Hybrid Math
MY FAMILY WILL SOON be in the market for a new vehicle. With gas prices approaching $5 a gallon in California, my gut tells me that we should set our sights on a hybrid. Upon doing some math, however, I get a different answer.
I priced out a few different vehicles, including the Toyota Camry and the Honda CR-V. In both cases, you pay an all-in premium���including taxes���of about $4,500 to own a hybrid over a similarly equipped model with a conventional engine. As the Camry gets better gas mileage, I selected that vehicle to do some additional calculations.
A conventional Camry gets 34 miles per gallon (MPG) compared to an impressive 46 MPG for the hybrid model. Assuming the current California price per gallon of $4.50 holds, you���d need to drive about 130,000 miles to break even on the hybrid, given the premium price. Interestingly, this is about the same number of miles for which hybrid batteries carry a warranty. In other words, once you���ve broken even, you���ll likely incur several thousand dollars to replace the hybrid battery. The upshot: With a breakeven point of 130,000 miles, I don���t see the hybrid as a financially attractive option.
If fuel prices continue their ascent, however, the math could swing in favor of hybrids. For instance, if California prices hit $6.50 a gallon���which is conceivable given current inflationary pressures���you���d only need to drive 92,000 miles to break even with the hybrid and thereafter you���d pull ahead. While that���s quite a few miles, I know I���ll probably rack up that sort of mileage over the next five years.
One other factor to consider: If gas prices do rise, dealers will likely increase the premium on hybrid models. They know the math that folks like us���readers of HumbleDollar���are doing to determine if hybrid models are worth it, and there���s a chance they���ll stay a step ahead of us in their pricing.
I priced out a few different vehicles, including the Toyota Camry and the Honda CR-V. In both cases, you pay an all-in premium���including taxes���of about $4,500 to own a hybrid over a similarly equipped model with a conventional engine. As the Camry gets better gas mileage, I selected that vehicle to do some additional calculations.
A conventional Camry gets 34 miles per gallon (MPG) compared to an impressive 46 MPG for the hybrid model. Assuming the current California price per gallon of $4.50 holds, you���d need to drive about 130,000 miles to break even on the hybrid, given the premium price. Interestingly, this is about the same number of miles for which hybrid batteries carry a warranty. In other words, once you���ve broken even, you���ll likely incur several thousand dollars to replace the hybrid battery. The upshot: With a breakeven point of 130,000 miles, I don���t see the hybrid as a financially attractive option.
If fuel prices continue their ascent, however, the math could swing in favor of hybrids. For instance, if California prices hit $6.50 a gallon���which is conceivable given current inflationary pressures���you���d only need to drive 92,000 miles to break even with the hybrid and thereafter you���d pull ahead. While that���s quite a few miles, I know I���ll probably rack up that sort of mileage over the next five years.
One other factor to consider: If gas prices do rise, dealers will likely increase the premium on hybrid models. They know the math that folks like us���readers of HumbleDollar���are doing to determine if hybrid models are worth it, and there���s a chance they���ll stay a step ahead of us in their pricing.
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