Experts see hybrids paying their way
Hybrids can be worth the added up-front cost if the consumer holds on to it, according to Edmunds.com.
Analyst Alex Rosten says the Toyota Prius and the Ford Escape Hybrid are the best bets. The Escape's premium is only $1,200 when taking the $2,600 income-tax credit into account. If driven 15,000 miles a year, it would take 2.9 years to recoup the cost due to the improved fuel economy.
The Prius currently gets a $3,150 tax credit but that drops to $1,575 later this month. At the higher level it would take 2.1 years to recoup the cost. That's assuming 15,000 miles a year with gas costing $3 a gallon and the Prius achieving the EPA mileage estimate. Since there is no gas version of the Prius, Edmunds compares it to a Camry 4-cylinder sedan.
Other vehicles such as the Saturn Vue Greenline, Honda Civic Hybrid and Toyota Camry Hybrid would break even within six years.
[Source: San Antonia Express-News]
Reader Comments (Page 1 of 1)
loikll 12:55PM (9/11/2006)
Wrong, this Edmunds analysis is completely bogus. Perhaps I should say fatally amateurish and naive. They ought to be ashamed of themselves for going public with this.
A look at the Edmunds materials and it's readily clear what they ignored:
1. Time Value of Money: today's $3,165 premium does cost you $3,165, but the $280 you'll save in gas in the year 2013 is worth much much less than $280 today.
2. The incremental cost of FINANCING the extra hybrid premium -- servicing the larger debt. (Or the opportunity cost of not investing that hybrid premium, in the unlikely case no debt is used).
This isn't arcane stuff, it's very basic financial analysis that collegeboy learns in his first underagrad finance course. You cannot do financial analysis without these factors, it's simply invalid.
If you do a competent analysis, I suspect few if any of these models would ever actually pay for themselves -- maybe the Prius and Escape under their assumptions.
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Jimmy 4:58PM (9/11/2006)
loikll, the keyword you are looking for is "net present value" and you are absolutly correct that it should be used in this case.
See http://en.wikipedia.org/wiki/Net_Present_Value
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