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The 2011 Toyota Prius isn't that great a deal, compared to fuel-efficient gas vehicles.  (Source: Toyota)

The Hyundai Elantra is more affordable over a 10-year lifetime, given current fuel costs and an average driving budget.  (Source: Hyundai)

Nissan's LEAF EV is the best deal of all -- but only because of the $7,500 tax credit.  (Source: Nissan)
Are EVs the best deal of all? Yes, but only thanks to tax credits -- without them, they're the worst

Thinking about buying that Prius?  You might want to think twice.

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 even.

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 take.

The LEAF retails for $25,280 USD + fees, post $7,500 tax credit.  (Note, the Mitsubishi 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?

Toyota 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 financially.

One answer may lie in smaller hybrids.  Toyota is contemplating releasing a mini-Prius, dubbed the Prius-C.  Ford Motor Comp.'s (Fplug-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 might think.

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.





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