Hybrid cars don’t save you money (part II)

Ramit Sethi

In the last few months, there have been 89235932153 articles about why hybrid cars are the best because gas is so expensive and they save you lots of money.

So I’m digging out an article from the IWillTeachYouToBeRich archives today:

Hybrid cars don’t save you money. Do the math!

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  1. George

    This post badly needs an update, since it assumes that gas costs $2/gallon.

    What would be interesting is to figure out how high gas prices should go to make hybrid cars worth the extra money you pay for them.

  2. Sripathi

    The Cost savings and environment benefits aside, I am going to get a hybrid car, as it allows me to get onto the carppol lane (in Calif. atleast) and get that extra hour to 2 to do what I like.

  3. Ian Ybarra

    At $3/gallon, it would take 8.2 years to break even given the case I used in the original article.

    Furthermore, if gas cost $24.71/gallon, you would break even in 1 year.

    $12.35/gallon, 2 years
    $8.24/gallon, 3 years
    $6.18/gallon, 4 years
    $4.94/gallon, 5 years
    $4.12/gallon, 6 years
    $3.53/gallon, 7 years
    and, as I mentioned above,
    $3.00/gallon, 8.2 years

    See the attached spreadsheet for my calculations, and to do your own.

  4. Anonymous

    Gas is $2.02 where I live.

  5. SQ

    You mentioned the Clean-Fuel Vehicle Deduction, which nearly everyone owning a Hybrid should be able to get (you made it sound like not everyone can).

    However, that is a $2,000 DEDUCTION, not a CREDIT. Therefore, it means your AGI goes down by $2,000, which means the net amount you save is ~$700 (assuming a combined Federal + State Tax of 35%). (I got that by doing 2000 * 0.35.)

    Therefore, by your original calculations, you would not break even in under 4 years. It would still take about 9.4 years.

  6. pjh

    Environmental benefits are never black and white. Consider this article from the New Scientist on the effects of hybrid vehicles on the Amazon rainforests.

  7. Jim LeTap

    Plug-in Hybrid cars have their own economics in my opinion. The break even analysis will be more favorable then. I guess we have to wait a couple of years before they go mainstream.

  8. John Brown / Hybrid Cars

    Thanks for adding some measurements to your article.

  9. George Stephens

    Actually, the payback really comes down to how you drive, how much you drive and your car buying haggling abilities. After some haggling, I bought a HCH new in 2005 for $19,000. The standard Cicic would have been $16,000 or $3000 less. The true economy with a standard HC at the time was approximately 30 miles/gallon. With the change in my driving habits, I am consistently achieving 50 miles/gallon with the HCH. At $3.00/gallon for gas, that comes to $0.10/mile for the standard HC and $0.06/mile for the HCH or $0.04/mile less for the HCH. Since I drive approximately 20,000 miles/year, that is a savings of $800/year on gas for me. Therefore, I will “break even” after 4 years. Since I am starting my 5th year now, all the remaining savings will be pure profit for making the right purchasing decision for me. As I plan to keep this car for at least 5 more years, I will save approximately $4000 to use for the next car purchase. If gas prices go up even further, which they most likely will, I’ll get even more return for my investment. Crunch those numbers, BABY! I just hate it when naysayers try to condemn something without looking at each person’s situation differently. What works for you might not work equally well for me and vice versa. Hopefully, more people will learn to think outside the box.