Are You Overpaying for Your Hybrid?

 

When choosing hybrid models, consumers get the most bang for their buck with the Lincoln MKZ, picture above. Source: Ford Motor Company.


Lately, gasoline prices have been headed in a favorable direction: Down. 

But over the last several years -- especially in states like California and New York -- we've seen gas prices walk a line that many U.S. drivers have found angering and nearly unacceptable. 

In order to counter the effects of higher gasoline prices, automakers have introduced hybrid technology, which allows an electrically powered engine to fuel drivers' commute during certain driving conditions. 

This of course boosts a vehicle's fuel efficiency, since it requires less gasoline during the commute.

But is it worth it? Do drivers of hybrid vehicles really benefit from this added technology? 

A closer look at the 'break-even' point for hybrid cars
Of course, automakers don't add this mileage-boosting technology for free. Consumers generally have to pay up to get their hybrids. 

The folks at MojoMotors.com, a website designed to track vehicles and price drops at car dealerships, shed some light on how far customers have to drive in order to recoup the premium paid for the hybrid option rather than the standard model. 

Source: Mojo Motors

The above chart shows how many miles a hybrid vehicle must drive, in order for the improved gas mileage to offset with the added cost of the hybrid option. 

The calculations were done on the premise that gas costs $3.50 per gallon, which is slightly above the current average price in the U.S., according to Gasbuddy.comOf course, not every hybrid car buyer is in it for the cash they'll save -- although it certainly helps -- but also for the positive environmental effects too. 

Aside from seeing which hybrid vehicle provides the most bang for the buck (Ford's (NYSE: F  ) Lincoln MKZ) and which one will take the longest to recoup one's investment, (Toyota's (NYSE: TM  ) Highlander), the chart also shows how many miles per gallon the hybrid trim adds and how much that hybrid option will cost. 

What do we make of all this? 
This news may be semi-disappointing for hybrid owners and perhaps good news for those who are considering a hybrid.

Seven of the eleven hybrids listed above require customers to drive over 100,000 miles just to recover the added cost of their hybrid trim, while three of them require customers to drive over 150,000 miles. Talk about a long-term investment, especially considering the average U.S. driver only covers ~13,500 miles per year, according to the U.S. Department of Transportation Federal Highway Administration

Doing some quick back-of-the-envelop math for these cars, it will take roughly 7.5 years just for hybrid car drivers to break-even when purchasing a hybrid that takes 100,000 miles to offset the added cost. Of course, this is assuming these drivers fit the U.S. norm of only driving 13,500 miles per year. 

Some cars require less driving though. The Toyota Avalon needs customers to drive roughly 45,000 miles before breaking even on their hybrid investment. That's not too bad. 

The Toyota Highlander, the least deal-friendly hybrid. Source: Toyota Motor Company

The Lincoln MKZ is the best, allowing customers to start saving money the second the car roles off the lot. 

That's because the MKZ's hybrid option doesn't cost the customer anything, while adding 14 miles per gallon in fuel efficiency. 

Honda Motor Company's (NYSE: HMC  ) Civic and Accord hybrid models added the most fuel efficiency, with an extra 17 miles per gallon. However, customers would have to drive over 130,000 and 150,000 miles, respectively, to recoup the added cost of the hybrid trim. 

The bottom line 
Consumers who have a long commute, live in areas with particularly high gas prices, or tend to stick with their vehicle for many years can find value in hybrid cars. However other may find more value in a standard engine. 

Of course, the payback period for a hybrid is sensitive to fluctuations in gas prices.

For those hybrid car seeking consumers or those who fall somewhere in the middle, focus on getting the most bang for your buck when it comes to hybrid engine options.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 23, 2014, at 12:49 PM, ZFoolish1 wrote:

    It is interesting that the MojoMotors calculations referenced here don't seem to match the hybrid payback time calculations at the fueleconomy.gov web site:

    http://www.fueleconomy.gov/feg/hybridCompare.jsp

    This web site bills itself as "the official government source for fuel economy information".

    For example, the car listed as the worst in the article (Toyota Highlander), fueleconomy.gov says the hybrid version costs only $3,710 more than the non-hybrid, instead of the $7,660 shown in this chart. Setting the fueleconomy.gov calculator to 13,500 miles/year as the miles driven and the price of fuel to $3.50/gallon, it says the payback period would be 5.9 years. So at 13,500 miles/year * 5.3 years the payback mileage would be at ~79,650 miles, vs. the ~225,000 miles shown in the chart above for this vehicle in the report referenced from MojoMotors.com. That's almost a factor of 3 difference! One or both of the reports/sites must have massive calculation errors for the payback numbers to be that different. That's too bad as one or both of these reports/web sites would lead buyers to the wrong conclusions. I'd be interested to hear if anyone finds which one of these calculations are the more accurate ones.

  • Report this Comment On August 23, 2014, at 1:24 PM, ZFoolish1 wrote:

    I saw a typo in my posting: Where I documented the formula I typed "5.3" years instead of the correct 5.9 years I actually used for the calculation. The corrected line should have said:

    So at 13,500 miles/year * 5.9 years the payback mileage would be at ~79,650 miles ...

    The actual calculations used 5.9 years so all of the original totals and conclusions should be correct.

  • Report this Comment On August 23, 2014, at 3:07 PM, ekdikeo wrote:

    Something I don't see mentioned here, is the significantly reduced costs of maintenance -- Say 20k of your 150k miles (i'm just randomly pulling numbers here, I have no idea what real world use is) are driven with the gasoline engine off. Your gasoline engine has 20k fewer miles on it.

    Have been driving a Prius for over a year, which we got used. Got it used with 140k on it, have put 25k on it, am averaging close to 50mpg. We buy a full tank of gas about once every week now, whereas with our previous vehicle we were putting up two full tanks a week. With similar sized tanks, we are now saving $35 a week. $140 a month. $1680 a year. And we've had zero unexpected maintenance to do, which we were putting in almost $1k a year on the previous vehicle. So now we're saving $2680 a year, if not more. Car pays for itself in just over 3 years, assuming we don't have to replace any major parts, which are probably not likely, considering there are many Prius owners out there with over 300k miles that haven't done anything other than tires and oil changes.

    Short version: Hybrids require significantly lower maintenance costs, as well as significantly less gas usage.

  • Report this Comment On August 23, 2014, at 6:07 PM, Maximizese wrote:

    I saved a ton on both my hybrid 07 Lexus Rx400h and diesel 01 VW Golf TDI by buying them used with 4 years and 80K miles on the cars; I ended up paying 60% off the original MSRP at $19K and $9.5K respectively. We now have 270K miles on the VW and 120K miles on the Lexus without any issues. The VW is moderately modified and returns 45mpg while the Lexus is stock and returns 28mpg. Both cars get about 50% better fuel economy compared to their gasoline only variants.

    As for as maintenance cost, we spend about $500/yr on the VW and $300/yr for the Lexus. I do all the maintenance myself, but leave the bigger jobs for my mechanic (timing belt, water pump, radiator, and alignments). We also spend about $600 on tires for VW every 40K miles and $900 for the Lexus every 50K miles.

    These figures are much less expensive than the average car and it's not by coincidence that I bought these two cars. My wife drives the Lexus because she refuses to learn how to drive a manual. It makes it tougher on me during road trips since I insist on driving the VW for trips more than 10 miles when we are together...it takes 5 miles just to get the coolant to normal operating temp. The Lexus on the other hand has all sorts of heaters that get the engine to operating temperature in about .3 miles.

  • Report this Comment On August 26, 2014, at 11:23 PM, ZFoolish1 wrote:

    Mojo's table: Highlander Hybrid reaches payback @ ~225k miles ~= 16.7 years. ( 225k miles / (13.5k/year) ).

    But fueleconomy.gov says the payback time is 5.9 years (using the same 13.5k/year mileage):

    http://www.fueleconomy.gov/feg/hybridTable.jsp?mi=13500&...

    (This link leads to a nice table that shows all of the hybrid comparisons together on one page. Click "show all" on the http://www.fueleconomy.gov/feg/hybridCompare.jsp page after entering your own values to get your own customized version).

    The two hybrid comparisons are almost a factor of 3 different for this vehicle. After studying the fueleconomy.gov calculator and numbers for a while and not finding any major errors, I'm somewhat tending to believe fueleconomy.gov a little more.

    ZFoolish1

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