x 13 cents per kWh, which equals $1.56 per month. This is using Pacific Gas & Electric rates (California) for the average cost per kWh of 13 cents, your local numbers may differ.
According to Chevy, the Volt gets four miles per kWh, so 100 miles costs 25 kWh, which is about the same as leaving two lights on for four hours a day for a month. The cost per mile is then computed as 25 kWh x 13 cents/100, or about 3.25 cents a mile. Again, this will vary with your specific utility rates. However, if gas costs $3/gal, and your gas-guzzling mid-size sedan gets 20 mpg, the gas costs 15 cents a mile or five times more. (Learn more about going green in What Does It Mean To Be Green?)
The range for a Volt, before you have to step on the gas, is supposed to be 40 miles. If you drive a commute to and from work that is less than 40 miles, then you could drive gas free for around three cents a mile. A 40-mile commute per day for five days a week for 50 weeks a year means you commute 10,000 miles a year. If you were paying 15 cents a mile in your 20 mpg gas guzzler, those miles cost you $1500 annually, or $10,500 over the seven-year life span of a car. But if you bought a Volt, you would only be paying three cents per mile, costing you $300 annually, or $2,100 over the seven-year life span of the car. This is a savings of $8,400. (Still got a gas-guzzler? Read Getting A Grip On The Cost Of Gas to learn how to save.)
Savings Vs Price
However, the gas savings are lost in the price tag of the car. Currently the speculation is that with a $7500 federal government tax credit, the car will cost about $32,500. Subtract your gas savings and you're right in the price range of gas cars with similar size and style. Of course, if the tax credit goes away, then it gets pricey.
Compared to Other Hybrids
But before we call it a wash, let's compare the Volt to non-plug-in hybrids. The Prius has an estimated 51 mpg in city and 48 mpg highway, so let's use 50 mpg in our example. If gas costs $3/gal, and the car gets 50 mpg, the gas costs six cents a mile. That's about twice as much as the Volt using electric power only. So for our example of a 10,000-mile annual commute, the Prius has $900 a year in fuel savings over the 20 mpg gas guzzler and a $300 annual increase, or $2100 seven-year total increase, in fuel costs compared to the Volt. However, we must remember that this is for your short-term electric-only commute. More than that and the Volt's cost increases. (Learn more in What Determines Gas Prices?)
When comparing the Volt and the Prius, the toughest part of the comparison is cost. The entry-level Prius is around $22,000, so including the tax credit, the Volt costs an additional $10,000. This cost of purchase is only offset by a $2100 in fuel savings, making the Prius more cost-effective by more than $7500.
Of course, you may not want the base model, more elaborate models are more costly, and now the purchase decision leaves the financial arena and moves towards other decision points. You aren't going to commute on the electric portion of a Prius as the gas engine will kick in as you pick up speed. So the environment is clearly a winner with the Volt's electric-only commute. For many, that will be enough to fork over a few more bucks.
In addition, styling, features and drivability will also play a role in the purchase decision. Who knows how much fun it is to drive an electric car? That may be a huge factor for some people. Also, the electric motor of the Volt will be impacted by common electric uses such as plugging in cell phones, iPods, navigations systems, etc. So for some gadget freaks, this may be a limiting factor.
So will you be financially better off with a Volt? Probably not right now. But you may not be worse off either, and there may be some other considerations that will sway your purchase.
For more on cars and car insurance, check out our related articles: Free Car Payment Insurance: What's The Catch? and Shopping For Car Insurance.