When does a Hybrid car break even?

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Huckleberryhen
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When does a Hybrid car break even?

Post by Huckleberryhen »

We are thinking of trading in a car and getting a Toyota highlander Hybrid. We liked it quite a bit but as we near retirement we wondered how long we would need to keep it to make it sensible as opposed to a non hybrid in terms of fuel savings.

Any thoughts? I guess to make it even more challenging is that we likely could make it our only car in a few years IF we retire. I assume it then is a bit more favorable to save us money. HOpe that makes sense
onourway
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Re: When does a Hybrid car break even?

Post by onourway »

It depends on how many miles you drive, what mix is city vs. highway (the hybrid advantage is larger for city/short trips), and what you use for estimated fuel costs over the life of the vehicle. The first two factors should be fairly easy to predict. The last one, not so much. Estimates made today with gas at ~$4/gallon may be completely off if gas falls back to $2 (or work in your favor if it continues to rise).
mhalley
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Re: When does a Hybrid car break even?

Post by mhalley »

There are several calculators on the net, such as https://walletburst.com/tools/hybrid-vs ... alculator/
But a boglehead would keep a new car for at least 10 years anyway. :happy
Jayhawker
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Re: When does a Hybrid car break even?

Post by Jayhawker »

I really like this calculator for this question. https://fueleconomy.gov/feg/savemoney.jsp

If you take out a loan, it’s very possible your fuel savings will outweigh the extra monthly payment for the hybrid making your net outlay lower for the hybrid starting day one. Worth running the numbers!
lostdog850
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Re: When does a Hybrid car break even?

Post by lostdog850 »

Hi,

I believe the cost difference between hybrid and nonhybrid is about 1000 to 1,500 for the same trim level. Getting the hybrid makes more sense to me.
PaunchyPirate
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Re: When does a Hybrid car break even?

Post by PaunchyPirate »

Love my 2021 Highlander Hybrid that I’ve had since Oct. 1st. But in doing your math estimates, don’t count on 35 mpg for year round if you live in a northern climate. In Northern PA this winter, I averaged about 27 mpg. Now that spring is in the air, that has slowly crept up to a little over 30. On vacation in sunny Florida this winter, it was getting right about 35-37 mpg. I’m hoping I start to see that as summer approaches in PA.

PS. Also, even though it supposedly has a 17.1 gallon gas tank, there is an issue actually putting more than 13 gallons or so in it. Your tank will show empty and the indicator light will come on. But it will only accept about 13 more gallons when you fill it. Not the end of the world, but annoying.
02nz
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Re: When does a Hybrid car break even?

Post by 02nz »

PaunchyPirate wrote: Tue Apr 26, 2022 6:55 pm Love my 2021 Highlander Hybrid that I’ve had since Oct. 1st. But in doing your math estimates, don’t count on 35 mpg for year round if you live in a northern climate. In Northern PA this winter, I averaged about 27 mpg. Now that spring is in the air, that has slowly crept up to a little over 30. On vacation in sunny Florida this winter, it was getting right about 35-37 mpg. I’m hoping I start to see that as summer approaches in PA.
The regular, non-hybrid Highlander will also get worse fuel economy in winter though, so the gap in consumption/cost will be similar even in winter.
shunkman
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Re: When does a Hybrid car break even?

Post by shunkman »

Today, hybrid vehicles are often selling for way above MSRP. The sale price difference between a similarly equipped hybrid Highlander and a non-hybrid Highlander is likely going to be more than the difference between the MSRPs. So, the payback period is going to be longer.
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galving
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Re: When does a Hybrid car break even?

Post by galving »

Huckleberryhen wrote: Tue Apr 26, 2022 5:47 pm We are thinking of trading in a car and getting a Toyota highlander Hybrid. We liked it quite a bit but as we near retirement we wondered how long we would need to keep it to make it sensible as opposed to a non hybrid in terms of fuel savings.

Any thoughts? I guess to make it even more challenging is that we likely could make it our only car in a few years IF we retire. I assume it then is a bit more favorable to save us money. HOpe that makes sense
'It depends". . .

Fuel price & Fuel Efficiency
Electricity cost & Power Efficiency
Miles driven per year
Investment premium of hybrid over 'regular' car.

You'll have to make some assumptions to be able to estimate the savings per year of the hybrid over the 'regular' car.
Will the fuel price remain constant?
Will the power price remain constant?
Will the miles you drive per year remain constant?

Best would be to build an easy spreadsheet to test out how the variables influence the payback time.
jebmke
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Re: When does a Hybrid car break even?

Post by jebmke »

PaunchyPirate wrote: Tue Apr 26, 2022 6:55 pm Love my 2021 Highlander Hybrid that I’ve had since Oct. 1st. But in doing your math estimates, don’t count on 35 mpg for year round if you live in a northern climate. In Northern PA this winter, I averaged about 27 mpg. Now that spring is in the air, that has slowly crept up to a little over 30. On vacation in sunny Florida this winter, it was getting right about 35-37 mpg. I’m hoping I start to see that as summer approaches in PA.

PS. Also, even though it supposedly has a 17.1 gallon gas tank, there is an issue actually putting more than 13 gallons or so in it. Your tank will show empty and the indicator light will come on. But it will only accept about 13 more gallons when you fill it. Not the end of the world, but annoying.
Do you top off the air in your tires in the fall and monitor the tire pressure in winter? When the temperature starts to drop in the fall, the air pressure drops and tires can become significantly under-inflated. I check mine monthly and adjust accordingly if the pressure drops or rises above the optimal level for my car. I can notice the difference right away if I have been driving with under-inflated tires.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
MnD
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Re: When does a Hybrid car break even?

Post by MnD »

Ours was immediate because at the time, hybrid federal and state tax credits offset 100% of the additional cost.
Savings on fuel economy and also other things. Like the brakes last forever - still original at 11 years and 95K miles.
The 12V battery is now 11 years old (not used to start the car). There is no power steering fluid to flush (direct electric power steering).
It significantly outperforms the gas version on power while using less fuel so there's that too. Less time wasted filling up.
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Businesscasual
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Re: When does a Hybrid car break even?

Post by Businesscasual »

Toyota hybrids are extremely popular so the gap in price over the gas-powered is probably larger than MSRP. I have a RAV4 Hybrid and it drives much nicer than the gas-powered (more torque, HP, etc.). It'll take a bit to break-even but I would just go for it if you can afford it, will also likely hold its value better.
sureshoe
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Re: When does a Hybrid car break even?

Post by sureshoe »

The biggest problem with people buying hybrids for "breakeven" is people using the hybrid and "savings" as an excuse to buy a new car.

If you have a serviceable $15k car that you're spending $4k/year in gas, upgrading to a $50k hybrid that you only spend $2k/year on has a nearly unsalvageable breakeven point.

If you are buying a new car regardless and simply deciding "hybrid or not", it's different. Back when hybrids were $7k more, the answer was "next to never". Now, they're so close in price, it's pretty quick, use a calculator above.

But upgrading to a hybrid is almost never a money-saving endeavor.
nura
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Re: When does a Hybrid car break even?

Post by nura »

Hybrid card depreciate lot less than ICE hybrid counterparts, the difference is even higher times when fuel prices are higher.
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grabiner
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Re: When does a Hybrid car break even?

Post by grabiner »

The way to work out the math for gas prices is to compare your mileage estimates.

In 2017, when I bought my car, I expected 50 MPG from a Toyota Prius, or 30 from a standard car. Since I drive 12,000 miles per year, that is 240 versus 400 gallons. At $2.50 per gallon at the time, the expected difference was $400 per year. Over 120,000 miles, which is about how long I expected to keep the car, the estimate was $4000, which more than covered the price difference between a Prius and a comparably equipped Mazda 3.

I actually wound up saving even more. I get 56 MPG, not 50 (averaged over the whole year; I get worse mileage in the winter because the car takes a long time to warm up), and gas prices are now much higher.
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Valuethinker
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Re: When does a Hybrid car break even?

Post by Valuethinker »

Huckleberryhen wrote: Tue Apr 26, 2022 5:47 pm We are thinking of trading in a car and getting a Toyota highlander Hybrid. We liked it quite a bit but as we near retirement we wondered how long we would need to keep it to make it sensible as opposed to a non hybrid in terms of fuel savings.

Any thoughts? I guess to make it even more challenging is that we likely could make it our only car in a few years IF we retire. I assume it then is a bit more favorable to save us money. HOpe that makes sense
Grabiner, above, explains how to do the calculation. When you hit breakeven on the higher price-- how many years. But what gas price to use?

It does depend what you pay for gas. Although I have reasons to believe that US gasoline prices could go even higher, this winter, due to the geopolitical situation with the Ukraine, it's probably a somewhat-safe assumption that gas prices stay say around $4/gal. (It has been pointed out to me, here, that the market expects crude oil to go lower, by about 20%). It's not only the price of crude oil, it's also a global shortage of refinery capacity, which can take a long time to fix.

It's also the case that hybrids have lower depreciation - it appears. Maybe if gas prices go back down, that advantage will narrow.

There is also "option value". That arises because gas prices might go higher. So option value arises from something that might happen in the future (in which case you are "in the money") but might not (out of the money). Any time in the length of time you own the car.

If it's going to be your sole auto, then that also tilts me towards saying get the more fuel efficient option.

My 80-something aunt has just leased her 3rd Toyota RAV Prime hybrid. I am sure her mileage does not justify it, but she has plenty of money & likes the frugality. Doubtless if she stops driving, then she will recoup that extra cost in terms of a higher resale value.
Glockenspiel
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Re: When does a Hybrid car break even?

Post by Glockenspiel »

We have a 2020 Highlander Hybrid. It gets about 34-36 mpg during the summer and about 30-32 mpg in the winter (we live in Minnesota). I believe the cost to upgrade to the Hybrid was around $1,400 at the time we bought it. I think the non-hybrid version only gets around 20 mpg.

This means if we drive 12,000 miles/year, the Hybrid uses about 225-250 fewer gallons of gas per year. Assuming a gas price of $4/gallon, ($4/gallon x 250 gallons = $1,000), your break-even timeframe is less than 2 years.
Colorado14
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Re: When does a Hybrid car break even?

Post by Colorado14 »

Our family has discussed purchasing a hybrid for our next vehicle. This purchase is likely a few years away because our vehicles have low miles.

I currently average 33 mpg in town if I am very conscious about avoiding Jack rabbit starts. Current hybrid SUVs don't improve on this very much, if at all, so this cost/benefit discussion is insightful. Thanks to all who are sharing expertise.
JVV
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Re: When does a Hybrid car break even?

Post by JVV »

I purchased a 2022 Toyota Corolla Hybrid this year. I believe it was about 2K more for hybrid. I did the math for $2.50/gallon gas and figured I would break even at around 80K miles on vehicle. Obviously better now if gas stays higher. I did not take into account higher re-sale value of a hybrid.
tvubpwcisla
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Re: When does a Hybrid car break even?

Post by tvubpwcisla »

Right before you have to purchase a new set of batteries.

:twisted:
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Lee_WSP
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Re: When does a Hybrid car break even?

Post by Lee_WSP »

Huckleberryhen wrote: Tue Apr 26, 2022 5:47 pm We are thinking of trading in a car and getting a Toyota highlander Hybrid. We liked it quite a bit but as we near retirement we wondered how long we would need to keep it to make it sensible as opposed to a non hybrid in terms of fuel savings.

Any thoughts? I guess to make it even more challenging is that we likely could make it our only car in a few years IF we retire. I assume it then is a bit more favorable to save us money. HOpe that makes sense
https://caredge.com/toyota/highlander
https://caredge.com/toyota/highlander-hybrid

Based on just the five year cost to own, you break even after year 5 and probably profit from then on.
stoptothink
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Re: When does a Hybrid car break even?

Post by stoptothink »

Thankfully the Ford Maverick hybrid is actually the base model (and the cheapest hybrid on the market), ~$2k less than getting the ecoboost engine. We're averaging 48.0mpg after 2.5 months and 2k miles. If hybrid wasn't an option, we wouldn't have even been looking at a truck, although it definitely has some utility for our family and lifestyle.
Last edited by stoptothink on Thu Jun 30, 2022 11:04 am, edited 1 time in total.
JVV
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Re: When does a Hybrid car break even?

Post by JVV »

I just did the math for Toyota corolla gas vs hybrid. At $4/gallon gas, it breaks even at 60K miles. This doesn't account for less maint (brakes) and increased value if you re-sell. Hybrid battery warranty is 10 years/150K miles and my other two prius all went over 200K miles without needing new battery. Seems like if you think gas will stay elevated, the hybrid is a no-brainer...
Valuethinker
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Re: When does a Hybrid car break even?

Post by Valuethinker »

JVV wrote: Thu Jun 30, 2022 11:04 am I just did the math for Toyota corolla gas vs hybrid. At $4/gallon gas, it breaks even at 60K miles. This doesn't account for less maint (brakes) and increased value if you re-sell. Hybrid battery warranty is 10 years/150K miles and my other two prius all went over 200K miles without needing new battery. Seems like if you think gas will stay elevated, the hybrid is a no-brainer...
And there are plenty of possible scenarios like high prices (now) - low prices (years 2-5) - high prices (years 5-10)

There is this race between the depletion rate of existing oil wells (5-10% pa, but faster for fracked wells) and the ability to make new discoveries and bring them into production (for deep offshore fields, 5+ years). So high prices tend to bring on more investment and more supply (but with a lag) - which leads to lower prices. And then vice-versa.

I am sitting in Europe where ofc gasoline prices are much higher due to taxes. Historically diesel has been an alternative (higher fuel economy) - but for environmental reasons (urban air pollution) that is now being deemphasised. And the geopolitics are saying a very tough winter ahead** -- so that's a short term view.

** that's natural gas prices, where Russia is 40% European gas supply. For crude oil, diesel & gasoline, it's a world market-- what we don't buy, India and China may buy. But sanctions can still lead to higher prices. It has been pointed out to me that crude oil futures for delivery next winter are c -20% below current prices, suggesting the market is more relaxed.
Dottie57
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Re: When does a Hybrid car break even?

Post by Dottie57 »

When I had a Camry Hybrid I would fill up 1 time per month. With regular car it was 2 to 3 times a month..

Hybrids are good. I think my next car will be electric.
Base Hit
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Re: When does a Hybrid car break even?

Post by Base Hit »

For me, a year and a half for 15,000 driven. You can do it to save the earth or just because you're cheap.
beardsicles
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Re: When does a Hybrid car break even?

Post by beardsicles »

tvubpwcisla wrote: Thu Jun 30, 2022 10:47 am Right before you have to purchase a new set of batteries.

:twisted:
Our 2008 Prius with 212k miles on it still gets 49mpg with zero signs of any battery problems.

It’s been…probably five years since we put any money other than standard maintenance into it.
Bogle-007
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Re: When does a Hybrid car break even?

Post by Bogle-007 »

I see many posters here with long-lasting batteries. Does the battery really usually last the life of the car? If the battery needs to be replaced, that’s thousands of $$$ - and changes the true break even point.

Also, how are the Honda hybrids?
02nz
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Re: When does a Hybrid car break even?

Post by 02nz »

NewbieBogle007 wrote: Sun Jul 03, 2022 10:18 pm I see many posters here with long-lasting batteries. Does the battery really usually last the life of the car? If the battery needs to be replaced, that’s thousands of $$$ - and changes the true break even point.

Also, how are the Honda hybrids?
The Priuses that have been used as taxis have proven exceptionally reliable. Battery replacement is not a thing until well over 100K miles, well beyond what most people keep their car for. And those batteries are tiny compared to today's full BEVs, and cost much less. You're looking at a few thousand to replace a battery, not the five-digit figures that an EV battery can cost.
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Re: When does a Hybrid car break even?

Post by sailaway »

NewbieBogle007 wrote: Sun Jul 03, 2022 10:18 pm I see many posters here with long-lasting batteries. Does the battery really usually last the life of the car? If the battery needs to be replaced, that’s thousands of $$$ - and changes the true break even point.

Also, how are the Honda hybrids?
Insight (2nd gen) owner here. My 2010 was delivered to me in May 2009 and has 158xxx miles on it with the original battery. Love that thing!
ChrisC
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Re: When does a Hybrid car break even?

Post by ChrisC »

NewbieBogle007 wrote: Sun Jul 03, 2022 10:18 pm I see many posters here with long-lasting batteries. Does the battery really usually last the life of the car? If the battery needs to be replaced, that’s thousands of $$$ - and changes the true break even point.

Also, how are the Honda hybrids?
We have a 2019 Lexus Hybrid which we intended to use primarily for long distance drives to vacation destinations and for convenience of making as few pit stops as possible. (Covid messed that plan up.) We only have 15K miles logged on the vehicle.

It has 2 batteries. The regular 12 volt battery that runs accessories and the expensive Lithium battery that powers the engine. Two weeks ago, our 12V battery went kaput and was replaced under warranty. The service people told us we need to drive the car more often to extend the life of the battery. They also told us the price of batteries is spiraling upwards.

Lexus has a 10 year, 150k warranty on the Lithium battery, that could cost up to $7k to replace.
yosh99
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Re: When does a Hybrid car break even?

Post by yosh99 »

I'm surprised that there has been no mention of a Plug-In Hybrid (PHEV). Many are eligible for a signifiant federal tax break and depending on your driving habits are nearly equivalent to a full EV. Mine, for example, gives me only 30 battery only miles/day, but for my driving habits means 95% of my driving is on battery. My biggest concern is having the gasoline become stale and gum up.
AnEngineer
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Re: When does a Hybrid car break even?

Post by AnEngineer »

yosh99 wrote: Mon Jul 04, 2022 8:31 am I'm surprised that there has been no mention of a Plug-In Hybrid (PHEV). Many are eligible for a signifiant federal tax break and depending on your driving habits are nearly equivalent to a full EV. Mine, for example, gives me only 30 battery only miles/day, but for my driving habits means 95% of my driving is on battery. My biggest concern is having the gasoline become stale and gum up.
Don't PHEVs burn a bit of gas sometimes when they don't need to in order to prevent that? I think I read about Toyota doing that.
yosh99
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Re: When does a Hybrid car break even?

Post by yosh99 »

AnEngineer wrote: Mon Jul 04, 2022 8:33 am
yosh99 wrote: Mon Jul 04, 2022 8:31 am I'm surprised that there has been no mention of a Plug-In Hybrid (PHEV). Many are eligible for a signifiant federal tax break and depending on your driving habits are nearly equivalent to a full EV. Mine, for example, gives me only 30 battery only miles/day, but for my driving habits means 95% of my driving is on battery. My biggest concern is having the gasoline become stale and gum up.
Don't PHEVs burn a bit of gas sometimes when they don't need to in order to prevent that? I think I read about Toyota doing that.
Mine has three modes: all battery, all ICE, and "auto" where the computer optimizes range. By default, the car starts in all battery mode and switches to ICE when the battery is depleted. However, if I floor the engine and create a lot of demand, the ICE will briefly kick in even while in all battery mode, but this is rare. Except for occasional road trips, I only fill the tank every two or three months.
Flyer24
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Re: When does a Hybrid car break even?

Post by Flyer24 »

Topic moved to Personal Consumer Issues.
Raycpact
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Re: When does a Hybrid car break even?

Post by Raycpact »

Is the car market efficient? Wouldn't the gas saving be built into prices? Especially used cars.

Also, my prior analysis of this question weighed higher taxes, insurance, interest as well as higher risk on actually keeping car long enough to get savings from lower gas costs.

My attempts at this question on past purchases was that if I take into consideration all costs and risks the comparable cars life time costs are equivalent but the risk for better gas mileage was higher.
Valuethinker
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Re: When does a Hybrid car break even?

Post by Valuethinker »

Raycpact wrote: Mon Jul 04, 2022 9:22 am Is the car market efficient? Wouldn't the gas saving be built into prices? Especially used cars.

Also, my prior analysis of this question weighed higher taxes, insurance, interest as well as higher risk on actually keeping car long enough to get savings from lower gas costs.

My attempts at this question on past purchases was that if I take into consideration all costs and risks the comparable cars life time costs are equivalent but the risk for better gas mileage was higher.
I think there are too many factors at play to presume efficiency.

If there are 2 identical cars of identical condition & age, one hybrid & one not, then one could make inferences about the relative value of fuel economy. That would be used vehicles, because there are a number of other factors that come into play in a new vehicle (MSRP v actual realised price, the latter which may not be public; financing packages etc).

In actual practice that's never the case.

I think there was quite a bit of work done in the 1980s. What it suggests is that US car buyers respond to changes in gasoline prices, but with a lag. i.e. they are not sure, immediately, whether a high (or low) gasoline price is going to persist. If it does, for a while, then you see average fuel economy shift up (down).
the risk for better gas mileage was higher
I am not sure what this means? You mean that if you spend more money for better gas mileage, that's got a higher risk? Because gas prices tend to revert? In actual fact I'd view it the other way-- that a more fuel efficient vehicle has more option value (protection in the case of a rise in gas prices). Again, it appears that buyers are myopic - they undervalue fuel efficiency in periods when gasoline is cheap and (perhaps) overvalue it when it is expensive. That assumes a reversion to mean in gasoline prices - which might be the case although I think it's hard to say what "mean" gasoline price is. Thinking since 1980 (all time high) to 1998 (when it was at its all time low?) to now (nominal price high, not yet real).

Buyers are curiously insensitive to depreciation rates which have a big influence on Total Cost of Ownership. At least from articles studying this that I have read. Nature of financing packages may be a reason.
Raycpact
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Re: When does a Hybrid car break even?

Post by Raycpact »

Valuethinker wrote: Mon Jul 04, 2022 9:47 am
Raycpact wrote: Mon Jul 04, 2022 9:22 am Is the car market efficient? Wouldn't the gas saving be built into prices? Especially used cars.

Also, my prior analysis of this question weighed higher taxes, insurance, interest as well as higher risk on actually keeping car long enough to get savings from lower gas costs.

My attempts at this question on past purchases was that if I take into consideration all costs and risks the comparable cars life time costs are equivalent but the risk for better gas mileage was higher.
the risk for better gas mileage was higher
I am not sure what this means? You mean that if you spend more money for better gas mileage, that's got a higher risk? Because gas prices tend to revert? In actual fact I'd view it the other way-- that a more fuel efficient vehicle has more option value (protection in the case of a rise in gas prices). Again, it appears that buyers are myopic - they undervalue fuel efficiency in periods when gasoline is cheap and (perhaps) overvalue it when it is expensive. That assumes a reversion to mean in gasoline prices - which might be the case although I think it's hard to say what "mean" gasoline price is. Thinking since 1980 (all time high) to 1998 (when it was at its all time low?) to now (nominal price high, not yet real).

Buyers are curiously insensitive to depreciation rates which have a big influence on Total Cost of Ownership. At least from articles studying this that I have read. Nature of financing packages may be a reason.
My risk is higher with the better gas mileage auto because I have invested more money, I will have increased taxes and insurance while my actual use of the auto can reduce if it is a lemon or my needs change or gas prices decline.
Valuethinker
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Re: When does a Hybrid car break even?

Post by Valuethinker »

Raycpact wrote: Mon Jul 04, 2022 10:06 am
Valuethinker wrote: Mon Jul 04, 2022 9:47 am
Raycpact wrote: Mon Jul 04, 2022 9:22 am Is the car market efficient? Wouldn't the gas saving be built into prices? Especially used cars.

Also, my prior analysis of this question weighed higher taxes, insurance, interest as well as higher risk on actually keeping car long enough to get savings from lower gas costs.

My attempts at this question on past purchases was that if I take into consideration all costs and risks the comparable cars life time costs are equivalent but the risk for better gas mileage was higher.
the risk for better gas mileage was higher
I am not sure what this means? You mean that if you spend more money for better gas mileage, that's got a higher risk? Because gas prices tend to revert? In actual fact I'd view it the other way-- that a more fuel efficient vehicle has more option value (protection in the case of a rise in gas prices). Again, it appears that buyers are myopic - they undervalue fuel efficiency in periods when gasoline is cheap and (perhaps) overvalue it when it is expensive. That assumes a reversion to mean in gasoline prices - which might be the case although I think it's hard to say what "mean" gasoline price is. Thinking since 1980 (all time high) to 1998 (when it was at its all time low?) to now (nominal price high, not yet real).

Buyers are curiously insensitive to depreciation rates which have a big influence on Total Cost of Ownership. At least from articles studying this that I have read. Nature of financing packages may be a reason.
My risk is higher with the better gas mileage auto because I have invested more money, I will have increased taxes and insurance while my actual use of the auto can reduce if it is a lemon or my needs change or gas prices decline.
The thought I have with this is it leads to a reductio ad absurdum argument?

i.e. "By buying the least efficient car I can, I can minimise the loss to me of a fall in gas prices". That's obviously absurd because it ignores the costs of buying gasoline at the current price.

The question is "Is a higher price worth it"?

At the sort of premiums the OP is talking about for the hybrid v non-hybrid, it most definitely is.

The payback stretches

Say car lasts 160,000 miles, Hybrid 40 mpg, non hybrid 30 mpg.

4000 gallons of gasoline v 5200 gallons.

If we posit an efficient market for used cars, then the market will pay exactly the remaining fuel saving x the expected gasoline price, for that extra fuel economy on trade-in or sale. This handles the case where ownership changes hands before the car is scrapped (the normal with new buyers).

Option value exists:

- positive option value because gas prices can go higher. I can see a scenario this winter where they go a lot higher (probability is perhaps not high) -- due to geopolitics (+ Chinese economic recovery)

Negative option value exists:
- gasoline prices might fall from here

Very difficult to forecast gasoline prices. The futures market does not do a good job.
Valuethinker
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Re: When does a Hybrid car break even?

Post by Valuethinker »

Huckleberryhen wrote: Tue Apr 26, 2022 5:47 pm We are thinking of trading in a car and getting a Toyota highlander Hybrid. We liked it quite a bit but as we near retirement we wondered how long we would need to keep it to make it sensible as opposed to a non hybrid in terms of fuel savings.

Any thoughts? I guess to make it even more challenging is that we likely could make it our only car in a few years IF we retire. I assume it then is a bit more favorable to save us money. HOpe that makes sense
The best way to do this, I think, is to consider that the car will drive 150,000 miles before it is scrapped.

150k/ mpg = gallons consumed in lifetime
gallons consumed x gasoline price = cost

You can do this for the hybrid v non-hybrid model

What you are assuming there is that if you sell or trade-in the car before 150k miles, the buyer will pay you the value of the additional fuel economy to them for the rest of the life of the car. i.e. an "efficient market". Of course the real world doesn't work that way but it's a reasonable simplifying assumption.

Now one should check this against one's annual payback

miles pa/ mpg = gallons pa

(diff in gallons pa between 2 vehicles) x gallons pa = savings pa

You can then work out how many years it would take to payback in years for the additional cost (this is what poster Grabiner is suggesting, I believe).

So say you burn 500 gallons pa (a fairly high number) with the non-hybrid and 400 gallons pa with the hybrid. Then 100 gallons x $5.00/ gal say = $500 saved pa. If additional cost is $1500 payback = 1500/500 = 3 years

There's another factor which is difficult to actually estimate:

- gasoline prices might go down, so the payback is longer
- gasoline prices might go up, and what you have done is (partially) hedged that by buying a more fuel efficient vehicle

For my money, I would buy the hybrid. Lower pollution & a constant nagging worry in the back of my mind that if gasoline went to $6, $7, it would really hurt. So I am risk averse.

BTW my gasoline (petrol) is about $10/gallon last I checked (in the UK). One learns to live with it. But generally there are very few monster cars & trucks - even a Range Rover is not that big by North American standards. Where would one park such a beast -- parking spots are too small? We used to buy diesels until the environmental issues became clear and its swung back to petrol & hybrids & EVs now - about 20% of new sales are BEVs or PHEVs (plug ins).
Last edited by Valuethinker on Tue Jul 05, 2022 5:25 am, edited 1 time in total.
dknightd
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Re: When does a Hybrid car break even?

Post by dknightd »

We recently purchased a Highlander Hybrid. The additional cost of hybrid, over gas only, was small.
I did some quick estimates, and the payback was 3-4 years. I expect we'll keep the car for at least 10 years.
I financed the car for 5 years, so, essentially I'm "saving" money from day one. The increased payment is less than the reduced cost for fuel.
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
Trism
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Re: When does a Hybrid car break even?

Post by Trism »

Make sure you are evaluating realistic selling prices when you compare the relative costs of hybrid vs. non-hybrid models.

A lot of hybrids are commanding a premium over MSRP (some pure gas models also are, but their hybrid equivalents are going for an even higher markup).

I doubt most people are doing the math, given how common it is for Paul and Paula Public to put a bunch of money down and then brag about what a great deal the monthly payment is.
Carguy85
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Re: When does a Hybrid car break even?

Post by Carguy85 »

I did a recent analysis on our Sequoia vs a new Highlander hybrid. We are talking roughly 15mpg vs 35mpg and at the time nearly 20k miles a year. It was surprising how it actually didn’t make sense strictly for gas savings given the paid off Sequoia is in great running order with about 105k mi and the purchase price difference was gonna be about $20k. Do you NEED a new car anyway? Are you sacrificing anything else to get a hybrid?
smitcat
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Re: When does a Hybrid car break even?

Post by smitcat »

dknightd wrote: Tue Jul 05, 2022 4:37 am We recently purchased a Highlander Hybrid. The additional cost of hybrid, over gas only, was small.
I did some quick estimates, and the payback was 3-4 years. I expect we'll keep the car for at least 10 years.
I financed the car for 5 years, so, essentially I'm "saving" money from day one. The increased payment is less than the reduced cost for fuel.
What was the differences in insurance?
What are the electric rates in your area?
What % residual value did you use for each version of the vehicle?
And for repairs/maintenance?
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jabberwockOG
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Re: When does a Hybrid car break even?

Post by jabberwockOG »

02nz wrote: Sun Jul 03, 2022 10:40 pm
NewbieBogle007 wrote: Sun Jul 03, 2022 10:18 pm I see many posters here with long-lasting batteries. Does the battery really usually last the life of the car? If the battery needs to be replaced, that’s thousands of $$$ - and changes the true break even point.

Also, how are the Honda hybrids?
The Priuses that have been used as taxis have proven exceptionally reliable. Battery replacement is not a thing until well over 100K miles, well beyond what most people keep their car for. And those batteries are tiny compared to today's full BEVs, and cost much less. You're looking at a few thousand to replace a battery, not the five-digit figures that an EV battery can cost.


3rd party batteries are available from multiple sources for lots of hybrids. On a Prius a replacement battery with life time warranty, installed runs $1500-2000 depending on the model and year Prius. Most of the Asian brand hybrids are extremely reliable. Payback on a hybrid can be pretty long given the add on "demand" premium consumers are being charged and inexplicably seem willing to pay.
AnEngineer
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Re: When does a Hybrid car break even?

Post by AnEngineer »

Carguy85 wrote: Tue Jul 05, 2022 8:18 am I did a recent analysis on our Sequoia vs a new Highlander hybrid. We are talking roughly 15mpg vs 35mpg and at the time nearly 20k miles a year. It was surprising how it actually didn’t make sense strictly for gas savings given the paid off Sequoia is in great running order with about 105k mi and the purchase price difference was gonna be about $20k. Do you NEED a new car anyway? Are you sacrificing anything else to get a hybrid?
This is a good point. It's hard economically or environmentally for a new car to make sense when it's replacing an existing car that works fine.
JayB
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Re: When does a Hybrid car break even?

Post by JayB »

In comparing the mpg of your current conventional car to a hybrid, it's helpful to put your driving behavior in the equation; doing so may change your breakeven calculations. You can shift a conventional car's mpg much closer to that of a hybrid by (a) accelerating gently, especially going up hills (b) driving closer to the speed limit on highways, and (c) braking less and coasting more where practical (and w/o getting tailgated). I have been doing these things with my Civic since gas prices jumped recently and have raised my city mpg from about 30 to 40+ and hwy mpg from 42 to 50+. The coasting part largely compensates for the energy that regenerative braking would recapture on a hybrid. I find squeezing more mpg out of driving to be a pleasant challenge.
stoptothink
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Re: When does a Hybrid car break even?

Post by stoptothink »

jabberwockOG wrote: Tue Jul 05, 2022 8:54 am
02nz wrote: Sun Jul 03, 2022 10:40 pm
NewbieBogle007 wrote: Sun Jul 03, 2022 10:18 pm I see many posters here with long-lasting batteries. Does the battery really usually last the life of the car? If the battery needs to be replaced, that’s thousands of $$$ - and changes the true break even point.

Also, how are the Honda hybrids?
The Priuses that have been used as taxis have proven exceptionally reliable. Battery replacement is not a thing until well over 100K miles, well beyond what most people keep their car for. And those batteries are tiny compared to today's full BEVs, and cost much less. You're looking at a few thousand to replace a battery, not the five-digit figures that an EV battery can cost.


3rd party batteries are available from multiple sources for lots of hybrids. On a Prius a replacement battery with life time warranty, installed runs $1500-2000 depending on the model and year Prius. Most of the Asian brand hybrids are extremely reliable. Payback on a hybrid can be pretty long given the add on "demand" premium consumers are being charged and inexplicably seem willing to pay.
Friend just replaced his prius battery for $1200. The car had 250k+ miles before needing a battery replacement.
Valuethinker
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Re: When does a Hybrid car break even?

Post by Valuethinker »

AnEngineer wrote: Tue Jul 05, 2022 9:09 am
Carguy85 wrote: Tue Jul 05, 2022 8:18 am I did a recent analysis on our Sequoia vs a new Highlander hybrid. We are talking roughly 15mpg vs 35mpg and at the time nearly 20k miles a year. It was surprising how it actually didn’t make sense strictly for gas savings given the paid off Sequoia is in great running order with about 105k mi and the purchase price difference was gonna be about $20k. Do you NEED a new car anyway? Are you sacrificing anything else to get a hybrid?
This is a good point. It's hard economically or environmentally for a new car to make sense when it's replacing an existing car that works fine.
Agree absolutely. There's very few cases where replacing a car before its time makes sense.

One caveat. Used car prices are also high right now (latest figures I saw suggest they are slipping a bit?). Given the shortage of new models since the Covid emergency began, that shouldn't correct that quickly - there's a shortage of 1 & 2 year old cars right now. Even when car production normalises, it will take 1-2 years before there is a "normal" level of used cars available.**

So there might be a trade right now, selling an "overvalued" used car for a new car. However given the very limited/ none discounts on new cars right now, it's not likely to be that lucrative a trade.

** I have read a bit about sub-prime auto loans. Seems like a huge risk area. When that financing is no longer available, then car demand will drop quite sharply.
Valuethinker
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Re: When does a Hybrid car break even?

Post by Valuethinker »

smitcat wrote: Tue Jul 05, 2022 8:34 am
dknightd wrote: Tue Jul 05, 2022 4:37 am We recently purchased a Highlander Hybrid. The additional cost of hybrid, over gas only, was small.
I did some quick estimates, and the payback was 3-4 years. I expect we'll keep the car for at least 10 years.
I financed the car for 5 years, so, essentially I'm "saving" money from day one. The increased payment is less than the reduced cost for fuel.
What was the differences in insurance?
What are the electric rates in your area?
Hybrid not plug-in hybrid? So should not matter?
What % residual value did you use for each version of the vehicle?
And for repairs/maintenance?
Repairs & maintenance one could plausibly use the same estimates? Hybrids might need fewer brake replacements but are otherwise similar vehicles?

On residual value that's a moving target. If one keeps one's vehicles for say 10 years/ 150k miles, and tends to trade them in for very little, it probably doesn't matter much to the calculation?

Formally, one would do an IRR calculation using cash flows, and assume say 13 year car life (with minimal value at end). Then the residual value is just assumed away. What one is doing there is saying that if, say, I sell it after 7 years, the market pays a residual value worth the gas savings for the next 6 years. That's almost certainly incorrect, but it's also probably an assumption that doesn't bias the decision either way - fairly conservative.
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