Why Hybrids Make Sense

Nearly one-fourth of consumers surveyed recently by J.D. Power and Associates say their next car will be a hybrid, and sales have risen steadily over the past four years. But when you compare the cost of a hybrid with that of a conventional model, the price premium may give you pause. The average price of a hybrid is about $3,700 higher than that of its comparable gasoline-engine model. Back-of-the-envelope calculations of savings on gas show that it would take years to recoup that money; that’s one reason hybrids accounted for only 3% of total sales last year. It doesn’t help that Uncle Sam ended tax credits for hybrid purchases in 2010. Plus, the Energy Information Administration has forecast lower gas prices for the next year or two.

See Also: 15 Most Fuel-Efficient Cars, 2013

The whole picture. But there’s more to the calculation than just fuel savings and tax credits. Hybrids retain more of their original value and often have lower maintenance costs than their nonhybrid counterparts. Too many buyers “overweight initial cost and underweight the total cost of ownership,” says John Voelcker, editor of Green Car Reports. When you take these costs into account, the financial equation shifts.

Kelley Blue Book’s ownership cost calculator lets you compare the five-year costs of models on the market. For example, the Toyota Camry Hybrid LE (sticker price $26,935) costs $3,460 more than the Camry LE ($23,475). But the hybrid’s five-year ownership cost is $150 less than its nonhybrid sibling’s.

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Ford’s Fusion SE Hybrid ($27,995) costs $1,700 less to own over five years than the Fusion SE gas-engine model ($24,515). Other hybrid models that cost less or virtually break even over five years compared with their conventional doppelgangers include the Acura ILX ($29,795), Ford C-Max ($25,995, compared with the Ford Focus hatchback), Honda Civic Hybrid ($25,150), Lexus ES 300h ($39,745) and Toyota Prius Two ($24,995, compared with the Toyota Matrix). Lincoln’s MKZ hybrid is the same price as the base model ($36,820) and costs nearly $7,000 less over five years. The greater the initial price premium, the less likely you’ll recoup it, and that’s especially true with luxury vehicles.

Many hybrid owners are just as concerned with the environmental benefits as with the impact on their wallets. A hybrid produces lower emissions than its gasoline-engine equivalent because the less gasoline a car burns, the less carbon dioxide it spews. Using less fossil fuel is also a plus.

Good news for buyers. Nearly every category of vehicle now has a hybrid option, and some hybrid models are making a comeback. Honda’s Accord Hybrid, last sold as a 2007 model, will return early next year. Nissan is expected to bring back the Altima Hybrid after a two-year hiatus. And Ford will likely bring back the Escape Hybrid.

Battery life has long been a concern of potential buyers, but experts say it isn’t an issue. The only vehicles needing replacements in any quantity are the first generation of Toyota Priuses, which are now 12 to 13 years old. The cost of a replacement pack for the Prius is down from $9,800 to $2,600, and prices are expected to decrease further as automakers benefit from economies of scale with more hybrid sales. Most brands’ hybrid component warranties are for eight years, and Hyundai offers a lifetime warranty.

If you own a hybrid for fewer than five years or don’t drive much, you’ll get less value from a hybrid model. Thanks to stricter government fuel-economy standards, you have more choices among gas-sipping conventional vehicles. Among midsize sedans, both the redesigned Nissan Altima ($22,550) and the 2014 Mazda6 ($23,290) post 38 mpg on the highway.

Ask Jessica a question at janderson@kiplinger.com, or follow her on Facebook or Twitter.