A Tough Call on Hybrids

published 16 March 2009

In the expanding cast of green automotive technologies, electric vehicles are hogging the limelight. But a mass-produced EV is still a year or two away. Meanwhile, hybrids continue to gain a foothold in the market, with 20 models available for 2009.And later this year, car buyers will have even more choices, including the 2010 Honda Insight, the Ford Fusion hybrid, and the redesigned Toyota Prius and Lexus RX.

There's just one problem: After gas prices dropped in late 2008, hybrid sales collapsed, falling 43% in December compared with the previous year. That highlights the reality that when fuel prices are low, savings at the pump rarely make up for the $3,000-plus hybrid premium. The last time Kiplinger's examined the hybrid equation, fuel prices were in the $4-per-gallon range, and hybrids looked much more attractive. But with cheap gas on every corner, it's harder to justify the premium you pay for a hybrid. (Try our Hybrid Calculator.)

Run the numbers. Using five-year ownership numbers from Vincentric, an automotive research firm, we compared the 2009 hybrids with their gasoline-engine counterparts. The calculations assume you drive 15,000 miles a year with fuel at $2.22 a gallon, and they factor in depreciation, maintenance and repairs. The math also assumes you finance the vehicle with a five-year loan after a 15% down payment, and that you take advantage of hybrid tax credits -- which are no longer available for Honda, Lexus and Toyota models.

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The only hybrid that beats its conventional counterpart is the recently redesigned Saturn VUE, which costs $400 less to own over five years than the VUE XE. All other hybrids cost more to own than their gas-engine siblings, but three at least come close: the Nissan Altima Hybrid ($1,360 more than the Altima S), Saturn Aura Hybrid ($1,390 more than the Aura XE) and Ford Escape Hybrid ($1,420 more than the Escape XLT). You can use our online calculator to compare a number of hybrids to nonhybrid models.

At current fuel prices, it's cheaper to own a gas-engine fuel sipper. For example, the Honda Civic Hybrid has a five-year ownership cost of $38,000, and the Toyota Prius costs $36,300 over five years. But the 2009 Nissan Versa costs $28,990 to operate over five years, the Honda Fit costs $29,780 and the Toyota Matrix wagon costs $32,380.

Buy one anyway? Bradley Berman, editor of HybridCars.com, says there are a couple of reasons to buy a hybrid now. "Hybrids are like an insurance policy against high gas prices, which might be right around the corner," says Berman. "If you're going to own your car for five years, it's not just today's gas prices that matter, it's prices in every year after that."

What's more, today's low gas prices and depressed new-car sales mean that you're more likely to be able to strike a deal on a hybrid. Even the popular Prius is languishing on dealer lots, and many customers are now paying less than sticker price.

As more hybrids are introduced and production increases, the premium will start to come down -- to a few hundred dollars in some cases, says Berman. He points to the spring introduction of the Honda Insight as a harbinger of affordable hybrids; its sticker will be about $20,000, or some $3,000 less than the base-level Prius. The Insight gets 40 miles per gallon in the city and 43 on the highway.

Also coming this spring is the Ford Fusion hybrid (estimated at 41 mpg city, 36 mpg highway), which beats the Toyota Camry hybrid's fuel economy. It will start at about $27,000.

Lexus's redesigned RX crossover is already in showrooms, and its hybrid twin is on the way. The new RX 450h has a larger, 3.5-liter V6 engine that delivers 295 total horsepower, but it still sips a polite 28 mpg city and 27 mpg highway. Prices are expected to start at less than $42,000.

Anderson has been with Kiplinger since January 2004, when she joined the staff as a reporter. Since then, she's covered the gamut of personal finance issues—from mortgages and credit to spending wisely—and she heads up Kiplinger's annual automotive rankings. She holds a BA in journalism and mass communication from the University of North Carolina at Chapel Hill. She was the 2012 president of the Washington Automotive Press Association and serves on its board of directors. In 2014, she was selected for the North American Car and Truck Of the Year jury. The awards, presented at the Detroit Auto Show, have come to be regarded as the most prestigious of their kind in the U.S. because they involve no commercial tie-ins. The jury is composed of nationally recognized journalists from across the U.S. and Canada, who are selected on the basis of audience reach, experience, expertise, product knowledge, and reputation in the automotive community.