about buying that Prius? You might want to think twice.
A recent study released
by the automotive analysis site TrueCar.com confirms what many
already suspected -- that the benefits of hybrid vehicles still fail to
justify their inflated premiums versus fuel-efficient budget vehicles.
I. Hybrids v. Gas Vehicles -- Hybrids Lose
A report examines the 2011
Toyota Prius from Toyota Motor Comp. (7203) -- the most
popular hybrid vehicle in America -- which gets about 49.6 miles per gallon
combined gas mileage and retails starting at $22,120 USD + fees. It
compares this to the 2011 Hyundai Elantra by
Hyundai Motor Comp. (005380), a fuel efficient budget "traditional"
gas vehicle which gets 33.1 mpg combined gas mileage and retails for $14,830
USD + fees.
At a gas price of $3.52 USD/gallon (the average price at the time of the
report's publication) the Prius owner would pay approximately $1,063 USD to
travel 15,000 miles over the year, while an Elantra owner would pay $1,594 USD
to travel the same distance. At $5 USD gas -- an extreme not yet reached,
the difference would grow to $1,510 USD (Prius) vs. $2,250 (Elantra).
Thus under the current price scenario, it would almost 14 years to recoup the
cost distance between the Prius and Elantra. However, Prius batteries are
only under warranty for 10 years and may die or experience significant
performance degradation as the vehicle gets up in the years. In other
words, buyers will have to wait years and may even then have trouble breaking
Of course if gas reached $5/gallon then it would only take 10 years to recoup
the difference, in which case the Prius might seem slightly more attractive.
Jesse Toprak, Vice President of Industry Trends and Insights at TrueCar.com,
concludes, "If you’re looking for the most fuel-efficient car, the Toyota
Prius wins. If you’re looking for the most cost-effective and fuel-efficient
car, the Hyundai Elantra is the clear winner."While intriguing the study has one serious flaw... read the update at the end of the study for that point and our conclusions.
II. Battery Electric Vehicles -- the Best Option of All?
What the report fails to mention is that the battery electric 2011 Nissan LEAF
EV from Nissan Motor Company, Ltd. (7201) might be the
most attractive option of all, given the initial comparison. Here's our
The LEAF retails for $25,280 USD + fees, post $7,500 tax credit. (Note,
i EV retails for even less --approximately $20,500 after federal tax
credit -- but is a significantly smaller compact and has limited availability).
The LEAF, comparable to the Prius in size, is approximately $3,150 USD more
expensive than the Prius and almost $10,500 more expensive than the Elantra.
But in theory that same driver could travel the 15,000 miles using only the
electric drive (even if you only consider driving on weekdays, this would work
out to an average of about 58 miles per day -- within the LEAF's range).
Over the year the driver would save approximately $1,600 at present gas
prices, minus the additional cost of electricity.
Assuming about $400 of the electricity based on $0.11 per kWh [source], this would work out to
$1,200 saved a year. Thus it would take nearly 9 years to recoup the cost
of investment -- and lo and behold, you might even come out ahead.
Of course this only is thanks to the $7,500 tax credit.
III. The Future -- Hope for the Hybrid?
is producing a lot of
Prii, currently (or was
pre-tsunami). But it still has a way to go before it sells as many as
its best-selling models like the Camry. Once this volume is reached,
costs should drop, which should help to justify the payback.
The real question is how to convince buyers to purchase enough hybrid vehicles
to get to that point at a time when the vehicles don't necessarily make sense
One answer may lie in smaller hybrids. Toyota is contemplating releasing
a mini-Prius, dubbed the
Prius-C. Ford Motor Comp.'s (F) plug-in
C-Max Energi, due out in 2012 will fill a similar niche. These
smaller hybrids will likely be more affordable, and are expected to get even
better gas mileage.
Of course they will be competing against smaller cars that are themselves far
cheaper and more fuel efficient, so this strategy may not be as easy as one
At the end of the day the pricing is predictable -- EVs are most expensive,
then hybrids, then traditional gas vehicles. EVs are the best deal
price-wise with tax credits, but without them they're the worst.
As the technology advances hybrids and electric vehicles may become the best
buy. But for now expect diesel vehicles and efficient gas-only sedans to
remain the most financially advantageous non-subsidized option.Updated: May 16, 2011 5:03 p.m.--As one reader points out, the base Elantra does not include air conditioning or an automatic transmission. The A/C upgrade costs an extra $1,250, while automatic trans. bumps the price $2,200. This would skew the figures slightly in favor of the Prius, but it's still very close. The return would be reduced to 7.5 years at current gas prices.This would still leave the EV even farther in the lead, so this conclusion is correct regardless of the comparison point.One thing to consider is that you'd only see returns on the Prius after 7.5 years, and would likely only see savings for ~ 2.5 years on average, as your battery would begin to deteriorate. Thus you'd be saving about $1,250 over a 10 year lifetime. That's less than an investment with 3 percent annual return over inflation, so it means even if you do save, it's not that "great" an investment for the amount of money you have to put in, up front.