Most Hybrid Vehicles Not as Cost-Effective as They Seem, Reports Edmunds.com


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Most Hybrid Vehicles Not as Cost-Effective as They Seem, Reports Edmunds.com

SANTA MONICA, Calif. — June 1, 2005 —Consumers seeking shelter from high gas prices might not find the relief they expect by turning to hybrids, announced Edmunds.com, the premier online resource for automotive information.

"The combination of increasingly higher gas prices and a greater variety of hybrids in the marketplace has made many consumers seriously consider a hybrid as their next vehicle," said Phil Reed, co-author of Edmunds.com's "Strategies for Smart Car Buyers." "While some people buy hybrid cars because they appreciate the environmental benefits and enjoy using advanced technology, consumers looking at hybrids solely to save money at the gas pump need to carefully research the cost of actually owning and operating a hybrid."

Consumers who own a hybrid car or SUV may purchase less gas and have lower maintenance expenses than if they owned the non-hybrid counterpart, and may qualify for a federal tax credit designated for hybrid vehicle owners. However, most hybrids high sales prices, insurance costs and related expenses will offset the savings. Edmunds.com found that during the first five years of ownership, a hybrid can cost as much as $5,283 more than its non-hybrid counterpart.

Model
Edmunds.com True Market Value®
price plus ownership costs*
Additional cost to own hybrid
Ford Escape Hybrid $50,521  
Ford Escape XLT AWD $47,092 $3,429
     
Honda Accord Hybrid $49,972  
Honda Accord EX V-6 $46,156 $3,816
     
Honda Civic Hybrid $36,666  
Honda Civic LX $32,993 $3,672
     
Toyota Prius $37,893  
Toyota Corolla LE $32,610 $5,283
Toyota Camry LE $37,974 -$81

Only when the analysts compared the Toyota Prius to the Toyota Camry LE did the hybrid ownership experience prove financially advantageous but barely. Over the first five years of ownership, the Camry is expected to cost just $81 more than the Prius.

However, when comparing the costs of the other vehicles, Edmunds.com analysts determined that gas would have to cost at least $5.60 per gallon for hybrid drivers to break even if they drove 15,000 miles per year over the five years. Alternately, they could break even if they drove at least 37,000 miles per year at the current average gas price of $2.28 per gallon.

Below are the break-even points for hybrid ownership for each vehicle in the study.

Model
Fuel Would Have to Cost...
Or a Driver Would Have to Exceed Annual Mileage of...
Ford Escape Hybrid (vs. Ford Escape XLT AWD) $5.6 37,000
Honda Accord Hybrid (vs. Honda Accord EX V-6) $9.20 60,000
Honda Civic Hybrid (vs. Honda Civic LX) $9.60 63,000
Toyota Prius (vs. Toyota Corolla) $10.10 66,500
Toyota Prius (vs. Toyota Camry) $2.28 15,000

Edmunds.com analysts predict this cost differential is likely to decrease as the technology matures and hybrids become more mainstream. Currently, hybrids make up less than one percent of market share. Accordingly, the manufacturers have not yet been able to achieve economies of scale and are passing the higher costs along to their buyers. Since current customer demand greatly exceeds supply, the vehicles are easily able to carry the premium transaction price. At some point in the near future, these dynamics are expected to change.

Other factors may level the playing field even sooner. For example, President Bush made a speech on May 17 in which he stated that his proposed 2006 budget includes a substantial increase in the hybrid tax credit.

The above hybrid vehicle ownership research was based on data from Edmunds.com's free True Cost to OwnSM tool, found at http://www.edmunds.com/apps/cto/CTOintroController, which helps consumers estimate the total five-year cost of buying and owning a car or truck. The tool covers new vehicles and used vehicles starting with the 2001 model year.

Anyone shopping for a vehicle, especially one very different from his or her current car or truck, should do research to avoid being surprised by the ownership costs, advised Reed. In general, no more than 20 percent of a household budget should be designated to cover automotive expenses.

*How Edmunds.com Analysts Determined the Costs

The Edmunds.com True Market Value® is the average purchase price as described athttp://www.edmunds.com/tmv/about_new.html. The ownership costs used in the above estimations include interest on financing, taxes and fees, insurance premiums, fuel, maintenance and repairs. Fuel was estimated to cost $2.28 per gallon for the first year with a three percent increase for each subsequent year. It was also assumed that the vehicles are traditionally financed over 60 months with a 10 percent down payment by a buyer with a good credit rating who drives 15,000 miles per year. And, the buyer is assumed to be in the average demographic for insurance rates, and qualifies for the hybrid vehicle federal tax credit.

About Edmunds.com, Inc. (www.edmunds.com)

Edmunds.com is the premier online resource for automotive information. Its comprehensive set of data, tools and services, including Edmunds.com True Market Value® pricing, is generated by Edmunds.com Information Solutions and is licensed to third parties. For example, the company supplies content for the auto sections of NYTimes.com, AOL, About.com, iVillage.com and IGN.com, provides weekly data to Automotive News and delivers monthly data reports to Wall Street analysts. Edmunds.com also publishes a high-speed, on-screen car magazine called Inside Line available free at www.insideline.com. Edmunds.com was named "best car research" site by Forbes ASAP, has been selected by consumers as the "most useful Web site" according to every J.D. Power and Associates New Autoshopper.com StudySM and was ranked first in the Survey of Car-Shopping Web Sites as reported by The Wall Street Journal. The company is headquartered in Santa Monica, Calif. and maintains a satellite office outside Detroit.

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