Hybrids Don't Shine in True Cost To Own Study

By John O'Dell June 25, 2008

Chevy Aveo tops ownership cost study. Civic hybrid and other gas-electric vehicles don't fare well because of hybrid premium in initial purtchase price.

By John O'Dell, Senior Editor

If saving money is your thing, and in these rugged economic times who isn't into that, then Chevrolet, Honda, Toyota and Nissan all have cars for you.

But they aren't hybrids

Previous studies using Edmunds' True Market Value calculations have shown that the so-called hybrid premium makes it difficult for the fuel-efficient cars and SUVs to save enough on fuel to earn back the higher price automakers charge for the advanced technology packed into a gas-electric powertrain.

Now a new Edmunds.com True Cost to Own study finds that even with their sometimes hefty federal tax credits, hybrids slip well down into the pack when long-term ownership costs are considered.

The Civic Hybrid is No. 14 in the TCO rankings being released today, while  the nation's best-selling hybrid, Toyota's Prius, doesn't even make the top 25. It finished 34th overall, although it is in second place among hybrids. Should gasoline prices continue to rise, however, hybrids' ownership cost performance does improve. The Civic Hybrid would move up to sixth place overall if gasoline hits $6 a gallon.

Cost Not Everything

Despite their higher cost to own, hybrids still make sense to many from an environmental perspective. They typically use less fuel - and pump out fewer pollutants and CO2 -- than their conventional counterparts.

And a new study by auto market researchers at J.D. Power & Associates has found that most hybrid buyers don't consciously calculate longterm costs anyhow, concentrating instead on preceived fuel savings.

To help go beyond such a shallow approach to the economics of car buying, the new Edmunds TCO study uses purchase price, depreciation and the average annual costs of fuel, financing, insurance, routine maintenance and repairs based on five years of ownership at 15,000 miles a year to compute the cost-per-mile of the hybrids and the least expensive conventional models in every manufacturer's lineup.

While hybrids are less expensive in the fuel and maintenance categories, their relatively high purchase prices - which also affect the cost of financing, taxes and licenses -- make it difficult for them to compete against less-expensive models, said  Jesse Toprak, Edmunds.com's senior industry analyst.

"Gasoline cost is a big factor at today's prices, but it isn't the biggest."

No matter how great the fuel savings, "a $25,000 Prius isn't going to match up well against a $10,000 Chevy Aveo or a $15,000 Civic," Toprak said,. 

First Place 

Indeed, it was a basic Aveo - the "Special Value" 4-door hatchback package with 1.6-liter engine and 5-speed manual transmission - that placed first on the overall list of the models that are the least-expensive to own, with a TCO of just 42.7 cents per mile.

The top ten are separated by a mere four pennies per mile, so rankings are sometimes  based on differences of tenths of a cent per mile.

In second place at 42.9 cents a mile is Hyundai's Accent GS, a 2-door hatchback that, like the top finisher, has a 1.6-liter engine and a 5 speed manual.

Honda's 4-door hatchback Fit, with 1.5 liter engine and 5 speed manual, placed third, with a TCO of 44.2 cents a mile.

In fourth place, 44.5 cents a mile, was Toyota's Yaris 2-door hatchback, also with a 1.5 liter engine and 5-speed manual, while Honda's base Civic DX sedan with a 1.8-liter engine and 5-speed manual, rounded out the top five at 45.5 cents a mile.

Deep Dive

Hybrid fans have to look pretty far down the list to find cars on their primary interest lists: after the base Civic Hybrid (the Civic Hybrid with a navigation system is rated as a separate model in 31st place, with a 5-year cost of ownership working out to 39.3 cents per mile) and the 34th place Prius - 49.4 cents a mile -- the next best performer is the Nissan Altima Hybrid.

But it is way down the list, in 66th place overall with an operating cost of 53.9 cents a mile. That placement comes despite a $2,350 federal tax credit.

Following the Altima Hybrid are the Chevrolet Malibu Hybrid, 81st-place  at 56.3 cents a mile; the Ford Escape Hybrid SUV, in 94th place at 58.3 cents a mile, and its near-twin, the Mercury Mariner Hybrid, 102nd at 59.6 cents a mile. The Malibu has a $1,300 tax credit, the Escape and Mariner TCOs include $3,000 federal credits.

Other hybrids and their placement and five-year ownership cost per  mile are the Toyota Camry sedan, 134, 63 cents; Toyota Highlander, 190, 72.5 cents; Lexus RX400h, 260, 98.7 cents; and Lexus GS450h, 294, $1.12 per mile. Federal tax credits for all of the Toyota and Lexus hybrids have been exhausted.

Gas Can Be Green

Many of the conventional gasoline-fueled top finishers are small and fairly fuel-efficient cars that can compete well with the hybrids for consideration as "green" cars.

Rounding out the top 10 in the TCO study are the Mazda3 iSport 2-liter sedan with 5-speed manual, 46.3 cents a mile; the Kia Rio 1.6-liter sedan with 5-speed manual, 46.4 cents; Scion's XB wagon with 2.4-liter engine and 5-speed manual tranny, 46.7 cents a mile; and the Toyota Corolla CE sedan with 1.8-liter engine and 5-speed manual, 46.8 cents per mile.

Tax credits for hybrid models fading out over time and as sales increase.

The $1,050 credit for Honda's gas-electric version of the Civic will drop to $525 on July 1, and that will drop it into 18th overall and boost its TCO by 2 percent, to 48.3 cents a mile.

Edmunds.com provides a TCO calculator, adjusted to account for regional price differences. To check the True Cost to Own for the vehicles on your shopping list (note, it doesn't account for the hybrid tax credit), click here.

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brn says: 6:08 AM, 06.25.08

Little, cheap cars are less expensive. No surprise there. It'd be curious to see how that changes over time. With people keeping their cars longer, it might change the list.

gwmort says: 6:19 AM, 06.25.08

Yeah these types of articles are really misleading to the general public and irresponsible journalism. The only reason to include much larger, more comfortable, and higher quality vehicles like the Prius against each manufacturers cheapest smallest entry level conventional car is to make the hybrids look bad.
 
Compared to cars of similar size and quality the hybrids stack up very well. There is also a hedge against inflation built in, with a hybrid you pay more up front at known cost and interst rate and use less fuel which may rise at unknown rates in the future.
 
It is also very speculative, the first second gen prius' haven't been on the market 5 years yet (came out in 2004), so this "study" is using guesses and estimates rather than hard data of what repairs cost and how trade in value holds up.
 
Total Bupkus, shame on you edmunds

greenpony says: 7:19 AM, 06.25.08

Obviously if you're looking for economical transportation, you need to run your own numbers and see what's cost effective for your situation. Maybe a couple-year-old car is better than brand new, a point this article does not even touch on. But if you value more than just price, you'll look at other things, like fuel economy, towing capacity, handling, power-to-weight ratio, seat comfort, sound system, etc. To gwmort's point, I doubt many people cross-shop an Aveo and Prius, so maybe we're comparing apples to oranges. But I think this article highlights important considerations for those who value overall cost above all else.

norcalplanner says: 8:35 AM, 06.25.08

The most misleading thing about all these comparisons is that a good 3-5 year old used car (Civic, Corolla, 3) is going to blow all of these out of the water in terms of cents/mile. If you want to save money, don't buy a new car!

opfreak says: 8:37 AM, 06.25.08

I agree with greenpony.
 
the list of TCO, is just that a list. Use the data to compare cars you are interested in.
 
I did something similar, and if your are ever interest in numbers/costs.
 
just setup a spread sheet with cars you are interested in, and caculate 5 years costs.
 
then add a cheap(er) class car, and a car more expensive.
 
At times, you kind of wonder, if over 5 years spending an extra 15-30k is really worth it.

brn says: 10:44 AM, 06.25.08

"The most misleading thing about all these comparisons is that a good 3-5 year old used car (Civic, Corolla, 3) is going to blow all of these out of the water"
 
Too high of a resale value on the cars you mention. If you're buying used, look at a car with low resale value. Much better deal.

kdhspyder says: 4:30 PM, 06.25.08

Compliments on the methodology. Your own tool is the most realistic. It the realworld to a good solid number. The reference to the potential of sharply increasing fuel prices helps everyone plan ahead IMO.
 
It also makes it easier for the buying public to make accurate assessments of where they each would like to spend their transportation dollars. The market is not at all monolithic. Thus while the basic vehicles are clearly the best in terms of being the least costly those buyers that aren't at all interested in a $12000 vehicle - no matter what the fuel economy - can rationally slide themselves up the scale until they find their own personal level of features vs fuel economy.

norcalplanner says: 1:21 PM, 06.26.08

brn,
 
Plugging in the numbers to Edmunds calculator, a 2003 Honda Civic LX (which happens to be my daily driver) has a TCO of 43 cents/mile, which would make it #2 on the above list.
 
A 2003 Toyota Corolla LE has a TCO of 42 cents/mile, which would make it the leader on this list.
 
Edit: Trying a 2003 Hyundai Accent GL on the calculator works out to 39 cents/mile.

brn says: 2:20 PM, 06.26.08

norcalplanner, I guess I was thinking about buying a new car and keeping it for say ten years. We have an eight year old car and and ten year old suv. They both run well and I suspect the TCO is pretty darned low now. It's too bad the TCO calculator won't let me put the numbers in for either of my vehicles. It's also to bad that it won't let me estimate TCO for ten years on a new vehicle. I don't think I'm that far out of the norm. From what I've read, a lot of people are keeping their cars longer now. Probably because cars simply last longer.
 
Btw: I punched in a 2003 Ford Escort. 37 cents per mile. 35 cents for a Cavalier or Neon. The Sentra squeezes in at 34 cents. Interesting that all of these blow away the Civic and Corolla. I bet resale value has a lot to do with it.

norcalplanner says: 8:24 AM, 06.27.08

brn,
 
I'm totally with you on keeping a car longer than five years. My favorite time of car ownership is after the loan is paid off. On the cost comparison with other models, I'd personally rather drive a car with a better reliability history - lower initial cost plus more frequent repairs may be the same or lower end cost, but it's a lot more inconvenient because you can't plan when the car is going to break.
 
I'm also not convinced that the average maintenance/repair costs used in the Edmunds calculator are accurate. My Civic doesn't have anything close to the costs indicated; I've replaced tires once, the battery once, and changed the oil regularly, but everything else is still original (brakes, timing belt, spark plugs, etc.) since I'm following the maintenance schedule in the owner's manual instead of the more aggressive one hawked by my local Honda dealer. Of course, it helps that I only drive the car 10,000 miles/year in a flat area (easy on brakes and transmission) in a part of the country that doesn't snow (no salt corrosion).

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