Hybrid Cars

The word is out: An increasing number of Americans are falling madly in love with hybrids. The proof is in the numbers; in 2005, hybrid sales were up an astronomical 140 percent over 2004's figures. Why are more and more people finding it preferable to go green? We spoke with manufacturers, industry analysts, hybrid owners and a car dealer to get a sense of the factors motivating drivers to take the hybrid road.

Factor #1: Hybrid buyers want to make a statement. Many people are fed up with the United States' dependence on oil. They're concerned about the environment. They believe the solutions to these problems are hidden in plain sight, and they want to purchase a car that reflects these beliefs. Such is the case with hybrid owner Bill Fogarty. "I want to send as little of our money to the Middle East as possible while not changing my lifestyle," he says. For people like Fogarty, buying a hybrid does more than just reveal their convictions; it tells the world they have the strength to act on them. Phil Gott, director of automotive consulting at Global Insight, agrees, saying "Many people buy hybrids to make a statement; it's a green thing."

This factor certainly seems to play a part in the continued sales success of the Toyota Prius. In 2005, hybrid versions of popular vehicles like the Honda Civic and the Toyota Highlander were introduced. None of this made a dent in Prius sales, which rose 100.5 percent over 2004's numbers. The car remains far and away the best-selling hybrid, accounting for two-thirds of all hybrid sales. Gas-electric versions of the Civic and the Highlander can easily be mistaken for their non-hybrid counterparts. The distinctive-looking Prius exists only as a hybrid, so it's the leading choice for those who want to wear their hearts on their wheels.

Brian Hansen, a Prius owner and sales manager of a Toyota dealership in Wisconsin, agrees. "The true Prius buyer is motivated by the car's environmental impact — or lack thereof," he says. "They want to get that message out to others. Not so much from a 'look at me, I drive a Prius' standpoint; their perspective is more 'I drive a Prius because I care, and so should you.' Nothing else sends that message like a Prius."

Factor #2: Gas prices. Not surprisingly, steep gas prices have led many drivers to think outside the traditional gas-powered box when it comes to transportation. "I prefer to pass gas stations rather than stop at them," says Dan, an Edmunds.com Forums member who owns a Ford Escape Hybrid.

Fogarty has a similar perspective. "I feel strongly that the price of fuel is on a steep upward spiral," he says. "Driving as inexpensively as possible, given that I drive more than 40,000 miles each year, is critical."

The fact that hybrids are now available in a variety of configurations only makes them more appealing to those seeking to lighten their fuel bill. "I purchased my Ford Escape Hybrid because I was interested in a bigger vehicle without paying the extra energy cost," says one Forums user. "My Escape Hybrid gives me carlike economy with a truck stance. I'm getting about 34 mpg, with about 80-percent highway miles. This is what I had hoped for."

Hansen says his experience as a dealership sales manager suggests that gas prices are a primary factor driving hybrid sales. "When gas started climbing past $2.50 toward $3 per gallon, our Prius sales went through the roof," he says. "We went from a wait of about a month to wait times of four to five months. When gas prices started falling again, our wait time on the Prius went down, and we actually saw SUV sales start to make a slight comeback."

But Gott thinks the link between fuel prices and hybrid sales tends to be overstated. "If you look at the demographics, you'll see that most of the people who buy the Prius don't need to worry about fuel savings."

Factor #3: Tax credits and other perks. A tax credit that went into effect this January stands to give hybrid buyers an even better deal than the tax deduction it replaces. The actual amount of the credit depends on three things: the model of the hybrid, its popularity and when it was purchased. Also, the hybrid must have been purchased, not leased. But the payoff for this more complicated way of reckoning is significant: Hybrid owners are now eligible for a tax credit of up to $3,400 on their vehicles. See this article for a more detailed explanation of the credit.

Another perk of hybrid ownership allows owners with qualifying hybrids to drive solo (in some states) in High Occupancy Vehicle ("carpool") lanes. To qualify, hybrids must meet certain emissions and mileage requirements. Not all hybrids qualify. In California, popular hybrids like the Ford Escape Hybrid and the Toyota Highlander Hybrid aren't eligible. (See this page for more information on which hybrids qualify in California. Check your state's DMV site to see what the rules are in your neck of the woods.) And Travelers' Insurance recently announced it will give hybrid owners a 10-percent discount, since their statistics have shown that hybrid owners tend to be safer drivers.

For some, these benefits are key. "The fact that the tax break covers the difference between the top-of-the-line Civic EX and the Civic Hybrid made it a no-brainer for me," says Honda Civic Hybrid owner Jon Allen.

Hanson thinks the new tax credit stands to make some hybrids even more attractive. "With the Prius, the $2,000 deduction in 2005 was off total earned income and the savings were fairly small. If you earned $50,000 last year the deduction took your earned income to $48,000. In a 30-percent tax bracket that means a savings of $600. In 2006 it's a straight credit off your tax bill of $3,150. That makes it much easier to justify the extra money it takes to buy a hybrid. But it may not have as much of an impact on other [less fuel-efficient] hybrids like the Honda Accord Hybrid, for example, which is worth a credit of only $650."

Lonnie Miller, managing director for the Polk Center for Automotive Studies, thinks the perk factor is a secondary incentive. "It sweetens the deal — it certainly can't hurt," he says. "But most people don't come into the market with that as their primary motivator."

Factor #4: Hybrids are better for the environment. Cars, trucks and other mobile sources are responsible for almost a third of the total air pollution in the U.S. Hybrids help mitigate this problem by expelling lower emissions than their gas-driven counterparts. For example, a manual-equipped Honda Civic with a 2.0-liter engine generates 6.9 tons of greenhouse gas emissions per year. A Civic Hybrid is much cleaner, generating only 4.1 tons.

The emissions factor is of critical importance to many buyers, who'd like to do their part to keep our planet habitable for future generations. Miller thinks environmental concerns are paramount in the minds of many hybrid buyers. "This generation, when you cut 'em, they bleed green," he notes.

"Most Americans seem to drive without a conscience. I am not prepared to let that happen to me," says Allen. David Keith, a Honda Civic Hybrid owner, cites the car's "super-low emissions" as a primary factor in his decision to go green.

Factor #5: Hybrid owners love using new technology. Cutting-edge gadgets seldom make their way to the mainstream immediately. From podcasts to PDAs, new technology is typically championed by an elite few before being embraced by the masses. Hybrid owners want to be part of this elite group.

Keith cites the Civic Hybrid's "cool technology" as having played a part in his decision to buy one. Allen was also wooed by the "gee-whiz" factor inherent in hybrids, saying "I'll admit it — I'm a geeky engineer who likes good gadgets."

Some believe being first on board can help change the direction of the automotive industry. "For me, it's important to support the development of new technologies in fuel economy," says Fogarty.

But even within this clique of curve leaders, there are those who practice caution. "I waited a few years to get the bugs out," says Allen. "But does anyone remember Windows 1.1? I feel like my 2006 Honda Civic Hybrid is at least equivalent to Windows 3.0, which was good enough to be more time-saving than -wasting."

Greener Days Ahead
As hybrids grow more affordable, their popularity will likely increase. In a recent poll carried out by the Polk Center for Automotive Studies, respondents cited cost as the most significant factor standing between them and hybrid ownership. Hybrids have typically commanded a $3,500 premium over their non-hybrid counterparts. Already, this figure has begun to drop. The recently introduced Honda Civic Hybrid costs just $2,000 more than a top-of-the-line Civic, and the upcoming Saturn Vue Green Line will be similarly priced.

Future growth will also be fueled by the availability of a wealth of new models. Currently on the market are the Toyota Prius, Honda Insight and Lexus RX 400h, as well as hybrid versions of the Chevrolet Silverado, Ford Escape, GMC Sierra, Honda Accord, Honda Civic, Mercury Mariner, and Toyota Highlander. "The additional units from [last year's introduction of] the Lexus 400h and Highlander Hybrid alone contributed significantly to the increase in total industry hybrid sales" in 2005, says Toyota spokesperson Celeste Migliore.

This year, Toyota plans to woo green buyers with hybrid versions of the Toyota Camry and Lexus GS, and next year the manufacturer will likely unveil hybrid versions of the Lexus LS and Toyota Sienna. Other automakers are set to follow suit. General Motors plans to introduce hybrid versions of the Cadillac Escalade, Chevrolet Malibu, Chevrolet Tahoe and GMC Yukon. Nissan is expected to unveil a hybrid version of its Altima sedan. As mentioned earlier, Saturn plans to introduce a hybrid version of its Vue, dubbed the Vue Green Line. Ford's upcoming green machines include hybrid versions of the Ford Edge, Ford Five Hundred, Ford Fusion, Lincoln MKX, Mercury Milan and Mercury Montego. A hybrid version of the Porsche Cayenne is in the works. And DaimlerChrysler will likely introduce hybrid versions of the Dodge Durango and Dodge Ram.

"Hybrid technology is here and is being embraced," says Migliore. "With new manufacturers' offerings and entrants, the growth is surely going to continue."