Hybrids: Don't buy the hype

Sure, hybrids save gas but they won't save you money. There are smarter ways to go.

By Peter Valdes-Dapena, CNN/Money staff writer

NEW YORK - Toyota is now measuring "time on the lot" for the Toyota Prius in hours, not days. The average Prius goes unsold for only about 20 hours after it hits a Toyota dealer's lot, according to a recent report.

With gasoline prices now around $3 a gallon, you might think it makes a lot of sense that hybrid cars are hot sellers.

Actually, it doesn't -- at least not a lot of financial sense.

They may make a social statement you're interested in, but if you want to save money because of rising gas prices, you're heading down the wrong road, at least for now.

Some simple calculations by our partners at Edmunds.com revealed the following:

A hybrid Honda Accord costs about $3,800 more than the comparable non-hybrid version, including purchase, maintenance and insurance costs. Over five years, assuming 15,000 miles of driving per year, you'll make up that cost in gasoline money if the price of gas goes up immediately to $9.20 a gallon and averages that for the whole period.

For the Ford Escape hybrid, the difference is less stark. To make up the difference over five years between the Escape hybrid and a Ford Escape XLT, gas prices would have to average $5.60 after you purchase the vehicle.

The Prius itself, however, could be an exception. There is no such thing as a non-hybrid Prius, making a direct comparison impossible. Compared to a Toyota Camry, a car with similar interior space which costs about $100 more over five years, the Prius driver could actually save a small amount of money.

There is a tax deduction of $2,000 available for purchasing a hybrid vehicle, but that translates to a one-time tax savings of less than $500 for most buyers. That's nice, but it's not enough to make much of a difference in the long run.

The recently passed energy bill includes a tax credit that would range from $500 up to $3,400, depending on the fuel efficiency of the car, for vehicles purchased after Jan 1., 2006. The credit could be enough to create some real savings. For example, Ford estimates the tax credit on a Ford Escape hybrid to be $2,600.

The new rules are extremely confusing, though, said David Mellem of Ashwaubenon Tax Professionals in Wisconsin, and the IRS hasn't yet published an official list of what vehicles will qualify for what sort of tax credit.

Certainly, though, most car buyers who are considering a hybrid will be far better off waiting until 2006 to make that purchase, said Mellem.

In the meantime, there are other ways to save gas that won't cost you any extra money.

Drive more gently

First, change the way you drive. There's no trophy for being first to arrive at the red light, or beating everyone away from the green. In driving tests by Edmunds.com, simply going easy on the gas and brake pedals garnered gas mileage improvements of about thirty percent. Hybrid buyers pay thousands for that kind of savings.

Check out diesels

Second, consider buying diesel. Diesel cars cost only a little more than gasoline-powered cars, but they get far better fuel mileage. Also, because their engines are more durable, diesels have better resale value than gasoline-powered cars. That alone should be enough to make up any additional cost of the vehicle, leaving the gas-money savings in your pocket. Also, diesels will qualify for tax credits under the new tax rules. Again, diesel buyers might want to wait until next year to buy.

Shop smarter

Third, look more closely at the actual fuel economy numbers when you buy and consider what you're willing to give up. The promise of hybrids is better fuel economy with the same, or more, engine power. But, for that, you pay more for the complex technology and, to date, long-term resale value is unknown.

You could simply decide that you could do with less engine power or a smaller, lighter vehicle. That way you could get better fuel economy while paying even less money for the vehicle itself. And you don't have to buy a subcompact.

For example, an two-wheel-drive Ford Escape hybrid has a sticker price of about $26,900 and gets an EPA-estimated 33 miles per gallon in combined city and highway driving.

A Ford Focus wagon gets an EPA-estimated 28 mpg in combined driving but it costs about $10,000 less. With the Focus you get about same amount of interior space for passengers and even more cargo room.

Also, you'll have a much easier time negotiating a good price on the Focus wagon than you will on the Escape hybrid, which typically sells at full sticker price.

There are, of course, an endless number of similar comparisons out there. The point is, don't just get sucked into the hybrid hype. If what's really important to you is saving on fuel, do a little thinking before you buy. There are lots of options available.

Source: CNN Money