Are Hybrids Cost-Effective? -

Hybrids: Pause Before You Purchase

They've Gone Mainstream, but Hybrids Aren't a Panacea for Rising Gas Prices

If there's one thing General Motors wants you to know about its newest large SUVs, it's that they're hybrids.

The word "hybrid" — or a symbol for it — is plastered on the new Chevrolet Tahoe Hybrid no fewer than 10 times, inside and out — from a 4-inch-tall sticker at the top of the windshield to huge "Hybrid" decals distributed along the entire bottom of both sides of the vehicle. The new GMC Yukon Hybrid is similarly bedecked.

The decals are signs of the times: Hybrid vehicles have become the new fulcrum of the U.S. auto market, made so by consumers who responded to spiking gas prices by drastically revving up hybrid sales. In fact, Americans' demand for hybrids has quickly begun to outstrip the available supply.

"Gas prices went up so much, so fast that supplies of most hybrids have been dwindling, and some are nonexistent," said Jesse Toprak, executive director of industry analysis. "And there won't be much of an increase in hybrid supply until sometime in the '09 model year, maybe this winter."

Help Is on the Way The good news is that a few years ago, automakers caught on to the growing consumer interest in hybrids, so today's supply bottlenecks should be a passing phenomenon. Manufacturers are addressing the most acute supply shortages as quickly as they can: Toyota, for example, now plans to build more Prius hybrids at the U.S. plant that had been tagged for expanding output of Tundra pickup trucks, and Ford is adding more capacity for its Escape Hybrid.

Already, there are about two dozen different hybrid models available, across a wide range of vehicle sizes, types and performance expectations. Nearly every major domestic and Japanese manufacturer makes at least one hybrid. Many new hybrid models are scheduled for launch over the next year or two.

And with each succeeding generation of hybrid technology, of course, engineers and designers are improving their game. Batteries are getting stronger and longer-lasting, and powertrains overall are becoming better tuned to the growing range of demands put on the technology by eager drivers.

Fundamental Challenges But Americans' evident enthusiasm for hybrids isn't entirely well placed. In addition to short-term problems of availability, hybrids present at least five fundamental issues that should make buyers wary — or, at least, discerning.

First and foremost, there is the huge matter of the premium that you're still going to have to pay to obtain a hybrid compared with the conventional version of a particular vehicle, or a hybrid that compares with a similar internal-combustion model. Excluding the Lexus LS 600h L, the hybrid premium ranges from about $1,700-$14,000, the average being close to $6,000.

The original reason for these premiums was to help manufacturers recoup their extra costs for developing hybrid powertrains. But at this point, the extra charges largely reflect supply and demand. Obviously, continued tight supplies of most hybrids suggest these premiums won't fall any time soon.

For that reason, there has been little improvement in the second important issue in hybrid ownership: the true cost of owning and operating one. This is determined in large part by how long you must own the vehicle until the higher gas mileage "pays back" the premium you pay at purchase for a hybrid versus a regular powertrain.

Costly To Own Fast-rising gas prices averaging $4 a gallon in the summer of 2008 began shaving the payback period on hybrid premiums, but not by as much as most consumers might think. Even adding in the federal tax credits that are available on the newest hybrid models, hybrids slip well down into the pack when long-term ownership costs are considered, according to's latest True Cost to Own SM research.

The much-vaunted Prius, for example, comes in no better than 34th overall in Edmunds' new True Cost to Own rankings, while the best-performing hybrid — the Honda Civic — placed only 14th overall.

"From a purely bottom-line perspective," Toprak said, "you're probably still better off buying a four-cylinder compact car with a gasoline engine than any hybrid."

Also note that the federal, and sometimes state, tax credits do not apply to leased vehicles, making the hybrid-to-gas-only comparison even more stark.

The third fundamental issue for hybrid owners is how much of an advantage in fuel-efficiency they're actually gaining. With some hybrids, such as the Honda Civic, the advantage over its conventional counterpart is significant. Perhaps surprisingly, the big new Tahoe and Yukon hybrids also deliver 25 percent better fuel efficiency than their conventional predecessors.

But with other types of hybrid, such as the Chevrolet Malibu, there is barely an improvement with its hybrid powertrain compared with a conventional four-cylinder version, because of the nature of the starter motor assembly that GM designed for it.

Powering Up There is also the increasing possibility of obtaining robust power from hybrids. In general, hybrids do their best work in the continuous stop-and-start of city driving. On the open road, their fuel-efficiency advantage wanes, and their typical lack of punch is most exposed.

Some hybrids, however, such as the Lexus GS 450h and discontinued Honda Accord hybrid, have been specifically designed to give drivers as much instant torque and sustained propulsion as their internal-combustion counterparts. Unfortunately, as a result, such hybrids usually give up much of the fuel-efficiency advantage they would otherwise provide.

GM's two hybrid SUVs provide one of the best balances so far between mileage improvement and maintaining the performance standards of their traditional counterparts.

Green Cred The other crucial factor about hybrid ownership is simultaneously the least palpable and yet, perhaps, the most important: making a statement.

Despite the collective discouragement that might be presented by the above factors, more and more Americans want to own a hybrid anyway. This may be to flaunt their environmental chops to themselves and others; it may be because the technology itself is so attractive to them; or for both reasons.

"Prius consumers, for example, are luxury consumers who are basically seeking out the technology of the hybrid and are willing to pay a premium for it," said Tim Longnecker, auto-industry specialist with Acxiom, a Little Rock, Arkansas-based research firm.

Consumers who want to combine truly huge new advancements in mileage with unassailable green credentials may want to wait a couple of years, for the debut of the next generation of hybrids — so-called "plug-ins." In the form of the Chevrolet Volt as well as a new model from Toyota and others, plug-ins promise to deliver huge leaps in fuel-efficiency even compared with today's hybrid models. In the meantime, you can easily figure out if it makes sense to trade in your car for a more fuel-efficient one by using our Gas Guzzler Calculator.

Ultimately, hybrids may prove to be just a transitional form of automotive transportation on the way to truly transformational vehicles. But until technology can deliver those new forms, more and more American consumers will be driving hybrids.

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