August 20 2006 – Vol.11 No.22

PAY BACK TIME SHORT FOR TWO HYBRIDS, BUT CLOCK IS TICKING.

According to an Edmunds.com study of hybrid cars currently available in the US, only two, Ford’s Escape Hybrid and Toyota’s Prius will have their hybrid premium cost recovered in under 3 years. But the clock is ticking on the Prius. The US tax credit, which helps the Prius recoup its extra cost in the relatively short period of time, will be slashed in half at the end of September.

(Buy now, in other words. But check with your dealer to make sure the credit is still available.)

In the study Edmunds took into account the federal tax incentive (which varies per vehicle), gas at $3 per gallon, driving 15,000 or 25,000 miles per year and the hybrid cost premium over a similarly equipped conventional model of the same brand. (Since there is no similarly equipped conventional Prius, Edmonds compares that car with a Camry, which is a little unfair. They are quite different cars.)

The study showed that the Prius would recover its hybrid premium in 2.1 years if 15,000 miles were driven per year and in 1.2 years if driven 25,000 miles per year. Ford’s Escape Hybrid would recover its premium in 2.9 years at 15,000 miles per year and 1.7 years at 25,000 miles per year.

Others didn’t fare so well. Saturn’s Vue Green Line Hybrid, Toyota’s Camry Hybrid and Honda’s Civic Hybrid needed about 6 years to recover their hybrid premium. Even worse Toyota’s Highlander Hybrid would take more than 15 years to recover its hybrid premium and Honda’s somewhat ill-conceived Accord Hybrid would need more than 11.

All of this according to Edmonds.com, of course.

Yet there are other factors that could put a more positive economic light on hybrids. Gasoline could rise above $3 per gallon. The sticker price on hybrids might drop as it did for the 2007 Ford Escape Hybrid. Dealers and manufacturers might offer additional discounts, rebates or special financing on hybrid products to make them more appealing. A good deal on hybrid at the dealership level would make the premium disappear more rapidly.

Toyota stands to lose the most in the hybrid premium recovery game when the hybrid tax credit gets slashed in half at the end of September. All Toyota hybrids, including those from Lexus will see the steeply reduced incentive. The tax credit is applied to the number of hybrids produced by the manufacturer (60,000) not the number of any specific model.

For more about the study visit Edmonds.com http://www.edmunds.com/advice/fueleconomy/articles/116513/article.html