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The Real Costs of Owning a Hybrid

(updated September 9th, 2013)

A decade ago there were two hybrid car models available in the U.S. market. Today there are close to 50. The number continues to grow as automakers turn to hybrids as a way to meet tough new federal fuel economy goals and to appeal to consumers who seek them out for their fuel efficiency, low emissions and high-tech features.

What once was a niche vehicle with a decidedly small audience of early adopters has slowly entered the mainstream. But let's face it: In most cases the sticker price of a hybrid vehicle is higher than that of its gasoline-powered counterpart, sometimes significantly so.

Does the improved fuel economy offset the extra cost? What happens if the hybrid drivetrain breaks, or the battery wears out?

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We looked at a variety of issues and talked with hybrid owners, mechanics and manufacturers to learn the real costs of owning these high-tech cars.

Price Premium vs. Incentives
Hybrid cars, SUVs and trucks, including the plug-in hybrids that began appearing in the market in 2012, often can cost from several thousand dollars less to $13,000 more than gasoline-only versions of the same vehicles.

There are exceptions to the rule. At the low end of the premium scale, the 2013 Mercedes-Benz S400 Hybrid sedan comes in at $2,650 less than the S550 sedan. And both the 2013 Lincoln MKZ hybrid and the 2013 Buick Regal Hybrid are priced the same as their gasoline counterparts.

At the high end, the base 2013 Volkswagen Touareg Hybrid SUV costs $13,190 more than the base Touareg VR6, while the Audi Q5 Hybrid SUV starts at $13,091 more than the gas-only Q5. Granted, the hybrid models in both cases come with a number of features as standard equipment that are either pricey options or aren't available on the base versions of the gasoline models, but there's still a considerable "hybrid technology premium" in their prices.

There's also the one-of-a-kind situation over at Lexus, where the ultra-luxe and rarely sold LS 600h L hybrid is priced almost $25,000 higher than its closest gas-only stablemate, the Lexus LS 460 L.'s gas-guzzler trade-in tool can be used to calculate the price premium of any alternative-energy vehicle versus any gasoline or diesel model.

Buyers of plug-in hybrids can offset some of those premiums with a federal tax credit. The credit provides a dollar-for-dollar reduction in the owner's tax bill and while most plug-in hybrids have credits of $2,500-$3,750, they can go as high as $7,500, depending on the size of the vehicle's battery. The Department of Energy's Web site includes a list of vehicles that qualify for federal tax credits.

The plug-in hybrid credits were authorized in the Energy Improvement and Extension Act of 2008 and are lumped in with battery-electric vehicle tax credits. That means the credits for any particular model of plug-in won't expire until a year after its manufacturer has sold a total of 200,000 plug-in hybrid and battery-electric vehicles. So far, that's a sales figure no individual automaker has achieved.

Credits for conventional hybrids (those without external battery charging capability) were phased out at the end of 2010, and most state and regional incentives for hybrid purchases also have been phased out as the cars gained mainstream status.

The Energy Department maintains a list of remaining state incentives for hybrids and other alternative-fuel vehicles.

Insurance Changes
Some insurance companies believe that drivers of hybrid vehicles have a lower risk of being involved in an accident than drivers of non-hybrid vehicles. Others don't give any special credit to hybrids for modifying driver behavior. Thus, some insurers including Farmers Insurance and Travelers Insurance offer discounted premiums for hybrid models while others don't. Some insurers might actually charge more if their claims history shows that hybrid components cost more to fix if they're damaged.

So it's important to ask your agent about what to expect. If you insurer doesn't offer a hybrid discount, or even charges more, you may want to shop around for new coverage.

Batteries and Repairs: No Worries
Hybrid critics warn of potentially expensive repairs associated with the hybrid-specific parts, such as battery packs. "I was a little concerned initially," said Lydia Segal of Alexandria, Virginia, who owns a Lexus RX 400h, "but Toyota's had its hybrid technology out for quite a while now. Plus, I did a lot of research on the Internet and couldn't find anyone who had a problem with the hybrid system."

And there doesn't seem much reason to worry. All the hybrid-specific components in every hybrid vehicle currently on the market are covered under warranty for eight years/100,000 miles or 10 years/150,000 miles, depending on the state, but these components have been shown to have a much longer lifespan in testing and in real-world conditions.

Toyota, for example, reports that its battery packs have lasted for more than 180,000 miles in testing. A large number of Ford Escape Hybrid and Toyota Prius taxicabs in New York and San Francisco have logged well over 200,000 miles on their original battery packs and are still running well.

Additionally, the price of the nickel-metal hydride batteries used in most conventional hybrids is dropping as increased volume lowers production costs. Toyota sells batteries for the popular 2004-'09 Prius for less than $2,200, and replacement battery packs for 2005-'11 Honda Civic hybrids are now about $1,700, down from $2,400 in 2009.

Another factor in battery prices is battery recyclability. More recycling means lower costs because the raw materials for batteries don't have to be mined and refined each time. Hybrid battery recycling is still in its infancy. There simply haven't been all that many battery packs surrendered for recycling, which is a testament to the batteries' longevity.

Every hybrid manufacturer reports that it has conducted testing of hybrid components in extreme temperatures and with repeated charge/discharge cycles, with no ill effects on the hybrid system.

Regular Maintenance Costs Are a Draw
Most hybrid cars do not require any additional regular maintenance on the hybrid-specific components. An exception is the air filter on the battery system of the now-discontinued Ford Escape Hybrid, which needs to be replaced every 40,000 miles.

The gasoline engine in a hybrid vehicle requires the same maintenance that it would if it were the only power source driving the vehicle. That means regular tune-ups and oil changes every 5,000-10,000 miles, depending on the vehicle and the driving conditions.

One important hybrid benefit is that ordinary vehicles need to have their brake pads changed regularly. But hybrids' regenerative braking systems eliminate much of the wear on the mechanical brakes, so their brake pads typically last much longer, says Carolyn Coquillette, owner and lead mechanic of Luscious Garage in San Francisco, and a hybrid vehicle specialist.

Fuel Economy Is the Hybrid's Strength
The hybrid vehicle's reason for being is to reduce gasoline use. Toyota's Prius hatchback, for instance, is now rated at 50 mpg in combined city and highway driving. The larger 2013 Prius V wagon is rated at 42 mpg. Ford's Fusion hybrid is rated at 47 mpg.

Those ratings, issued by the EPA and included on all new passenger vehicles' window stickers, have never been spot-on for every car. Mileage varies for a variety of reasons, and one reason is that the EPA test protocol is optimized for conventional gasoline vehicles.

Hybrids deliver their best fuel economy at low speeds and in stop-and-go conditions, when the electric-drive system does a lot of the work. The hybrid advantage largely goes away for sustained highway speeds.

Thus the EPA admits that even after its most recent revision of fuel economy test procedures, which took place in 2008, the ratings for hybrids can easily be 20-30 percent higher than most drivers will experience in real-world conditions.

Ford Motor Co., for instance, has been stung by complaints that its hybrids aren't delivering anything close to their EPA-rated 47 mpg. Ford has announced a series of upgrades designed to bring its hybrids' real-world fuel efficiency closer to the official ratings.

Add to that the fact that hybrids, just like other cars, are sensitive to factors such as speed, hard braking, quick acceleration, cargo loads and use of air-conditioning and it's easy to see that while EPA fuel economy ratings are a valuable guide, they shouldn't be considered a promise.

Nonetheless, the cost of fueling a hybrid will always be lower than for its gas-only counterpart. The difference is more significant for some models than others, so even if you reduce the fuel economy ratings by 30 percent for the hybrid and 10 percent for its non-hybrid competitor, do look at the EPA ratings when comparing.

How Hybrids Improve Fuel Economy
The boost in fuel efficiency that a hybrid delivers is the result of drivetrain technology that combines the best of the gasoline engine and the electric motor. Vehicles that use only electric motors are incredibly fuel efficient, but have limited range and long recharge times. Gasoline engines aren't very efficient: Only about 25 percent of the fuel they burn is turned into energy that drives the wheels, and most of the time they are running, they need only a small portion of the power they produce.

To resolve those issues, a hybrid uses a smaller gas engine than a car of its size would typically need and augments it with an electric drive system that delivers extra power when needed without burning additional gasoline. There's no time lost plugging in hybrids to recharge the batteries: The car generates its own electricity through the gas engine and the regenerative braking system. (This is different for plug-in hybrids, as their name suggests.) And there's no range issue because a hybrid will keep going as long as there's gasoline available.

For a deeper dive on this subject, please read "What Are Hybrid Cars and How Do They Work?".

Hybrid Costs vs. Benefits
On the surface, it appears that the added costs of purchasing a hybrid are at least partially offset by reduced fuel costs and, in some cases, lower insurance rates. Thus far, maintenance and repair costs for hybrid cars seem to be a wash. Of course, much depends on the vehicle you choose, where you live, your insurer and your driving habits. Overall, about a third of the hybrid models in the market in 2013 will earn back their price premiums in five years or less through fuel savings alone.

The number and variety of hybrid models in the market will increase. That's a given, thanks to the upcoming federal fuel efficiency goal of 54.5 mpg by 2025. As that happens, economies of scale in manufacturing and raw materials purchasing should continue to erode the so-called hybrid premium.

Rising fuel prices also would help slash the premium. At $3.50 a gallon and 15,000 miles a year, it would take 6.6 years on fuel savings alone to earn back the premium for a hybrid that gets 35 mpg and costs $4,000 more than a gas-only car that gets 25 mpg.

But if gas were $4.50 a gallon, it would take just 5.2 years for the hybrid to earn back its premium over the 25-mpg car. The higher that gasoline prices go, and the wider the gap in fuel efficiency between a gas-only vehicle and a hybrid, the quicker the payback.

For some people, however, the reasons to buy a hybrid go beyond dollars and cents. Hybrid owners cite such reasons as their desire to reduce emissions, help wean the nation of its gasoline dependency and make a "green" statement. Many also are attracted by the top-of-the-market technologies typically found in hybrids. Finally, many talk about the sheer joy of bypassing that gas station that they used to have to visit once or twice a week.


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