Let's get one thing straight: I love our planet. I like clean air and I don't want to die some slow, painful death, choking on thick carbon fumes that lay blanketed within our atmosphere.
And so it's in this way that I have no problem with hybrid cars. Okay, I may have a couple problems with the whole affair -- such as the body design of the Prius (ick), and the fact that the production and recycling of hybrid batteries is rumored to be wretched for the environment. Yet, all in all, I think the idea of hybrid cars is great.
But I've recently heard many people proudly brag about how much money they're saving by driving a hybrid vehicle. These staunch purveyors of a greener tomorrow may feel like they're saving behind the wheel of one of these bad boys, but are they really? What is the total cost of ownership of said hybrid versus an older, used car? I read somewhere the other day that the price of gas has risen 250% in the last 10 years! Obviously any savvy saver would want to lessen gas' rising blow to the wallet, but environmental impact aside (this is a personal finance blog, after all, and not a green one!), how much do you truly save by shunning the automobiles of yesterday in favor of sleek new hybrids that purr down the freeway at 45 mpg?
Well first you have to look at the actual costs of the vehicles themselves. While hybrids tend to hold their value better than their gas-guzzling brethren, the initial cost of the hybrid is pretty high (think in the upper $20,000s). And that doesn't include all the interest that you'll have to pay back on the large car loan you'd have to take out. For comparison's sake, Love and I spent about $4,000 cash (including taxes) on our 2000 Hyundai Accent that gets about 30 mpg. In a nutshell, the longer you hold on to your hybrid, the more money you recoup on the overall cost of the car in the first place.
And so, chickadees, if you're in the mood to hop on the hybrid boat, consider how long you plan to hold on to your eco vessel. Many people I know tend to hold on to their cars for about 5 to 6 years, which doesn't necessarily recoup all the money you plopped down for the price of the auto in the first place. This problem is magnified by reports that the gas mileage posted by the EPA (Environmental Protection Agency) on many hybrids is more inflated than what it truly is. The New York Times, Wired Magazine, and Consumer Reports, among others, have said that hybrid mileage is actually 30% to 50% lower than what's generally promised, and to add metaphorical fuel to the fire, it's been reported by these same outlets that many hybrid versions of cars get almost the same mileage as their purely gasoline-sipping counterparts.
So a bit of false advertising may be the culprit, but as I said earlier, hybrids do tend to hold their value well, so even if you don't recoup the overall cost in the form of gas, at least you can take a smaller loss on the vehicle once you're ready to bid adieu.
But what is the real cost versus benefit? Let's say you're trying to decide whether to buy a new Honda Civic hybrid (sticker price: $26,000), or a used 2001 Honda Civic (about $7,000). You're okay with the high cost of the hybrid because you're sure you'll be able to justify it with all that gas money you'll be saving, right? Well if you drove 12,000 miles per year on $4 per gallon gas (the current national average), you'd pay about $88 per month in gas driving the 45-mpg hybrid. With the standard Civic you'd pay about $114 per month in gas. This all sounds fabulous until you realize that you just spent an extra $18,600 on the hybrid model to save you $312 per year on gas. In order to recoup the total cost of the hybrid in gas savings would take you about 59 years to justify the purchase. I don't know about you, but I like my cars like I like my heels -- meaning I get my use out of them and move on after a few years. (With the exception of this marvelous pair of Coach heels I own. I'd keep those for 59 years, but that's a different matter). Don't forget if you do decide to keep your hybrid that long, about every 10 years you'd also need to replace the battery, which I imagine would get pretty costly.
Air conditioning can also take its toll on the fuel economy of a hybrid vehicle, decreasing miles per gallon by 15% to 27%, according to the Idaho National Labroatory, operated under the Department of Energy.
Aside from the intrinsic resale value of hybrids (that is, until fully electric cars make their debut, which shouldn't be too far off on the horizon), there are also other perks that can save you money by investing in a green goliath. Some credit lenders offer special car loan rates for hybrid purchasers, and insurance companies such as Geico say they offer discounted car insurance. There was a time when the federal government was also offering savvy tax credits of up to $3,400 for hybrids, but unfortunately that only pertained to the first 60,000 of them made (i.e., Toyota and Honda buyers don't get the credit).
In the grand scheme of budgeters, though, recycling is always a good idea ... in many cases it can save you loads of money. Say one of your friends subscribes to Vogue and passes each issue on to you when she's finished. That saves you about $5 in newsstand charges to get your read recycled, right? Well the same logic applies to cars. Instead of buying a brand new car (hybrid or not) fresh off a factory line in a polluted area like Guangdong, buying a small used vehicle will not only ensure that its overall environmental footprint is lessened, it will also ensure that you'll be saving more money in the long run by buying a car with a cheaper upfront cost and comparable mpg.
I know many don't solely analyze the issue on a cost versus benefit basis alone. In fact many buy hybrids purely for the environmental benefits, which is great. But remember that just because you may feel like you are saving money, says Mark Shead at Productivity501.com, it may not always mean you are saving money. "Feelings are what marketing is about. What really matters is if you are saving money. Recognize that how you feel about something is probably a poor indication of its actual benefit."