Hybrids: cost vs. savings

23. AUTOS
Hybrids unlikely to save owners money, study says
Alex Kaplun, Greenwire reporter

Hybrid vehicles are not efficient enough to produce long-term savings for their owners, even with gas prices soaring, according to a study released yesterday.

An analysis by Edmunds.com Inc. found the increased total costs of owning a hybrid most likely will not be covered by the savings in gasoline use for most drivers. In calculating the total cost of owning a vehicle, the company considered the initial purchase price, insurance costs, maintenance costs and various tax credits and financing costs.

Overall, the company found the cost of hybrid ownership over the first five years for virtually all models would exceed the traditional counterpart by $3,400 to $5,200. To break even, a hybrid owner would either have to drive far more miles through that period than the average driver or gas prices would have to increase dramatically.

Michael Chung, a price and market analyst for Edmunds.com, said that while the technology may become more cost-effective in the long-run the current high demand for the vehicles will keep prices high for at least another couple years.

"They provide a lot of value on top of fuel economy," Chung said. "All these perks really drive up the value of these vehicles that are more intrinsic rather than qualitative."

For example, the study estimates the total cost of buying and operating a Ford Escape hybrid over five years at $50,521 -- almost $3,500 more than a non-hybrid counterpart. In order to cover those extra costs during the five year period, gasoline prices would have to reach an average of $5.60 per gallon or the driver's annual mileage would have to exceed 37,000 miles.

The cost difference is even more dramatic with the Honda Accord and Honda Civic hybrids, both of which cost at least $3,600 more than the traditional models. In both cases, the consumer would need to drive more than 60,000 miles per year or gas would have to increase to more than $9 per gallon in order to break even.

The only model currently available that would come close to breaking even for consumers is the Toyota Prius hybrid as compared to the traditional Toyota Camry vehicle. According to the study, at the current average price of $2.28 per gallon of gasoline and 15,000 miles in annual driving, the Prius would save the consumer $81 compared to the Camry over the first five years of ownership.

At the same time, the Prius would cost far more than another popular Toyota, the Corolla. The Prius driver would need to drive more than 66,000 miles a year or gas would have to rise above $10 in order to break even.

Chung admitted that consumers may see additional savings if they keep a hybrid beyond five years but also pointed out that there are many unknowns with the long-term viability of hybrid technology. Because hybrids have only been in mass use for a couple of years, questions remain about their reliability, the extra costs associated with repairing a hybrid battery and the resale value of the vehicles.

But Chung added that even if hybrids do not turn out to be the money-savers that consumers may think, they are likely to remain popular with consumers in the near-term because of their "cool" factor. He specifically cited the Prius -- by far the most popular of the hybrid models -- as becoming a hit with consumers because of its unique look, its environmentally friendly reputation and its use by some celebrities.

"The Prius of all hybrids became the cool car to own -- it was environmentally sound and it looked different," Chung said. "Toyota really pulled out all the stops with that vehicle, they really wanted to show it as the technology trendsetter."