The Price of Saving Fuel-Kiplinger

Drive Time


The Price of Saving Fuel

Jessica L. Anderson

Measure the five-year ownership costs to see whether it really pays to buy a green vehicle.



With the economy in recovery mode and summer driving on the upswing, gasoline prices are ticking up -- prompting more new-car buyers to consider an alternative-energy vehicle. According to a survey by Capital One Auto Finance, a third of respondents say it's likely their next car purchase will be green.

If your goal is better fuel efficiency and green bragging rights, no matter the cost, you have plenty of options -- hybrid, clean diesel and, this fall, plug-in hybrid and all-electric vehicles. But one thing that holds buyers back is the extra cost of an alternative-energy car. You'll pay an average of $5,500 more for a 2010 hybrid than for its gasoline-engine counterpart (although the premium can be much lower). The premium is about half as much for diesels; the average markup is $2,800. Diesel vehicles have cleaned up their act and are now every bit as clean as gasoline-engine cars (with up to 30% better fuel economy), despite a lingering image problem from the last generation of soot-spewing models.

Run the numbers. One way to see whether it pays to buy a green vehicle is to calculate the five-year ownership costs. That lets you crank in the long-term savings at the pump as well as tax credits available for many hybrid and diesel vehicles. When we compared the ownership costs of hybrids versus conventional vehicles in early 2009, gas prices were hovering just above $2 a gallon, and few hybrids earned back their extra cost with savings at the pump. But with gas now closer to $3 and with more eco-friendly vehicles on the market, you can more often save green by buying green.

We updated the calculations, pitting 19 hybrids and 11 diesels against comparable gas-engine vehicles. The numbers assume that you drive 15,000 miles a year and that regular gasoline is $2.85, premium is $3.15 and diesel is $3.08, with a 3.5% annual increase for each fuel. The math also includes depreciation, maintenance and repairs, and it assumes you finance the vehicle with a five-year loan after a 15% down payment. Finally, we account for federal tax credits for vehicles that still qualify for them; they've expired for Ford, Honda, Lexus and Toyota hybrids. (If you're hit by the alternative minimum tax, the credit won't help you, so your payback time will be a bit longer.)

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Winners and losers. Diesels pay back their premium more often than hybrids do. Over five years, every diesel except one -- Volkswagen's Golf TDI -- costs less to own than the comparable gas-engine model. The savings range from $307 on the BMW X5 35d to $6,082 on the Mercedes-Benz GL350 Blue-Tec (the $60,825 diesel GL is priced $1,000 below the gas-engine GL450 and has a tax credit of $1,800). Among hybrids, you're more likely to be on the losing end of the deal as long as a gallon of gas still costs about $3. You'll save the most buying the superluxury Mercedes-Benz S400 hybrid ($92,475). It beats the S550 by $6,764 over five years -- mainly because it costs $3,650 less than the S550 and carries a tax credit of $1,150. But in general, the more expensive a hybrid, the less likely it will save money over its gas-engine sibling. For example, the biggest losers are the Chevrolet Tahoe and GMC Yukon hybrids (both about $52,000) -- which would cost you $10,000 more than their gas-engine comparables over five years -- and the Lexus LS 600h L ($109,675), which would cost a whopping $41,428 more to own.

At the other end of the price spectrum, Honda's Insight comes in under the gas-engine Fit by $1,795 after five years -- even without a tax credit. But the Toyota Prius II is $3,335 more expensive over five years than the Corolla LE. The nearly $6,000 premium accounts for most of the difference.

Use our Green Car Calculatorkiplinger.com/tools to run the numbers yourself. You can compare nearly all the 2010 hybrids and diesels against traditional models and against one another.



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