The Car and Truck Fleet and Leasing Management Magazine

Most Hybrid Vehicles Not as Cost-Effective as They Seem, Reports

June 07, 2005

SANTA MONICA, CA – Consumers seeking shelter from high gas prices might not find the relief they expect by turning to hybrids, according to "The combination of increasingly higher gas prices and a greater variety of hybrids in the marketplace has made many consumers seriously consider a hybrid as their next vehicle," said Phil Reed, co-author of's "Strategies for Smart Car Buyers." "While some people buy hybrid cars because they appreciate the environmental benefits and enjoy using advanced technology, consumers looking at hybrids solely to save money at the gas pump need to carefully research the cost of actually owning and operating a hybrid," Reed continued. Consumers who own a hybrid car or SUV may purchase less gas and have lower maintenance expenses than if they owned the non-hybrid counterpart, and may qualify for a federal tax credit designated for hybrid vehicle owners. However, most hybrids' high sales prices, insurance costs, and related expenses will offset the savings. found that during the first five years of ownership, a hybrid can cost as much as $5,283 more than its non-hybrid counterpart. Only when the analysts compared the Toyota Prius to the Toyota Camry LE did the hybrid ownership experience prove financially advantageous. Over the first five years of ownership, the Camry is expected to cost just $81 more than the Prius, according to However, when comparing the costs of the other vehicles, analysts determined that gas would have to cost at least $5.60 per gallon for hybrid drivers to break even if they drove 15,000 miles per year over the five years. Alternately, they could break even if they drove at least 37,000 miles per year at the current average gas price of $2.28 per gallon. analysts predict the cost differential is likely to decrease as the technology matures and hybrids become more mainstream. Currently, hybrids make up less than 1 percent of market share. Accordingly, manufacturers have not yet been able to achieve economies of scale and are passing the higher costs along to their buyers. Since current customer demand greatly exceeds supply, the vehicles are easily able to carry the premium transaction price. At some point in the near future, these dynamics are expected to change, reported
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