The Morning Report
Get the news and information you need to take on the day.
With today’s high gas prices, a lot of people talk about buying a gas-electric hybrid car to save money at the pump, but a new analysis from Consumer Reports shows that the gas savings isn’t nearly enough to make up for the extra costs these cars carry in price, insurance and maintenance over the first five years of ownership.
In fact, only two of six hybrid cars tested by Consumer Reports offer any savings at all after calculating gas and federal tax credits: the Toyota Prius and Honda Civic Hybrid. The savings – a measly $400 and $300, respectively – will disappear as the tax credit phases out.
I should say I’m something of a hybrid-car enthusiast, or at least I would be if they didn’t cost so much. I’d love to buy a Toyota Prius, I just don’t want to spend $23,000 on a car.
(For the record, I own a long-ago-paid-for 1996 Jeep Cherokee that spends most of its time in the garage, and a 2001 Saturn SL1 that gets about 26 miles to the gallon and cost less than $8,000 when we bought it used in 2003. I know lots of people in my income bracket who readily spend $20,000, $30,000 even $50,000 on a car, I just don’t happen to be one of them).
Hybrid cars cost several thousand dollars more than a comparable non-hybrid, which means people are driving them because it makes them feel good about who they are. Kind of like the Hummer H2 without the absurdity. (Seriously, I live in the suburbs and don’t know how soccer moms would navigate the war-like terrain of our master-planned community without an H2. I can barely make it to Target in my Saturn).
I say if you’re going to lose money on a vehicle, it might as well be doing something for the environment.
Toward that end, the four other hybrids that have been tested by Consumer Reports – Ford Escape Hybrid, Toyota Highlander Hybrid, Honda Accord Hybrid and Lexus RX400h – carry extra ownership costs of between $1,900 and $5,500 over the first five years compared to similar all-gas models.
For example, a 2006 Toyota Highlander Hybrid costs $7,185 more to purchase than an all-gas Highlander, which means paying an additional $558 in sales tax and $2,653 in finance charges. The hybrid sport-utility vehicle also costs $358 more to insure and $12 more to maintain over five years.
The 2006 Ford Escape Hybrid costs $29,140 compared with $22,818 for an all-gas Escape. Even with a $1,950 tax credit and more than $3,000 in gas savings, the hybrid version will cost $1,883 more to own and operate than its counterpart.
The Consumer Reports calculations are based on cost and savings comparisons between six current hybrid models that it has tested and each model’s closest all-gas equivalent. To figure tax, insurance and fuel costs, researchers assumed the vehicles were purchased in California, which is the leading state for hybrid purchases.
Part of the problem is depreciation in value of the cars, which Consumer Reports pegs at up to 4 percent more for hybrids than equivalent gas vehicles. Consumer Reports based its analysis on data from Vincentric, a company that tracks ownership costs for nearly 2,000 vehicles per model year. However, experts say depreciation is a difficult number to track because used hybrid cars are hard to find.
Despite the numbers, I’m still fixated on hybrid cars. I believe in the environmental and national security imperative of more fuel efficient cars. I only wish President Bush and car makers would dedicate more resources to the issue and maybe then I could buy one for less than $23,000, but probably not. The automobile seems to be the only technology that gets more expensive even when the technology is not advancing. We’ve got electricity running our windows and doors and computers telling us when to get an oil change, but the engine is basically 19th century technology. Why?
American car makers ignored hybrids altogether until Toyota proved there was a demand for the vehicle with its Prius sedan. And do you really believe car makers need another 10 years to make hydrogen-powered cars affordable when they already work? According to the California Fuel Cell Partnership between government and industry, auto makers are already leasing more than 100 fuel cell vehicles to state and local agencies. Chula Vista is the only city in San Diego County with its own hydrogen fuel center and leased fuel-cell vehicle.
Hybrids are fuel efficient, getting as much as 44 miles per gallon and produce lower-emissions – significant attractions for conscientious consumers. (The average gas price in San Diego is currently $2.59 per gallon.) Most models have also performed exceptionally well in crash tests and rate high in reliability and owner-satisfaction surveys.
If you’re a hybrid enthusiast, the extra money may well be worth the peace of mind and satisfaction of conserving energy and doing your bit for the environment. In that case, Consumer Reports offers some tips for getting the most savings from your hybrid purchase:
– Federal tax credit: The full tax credit for hybrid cars is $2,000 for cars purchased by Dec. 31, 2005. The credit was established to encourage consumers to go hybrid, but interest is so high – the reason there is no tax break in California for hybrid cars – that the federal deduction is phasing out. It’s being replaced with a tax credit of up to $3,400, which sounds great until you realize that this credit is phased also. Once the manufacturer has sold 60,000 hybrids – a mark Toyota is expected to reach soon – the tax credit expires. If you’re going to buy a Toyota hybrid, Consumer Reports recommends you do it soon.
– State incentives: Several states offer tax credits for hybrids including Colorado (up to $4,500), Oregon (up to $1,500) and Utah (up to $3,000). California allows drivers of some hybrid vehicles – but not all – to use high-occupancy vehicle lanes with a single occupant. Cars making the list are the Honda Civic Hybrid, Honda Insight (except 2005) and Toyota Prius.
– Employee incentives: Find out if your company will contribute cash toward the purchase of a hybrid. Apparently, some do, according to HybridCars.com, a Web journal and hybrid market research organization. Palo Alto-based Integrated Archive Systems gives full-time employees a $10,000 subsidy toward the purchase of a hybrid car because CEO and Founder Amy Rao believes it’s the right thing to do. Seattle-based Topics Entertainment offers $2,000 toward the purchase of a hybrid and $1,000 to employees who downgrade engine sizes. The money is doubled if they downgrade from a V-8 to a more fuel efficient four-cylinder vehicle. Other companies that offer incentives include New Hampshire-based outdoor apparel company Timberland ($3,000), Patagonia ($2,000), Mountain View-based Google ($5,000), Santa Clara-based Hyperion ($5,000) and Rockville, MD-based MOM’s – My Organic Market (up to $3,000).
– Insurance: Shop around for the lowest insurance premiums. Farmer’s Insurance announced a 5 percent discount for hybrid driving California consumers last October, while Traveler’s Insurance began offering a 10 percent discount in February for hybrid drivers in 27 states. California wasn’t on the list.
– Maintenance: Consumer Reports says most hybrid repair and maintenance should not involve unique components and can be handled by independent mechanics.
Catherine MacRae Hockmuth is a freelance writer in Chula Vista. “Married and Mortgaged” runs every other Thursday. E-mail her at email@example.com with your tips, stories and feedback. Or write a letter to the editor here.