Through a few twists of fate we are now looking to replace one of our cars. So the question comes up about whether a hybrid car makes sense. It is generally 'known' that a hybrid doesn't make financial sense, you'll pay more than you'll ever make back in fuel savings. But, I'm not as sure about that. Here's the numbers as I've worked them out.
We're looking at the possibility of getting a Toyota Highlander which comes with either or a standard gasoline engine, or with electrical assist (hybrid). Note: I didn't include a link to the Toyota website because they have no option but to use Flash, it's a shame they can't support web standards. When we figure out all the options that we'd want (the hybrid comes with somethings by default that we had to add to the base vehicle) the hybrid option adds about $4000 to the cost of the car.
Now, if we look at a car as a depreciating asset we can start to see what the real cost is for the hybrid feature. We're tying up an extra $4k, that would make interest at 7%, so that's $280/year. Plus, we can assume that the value of the whole car would depreciate at, let's say, 50% over 5 years. So that $4K would also depreciate at the same rate meaning $2000. Making a total over five years of $3040.
On the label of the car there is an estimated yearly fuel cost, which is $1400 for the standard and $900 for the hybrid. So, we should save about $500 a year on gas. With a $1300 federal tax rebate, we're talking about $3800 over five years.
So, in very round, back of the envelope calculations, it looks like we'd save about $700 in five years going with the hybrid. Not a ton of money, but nothing to sneeze at. This doesn't include the possibility of more maintenance, but the hybrid model does come with a better warranty.
posted Jan 15, 2007 | permanent link
