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Archive for July 7th, 2009

To Buy Or Not To Buy A Hybrid Car

Ever thought that 60 miles per gallon would cut your monthly gas bill in half? Me too. The idea of the hybrid is almost too good to be true. And from a financial standpoint it is too good to be true. The following information is a cost comparison between the Honda Civic Sedan and the Honda Civic Hybrid Sedan. Essentially the same car except the hybrid uses half electric and half gas power thus improving gas mileage.

According to Honda the Civic gets 40 mpg on the highway while the Hybrid Civic gets an amazing 51 mpg. This is where the salesman gets you. “It will help protect the environment while saving you tons of money on your gas bill every month” a salesman might say. This is very convincing as it appeals to both our emotional side in protecting the environment as well as our wallet. But let’s take a closer look at the two:

* Civic Sedan: Starting MSRP 15010
* Civic Sedan: Highway MPG 40
* Civic Hybrid Sedan: Starting MSRP 22600
* Civic Hybrid Sedan: Highway MPG 51

Now I have compiled a spreadsheet that will aid you in your financial evaluation of the hybrid vs regular car purchase. As always I have run an initial estimation only you will need to download the spreadsheet at the bottom of the post and update the numbers per your circumstances. Let’s look at the findings:

Buy a Hybrid Car Financial Comparison

Make/Model Price MPG Hwy Miles Per Yr Price/Gal Gas /Month
Honda Civic Sedan 15010.00 40 15000 2.75 85.94
Honda Civic Hybrid Sedan 22600.00 51 15000 2.75 67.40

Monthly Savings with Hybrid 18.54
Yearly Savings with Hybrid 222.43
Price Difference 7590.00
Months to Recoup Price Difference 409
Years to Recoup Price Difference 34.1

The results are staggering! Look at how long it will take for the gas savings to pay you back for the difference in price of the car. 34 YEARS!!! Clearly not a wise investment. However if you still are considering buying a hybrid car the government does offer some tax advantages. The Energy Policy Act of 2005 allows a tax credit to be applied to an owner of a new hybrid car as long as it meets the programs requirements at least until 2009.

The tax credit is derived from statistics run on the particular make/model hybrid car you purchase but usually will fall somewhere around 15003000. This is a deduction however not a check. Depending on your tax bracket the actual dollars of tax savings will vary. The nice thing though is the deduction can be applied on top of the standard deduction!

Having said that if you are in the 20 tax bracket and got a credit of 2000 your tax savings would be 400. Not bad but you will still need to drive that Honda Civic Hybrid Sedan for about 30 years to get the payback. The bottom line is if you want to buy a hybrid car for the cost savings forget it. If you have a green thumb and want to help the environment then it is still an option. Be warned though the life cycle to obtain and use the additional batteries for the hybrid car puts extra pressure on the environment not found in regular gasoline cars.

I hope that I did not shun everyone from buying a hybrid car I still believe in the concept myself. However with the current technology it just doesn’t make sense financially. I look for the day of the fuel cell car or other concept car that takes away the need for gasoline…

About the writer:  Get better gas mileage with a motorcycle. Does it Pay to Buy a Hybrid Car? is just one of many great articles you will find at Personal Finance Resources.