Edmunds Data Proves Diesel "Break-Even" Is Shorter Than Hybrids

With a growing number of diesel vehicles making their way to the U.S., Edmunds.com has discovered that diesels present an even better choice for fuel-economy-minded consumers than hybrids.

Diesels cost more than their gas-powered equivalent vehicles, but this higher purchase price is quickly offset by fuel-economy savings and tax credits for some models. With hybrid vehicles, this so-called "break-even" period is longer — in some cases many years longer. Since 2010 is the final year for vehicles eligible for a tax credit, this is a good time to compare the cost-effectiveness of the two technologies.

"With high fuel prices, consumers are steering their car purchases toward vehicles that get better fuel economy. For many shoppers, this means their first thought is to buy a hybrid vehicle. But in light of this new data, they should also consider a diesel vehicle," said Jessica Caldwell, Edmunds.com director of pricing and industry analysis.

Why Diesels?

"Diesel engines produce a greater fuel-economy boost over their gasoline counterparts than do most hybrid powertrains," said Caldwell. "This makes it a great choice for anyone tired of rising oil prices."

If you take a look at the break-even period of diesel vehicles versus their gasoline equivalents, you'll find that the average is about 2.2 years. With hybrids, the average jumps to 13.5 years.

Case in point: The BMW 335d costs more to buy than its gas-powered counterpart, but the improved fuel economy it delivers pays for this higher cost differential in only four years. Compare this to the scenario where a car shopper chooses the Lexus GS 450h hybrid over the Lexus GS 460 gas-powered car. In that case, the better fuel economy of the Lexus GS 450h takes 9.7 years to pay for the cost difference (see chart below).

The Mercedes-Benz M-Class diesel and hybrid SUVs give us a unique situation to compare similar vehicles within a brand. The Mercedes ML450 Hybrid takes 10.6 years to break even. Since the Mercedes ML350 Bluetec costs about $6,110 less, this diesel will break even in only one year.


There are some vehicles that didn't make it in our chart, but had significant break-even periods — both good and bad. For example, since the Lexus LS 600h only saves you about $265 per year, it would take 112.7 years to pay off the $29,840 premium over the gasoline vehicle.

Mercedes has a few examples of an immediate break-even point. This means that the moment you purchase the vehicle, you are saving money over the gasoline equivalent. Both the GL350 Bluetec and the S400 Hybrid cost less than their gas counterparts, and offer fuel-economy improvements of 33.1 and 21.3 percent, respectively.

Hybrid Costs Have Come Down

It's not all bad news for consumers interested in hybrids. Here are a few examples of short hybrid break-even periods. The Toyota Camry Hybrid only needs 1.4 years to cover the extra cost. After that, you're saving about $348 per year in fuel. The Cadillac Escalade Hybrid may not be your first choice when considering a hybrid, but the hybrid version breaks even after a few months and saves you about $767 a year. Lastly, if you compare the Toyota Prius with its closest match, the Toyota Camry, the break-even period is about 2.4 years.

Haunted by the Past

So if diesels are so thrifty, why don't more people choose them?

"In the past, diesels have gotten a bad rap in this country," said Director of Vehicle Testing Dan Edmunds. "The diesels that were sold here were slow, noisy and smelly. But all that has changed."

Breakthroughs in diesel technology by Mercedes and Volkswagen have helped spread diesels to states with tough air quality restrictions. These modern diesels, with impressive fuel-economy benefits, have begun to steal some of the fuel-economy market share from hybrids.

Additionally, diesels are a good option for consumers who want to cut their use of foreign oil and show their support for energy independence. Diesels can run on biodiesel, produced in the U.S. from crops such as soybeans, with little or no modification. Biodiesel is often more expensive than "petro-diesel" but there is little drop-off in fuel economy between the petroleum-based fuel and the biofuel. This is not the case with E85 (85 percent ethanol and 15 percent gasoline), which costs less to buy, but because of a steep decline in fuel economy is ultimately more expensive to operate.

"Another point in diesel's favor is that it offers a better 'well-to-wheels picture than a gasoline-powered car,'" said Edmunds, referring to the entire environmental impact of drilling, refining and shipping the fuel to the filling station. "Diesel requires less energy to refine and then provides more fuel economy when it's burned — that's a double win for environmentally minded consumers."

For anyone looking for a new option to hybrids, diesels are definitely worth consideration. Eventually diesels will be combined with hybrid powertrains, for the best of both worlds.

Make/Model True Market Value (TMV)* Premium Paid for Alternative Fuel Vehicle** Average Miles Per Gallon (Alternative Vehicle) Average Miles Per Gallon (Gasoline Powered Vehicle) Percentage Savings of Fuel Economy vs. Gas Powered Engine*** Annual Fuel Savings**** Years To Break Even*****
2010 BMW 335d (Diesel) $41,740 $2,531 27.5 20.1 36.8% $635 4.0
2010 Lexus GS 450h (Hybrid) $54,387 $3,473 23.3 19.6 18.9% $359 9.7
2010 Mercedes-Benz ML350 BlueTEC Diesel $47,566 $542 20.6 16.9 21.9% $535 1.0
Mercedes-Benz ML450 (Hybrid) $53,675 $6,652 22.3 16.9 31.6% $630 10.6
2010 Volkswagen Touareg TDI (Diesel) $41,494 $2,136 20.6 15.9 29.6% $703 3.0
2010 Toyota Highlander (Hybrid) $33,244 $5,579 26.1 19.3 35.2% $545 10.2
2010 Audi Q7 TDI (Diesel) $49,266 $2,970 19.9 15.9 25.2% $626 4.7
2010 GMC Yukon (Hybrid) $48,320 $3,437 21.4 17.2 24.4% $460 7.5
2010 Volkswagen Jetta TDI (Diesel) $22,852 $1,220 34.4 25.7 33.9% $318 3.8
2010 Nissan Altima (Hybrid) $23,824 $2,348 34.1 26.3 29.7% $347 6.8

*Edmunds' True Market Value (TMV) provides the current transaction price for new and used vehicles. The data used in the chart above is the transaction price for a typically equipped vehicle in February 2010.
** The premium paid for an alternative-fuel vehicle is the difference between the typically equipped TMV alternative-fuel vehicle versus the TMV of its gasoline-powered counterpart.
*** Percentage saved by using an alternative-fuel vehicle versus its gasoline-powered counterpart.
**** Fuel priced on February 24, 2010 — Regular Gasoline ($2.68), Premium Gasoline ($2.95) and Diesel ($2.86) per gallon
***** Years it takes to recoup the additional premium paid for an alternative vehicle versus a similar gasoline counterpart.