Why Hybrids and Diesels Don't Always Save You Money

Hybrids and the current crop of clean diesels offer impressive fuel savings over their gas counterparts. But hybrid and diesel technologies aren't cheap and often add thousands of dollars to a car's sticker price. As recently as 2010, the federal government offered tax credits that helped soften the financial impact. That spurred sales and encouraged consumers to adopt this new technology. But those tax credits stopped on January 1, 2011. With their expiration and the ever looming shadow of $5-per-gallon gas, comes a good question for consumers: Are hybrids and diesels a good value?

Break-Even Times
Most people won't keep a diesel or hybrid car long enough to realize savings from them. If you're the average person, you hold onto a new car for six years. After that, you're thinking about purchasing a new one. Unless you keep the hybrid or diesel past its "break-even" period — the amount of time it would take you to save enough money on gas to offset the additional expense of buying the hybrid — it's not the wise choice.

Keep in mind that the break-even times are a reference tool for new car shoppers. Here, we are comparing a new hybrid or diesel vehicle to another new gasoline vehicle. Since everyone drives different cars, we aren't able to list the payback time for a vehicle you currently drive. If you are trying to determine whether you should trade in your vehicle for something more fuel efficient, the Edmunds gas-guzzler calculator can easily give you the answer.

The three charts below show the break-even times of the best-selling hybrids and diesels. This data assumes the driver averages 15,000 miles per year and that the national gasoline price is $3.45 per gallon for regular, $3.71 for premium and $3.88 for a gallon of diesel. Keep in mind that these numbers aren't set in stone. If you drive fewer miles per year, the payback time increases. Or if the price of fuel goes up, the payback times get shorter. To illustrate this, we also ran the numbers for gas at a cost of $5 per gallon. Next we added about 27 cents for the price of premium. Diesel fuel is typically about 40 cents more than the price of regular fuel, so we also plugged in that number, too.

This first chart is pretty straightforward. It is an apples-to-apples comparison of hybrids with their gasoline-model equivalents. The number in parenthesis represents a theoretical payback time for $5-per-gallon gasoline.

Top-Selling Hybrids vs. Their Gasoline Equivalents
Ford Fusion Hybrid: 5.9 years (4.1)
Lexus RX 450h: 8.1 years (5.6)
Ford Escape Hybrid: 8.4 years (5.8)
Hyundai Sonata Hybrid: 5.2 years (3.7)
Toyota Camry Hybrid: 7.3 years (5.0)

The most popular hybrids (Toyota Prius, Honda Insight, Lexus CT 200h) tend to be ones that do not have equivalent gasoline models. For some people, part of the appeal of a hybrid is its unique look. In an effort to have some point of reference for these cars, we compared the top-selling hybrids to similar models based on size and price within the same brand. The negative numbers mean that the hybrid model was less expensive than the gas model we compared it to.

Top-Selling Hybrids vs. Similar Gasoline-Powered Cars
Toyota Prius vs. Toyota Corolla: 7.4 years (5.1)
Honda Insight vs. Honda Fit: 4.8 years (3.3)
Lexus CT 200h vs. Lexus: IS 250: -2.3 years (-1.6)
Honda CR-Z vs. Honda Civic Coupe: -0.2 year (No significant change)
Lexus HS 250h vs. Lexus ES 350: 2.0 years (1.4)

Diesel-powered vehicles have increased in popularity, but still do not share the same level of success as hybrids. Nor do they have the hybrids' clean image. As the chart below shows, some diesel cars require a hefty payback period.

Top-Selling Diesels (excludes heavy-duty trucks):
Volkswagen Jetta TDI: 15.3 years (8.4)
Volkswagen Golf TDI: 18.1 years (9.9)
BMW X5 xDrive35d: 45.6 years (22.6)
Mercedes-Benz GL350 Bluetec: 0.4 year (0.2)
Mercedes-Benz ML350 Bluetec: 2.9 years (1.9)

Clearly, these break-even times are all over the map. It really depends on the model you are interested in and what you are comparing it to. But in general, hybrids and diesels are still pricey cars. And even in the unfortunate event that gas does reach $5 per gallon, it still may not be worth buying hybrid or diesel if you don't keep your car long enough to realize the gas-cost savings.

Hybrids have been around for more than 10 years, but while the technology keeps improving, the prices haven't. Plus, nearly every hybrid uses rare earth metals like lithium, lanthanum and neodymium, whose prices have increased as more products (e.g., laptops and cell phones) use these batteries.

Finally, the hybrid and/or diesel version of a vehicle is often positioned as the brand's high-tech model, and as such, it's loaded with more options than would normally be found in the gasoline equivalent. Buyers aren't just paying more for the clean-fuel technology, but also for foglights, unique wheels, added navigation or leather seats.

The Case for Hybrids and Diesels
It's easy to get fooled by advertising and think that as soon as you purchase a hybrid or diesel vehicle you will start saving money. That's not always true, but there are still reasons why people choose these cars:

• Reduced greenhouse gas emissions: People buy hybrids because they want a vehicle that uses less gasoline and thus reduces their carbon footprint. For them, the choice of car isn't based on saving money, but on reducing their impact on the environment.
• Fewer trips to the gas station: Not having to fill your car with gas on a weekly basis is such a powerful feeling that many people buy hybrids or diesels just to delay those inevitable trips to the gas station.
• The prospect of steeper gas prices: The break-even numbers in this article can change. They are snapshots of current gas prices and assume that a person drives 15,000 miles per year. If gas prices go up — and a number of signs say they will — the break-even times shorten. That's also the case for owners who drive more than the 15,000-mile average in these examples.

Hybrid and Diesel Alternatives
If you are put off by the break-even times on new hybrids and diesels but want to save money on fuel, there are a number of alternate routes to take:

• Keep your car: In most cases, you'll save money by simply hanging on to your current vehicle. The cost of buying a new car has to be offset before it can start saving you money on gas. Use our gas-guzzler calculator to determine whether the jump to a new car would make sense.
• Consider a new fuel-efficient conventional car: The Chevrolet Sonic, Ford Fiesta and Hyundai Elantra are a few examples of the new breed of compact cars that can get hybridlike fuel economy. Each of these achieves up to 40 mpg on the highway.
• Shop for a used fuel-sipper: If a new fuel-efficient car is beyond your budget, consider buying a used car that gets good mileage. A 2007 Honda Civic, for example, averages about 30 mpg in mixed driving. A quick search of used-car listings shows that a five- or six-year-old Civic can be had for thousands less than a new Civic Hybrid whose mpg is about 44 mpg. That savings can pay for a lot of gas.

Seeing Through Hybrid and Diesel Hype
Hybrids and, to a lesser extent, diesels, get a lot of media attention. But the fact is that they constitute less than 3 percent of all cars sold. Price is likely one reason for those meager sales figures. If you want to reduce your carbon footprint or take advantage of some of the non-economic benefits of hybrids and diesels, you might be willing to pay more to do so. But if your primary interest in a hybrid or diesel is saving money on fuel, it makes sense to check out other options.