Q. In a recent column you extolled the virtues of buying a hybrid car. A quick fact check reveals that the top-rated conventionally powered Hyundai Elantra gets 33-mpg highway and starts for around $18,000.
The top-rated Toyota Prius gets 50-mpg but starts at around $25,000. With gas at its current low prices it will take a ton of miles for the Prius to have a lower life cycle cost, especially if you factor in the difference in up-front cost. As a bonus, the Elantra is available with an automatic transmission. The Prius comes with a Continuously Variable Transmission which many people find irritating. —J.U., by email
A. Yes, hybrids can be the subject of wrongheaded messianic belief. But if we think about this a little longer and use a bit more data we’ll see two things.
First, that hybrids offer genuine cost savings, sometimes at no additional cost.
Second, and more important, we now have an abundance of good, fuel-efficient choices in conventional vehicles. If we make well-researched and wise choices for transportation, it can provide a “return” that we haven’t been getting from our money in savings accounts. Remember, the original premise of the column was that you were taking the opportunity of a new car purchase to shift from a 20-mpg car to a fuel-efficient car. The big payoff is the jump from 20 mpg to 30 or 35 mpg. There is an additional payoff for going further.
Let’s start with hybrids. Sometimes they cost more than comparable conventional models. Sometimes they don’t. Last year the website hybridcars.com offered a list of the “top six hybrid cars that pay back the soonest.” The list was based on EPA figures for the six cars. Gas prices have declined since then, so the payback periods would be longer— if there was a cost difference. In fact, the list showed three cars with no cost difference between a conventional and hybrid model, the Buick LaCrosse and Regal and the Lincoln MKZ.
Other models have a “payback” period for the additional cost relative to a conventionally powered model of the same car. But even there, it’s good to do the math. And it helps to start with an older low mpg vehicle, which many people own and could replace with a more fuel-efficient vehicle, conventional or hybrid. On the website fuel economy.gov, for instance, you can compare costs of hybrid and non-hybrid models of the same model.
Here’s an example. A Honda Civic hybrid that gets 45 mpg will cost $1,895 more than a Honda conventionally powered Civic that gets 34 mpg. So you’re paying $1,895 more to save $174 a year, which gives a payback period of 10.4 years.
From the same website, a Ford Fusion hybrid gets 42 mpg compared to the 27 mpg of the conventional Fusion and the MSRP cost difference is $2,310— to get a saving of $303 a year. That gives a payback period of 7.6 years.
In both cases, the “return” on going hybrid doesn’t look very exciting. Then again, if you own the car for 10 years, less than its full lifetime, the internal rate of return on your additional investment in the Fusion Hybrid, for instance, calculates to 5.65 percent a year. It’s also a return that is more likely to rise over the next 10 years than fall. Think of it as a hedge against rising oil prices.
This calculation assumes that the resale value of the hybrid vehicle is the same as the resale value of the conventional vehicle at the end of the period. If the hybrid retains any of the price premium originally paid, the return will be higher.
Is 10 years a wild and crazy assumption? Nope, the average age of cars on US roads is 11.5 years.
Bottom line? Both decisions look like good choices when compared to certificates of deposit that yield less than 1 percent.
In the Burns family we’ve driven three cars with continuously variable transmissions: a 2003 Prius, a 2004 Prius, and a 2013 Honda Fit. It’s a matter of taste, of course, but we think they’re fine.