Hybrid Cars Prices and its Tax and Credit

Prices are dropping and most still have tax incentives. Now, however, federal tax incentives can cover much of the cost difference.

Tax credits running out

Once a given manufacturer sells more than 60,000 credit-eligible vehicles, tax credits for that company's vehicles start being reduced and ultimately eliminated.

Toyota is now offering rebates and discounts to make up for lost tax credits.

For example, because Toyota is past the sales limit, the tax credit for purchasing a Prius has dropped to $1,575, from $3,150 in September 2006. Factoring in the tax credit, a Toyota Camry Hybrid purchased now should cost about $23,118, according to Edmunds True Market Value. Prices for other hybrid vehicles are falling as well, but not as fast. Tax incentives for those vehicles, like the Ford Escape and Mercury Mariner Hybrid, remain high, however.

Some state and local governments also offer tax incentives to purchasers of hybrid vehicles.

In addition, some corporations, such as Bank of America, offer cash incentives for employees who purchase hybrid vehicles. Some insurance companies, such as Travelers and Farmers Insurance Group, offer discounts to drivers of hybrid vehicles.

Prices likely to rise

Hybrid prices probably aren't going to stay low for long, though, Rosten told CNNMoney.com.

Either through errors or tricky rules, not all hybrid buyers will get the tax credit they had expected.

If you bought a Toyota Prius last summer you may have thought you were entitled to a $3,150 tax credit.

Following a story we published Friday about the cost-effectiveness of purchasing a hybrid vehicle, CNNMoney.com received an email from one reader who filled out the wrong form - she mistakenly asked for an electric vehicle tax deduction - and thought she was entitled only to a $1,000 tax credit, not the $3,150 credit she was actually supposed to receive.

She's now filing an amended tax return.

If a family's taxes, figured the old-fashioned way, come in below the AMT amount, they have to pay the higher AMT.

But the tax was never indexed for inflation since its 1970 inception. In that case, you're only allowed to claim as much of the tax credit as you can without reducing the taxes you pay below the AMT amount.

At tax time, Bob finds that for his income he's paying less in taxes than the AMT mandates, so he must pay the AMT. Bob gets no hybrid tax credit for his Prius.

Jane doesn't have to pay the AMT, either. But her taxes are just $1,500 more than she would have had to pay under AMT. Finally, if you bought a Toyota hybrid vehicle last year, the date you purchased the vehicle will influence how much your tax credit is.

Just in case you missed this detail: Because Toyota sold more than 60,000 hybrid vehicles last year, tax credits for those vehicles began phasing out after September. Also, the tax credits do not apply to leased vehicles and only apply to vehicles purchased new, not used.

Summarized by WS from CNN.com

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Hybrid Cars and Gas Prices

According to auto industry executives, hybrid cars and diesel cars will jockey for market position as long as gas prices remain under $3. While gas prices hung around $3, interest towards hybrid and diesel cars grew because consumers had concerns about the costs of filling the tanks of conventional cars. Now that gas prices have dropped, the concern for stretching every gallon of gas has also fallen.

Consumers are not as drawn to hybrid vehicles and diesel cars because they have no reason to spend anywhere from a $3,000 to $10,000 premium on an alternative fuel car. For much of the next decade, gasoline-powered hybrids, diesel engines and cars that can run on blends of gasoline and ethanol will jockey for market position, executives said.

Hybrids save fuel by using an electric motor at times rather than the gasoline engine. Diesel fuel can cost more than gasoline but gets 20 percent to 40 percent better fuel efficiency, meaning you go farther on a gallon.

The auto web site, Edmunds.com, is now saying that some hybrid cars are worth their premium price tag due to higher gas costs and tax credits from the government. "High gas prices and generous tax credits now offset the high sales prices of some hybrids, assuming owners keep their hybrids for a few years," said Alex Rosten, an analyst with Edmunds.com. 30, the tax credit gets cut in half. The tax credit on Toyota and Lexus hybrids is scheduled to drop to 25 percent in April 2007 and then be eliminated in October 2007.

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Chrysler to make hybrids with Hemis

Durango and Aspen hybrids will use powerful V8 engine for more hauling capability.

By Peter Valdes-Dapena, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Chrysler Group announced Monday that the gas/electric hybrid Dodge Durango and Chrysler Aspen SUVs to be released in 2008 will be powered by the company's 5.7-liter Hemi V8 engine.

The SUVs will use a "two-mode" hybrid system developed by Chrysler in conjunction with General Motors and Germany's BMW. The first vehicle to be sold using the system will be GM's GMC Yukon Hybrid slated to go on sale this fall.

Chrysler, the U.S. arm of DaimlerChrysler, calls the 5.7 liter Hemi, also used in the company's Chrysler 300C and Dodge Charger R/T sedans, its most fuel-efficient V8 engine. The Hemi engine shuts off four of its eight cylinders during highway cruising when their extra power is not needed.

In the hybrid SUVs, that engine will be coupled with electric motors to provide additional power, allowing the gasoline engine to work more efficiently and to shut off altogether whenever the vehicle is stopped. Batteries for the electric motors are charged using power from the gasoline engine.

Chrysler promises a 40 percent improvement in fuel economy in city driving and a 25 percent improvement in overall economy compared to the non-hybrid Hemi-powered SUVS.

The closely related Hemi-powered Durango and Aspen are estimated to get about 15 miles per gallon in combined city and highway driving, according to the EPA. That would increase to just under 19 miles per gallon overall in the hybrid versions, according to Chrysler's estimates.

Using the 345-horsepower V8 engine preserves hauling and towing capabilities that are important to Durango and Aspen buyers, according to Chrysler. Both SUVs are currently available with a smaller, less powerful V8 engine but the smaller engine does not provide better fuel economy, according to EPA estimates.

"We have to think hard about the consumer who buys vehicles like the Dodge Durango and the Chrysler Aspen," said Mark Chernoby, Chrysler Group vice president for advanced vehicle engineering, in a recording made available to journalists. "These are people who want to have hauling capability."

The two-mode hybrid system is designed to provide the most efficient performance in both city and highway driving, according to GM and Chrysler. The system is engineered to fit almost entirely within the vehicle's transmission tunnel, making it easier to adapt for use in different vehicles.

Chrysler does not currently offer any hybrid vehicles. GM currently sells a "mild hybrid" version of its Saturn VUE crossover SUV and will beginning offering more hybrid SUVs next year. Ford currently sells hybrid versions of its small Ford Escape and Mercury Mariner crossover SUVs and will begin offering hybrid versions of some of its cars next year.

Last year, more than half of the hybrid vehicles sold in the U.S. were produced by Japan's Toyota Motor Corp., according to Power Information Networks.

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