Will buying a hybrid really pay off?

Pricing a Hybrid Car

Let's say we're going to buy a brand-new Honda Civic in 2009. This particular car has a conventional version and a hybrid version, and we're interested in reducing our carbon footprint, but our money tree is not yet producing as much fruit as we'd like. Can we afford to go green?

To keep it simple, we'll start with the base versions of the 2009 Civic sedan, which costs $15,505, and the 2009 Civic hybrid sedan, at $23,650. That's a premium of $8,145. The Civic hybrid has been popular since its introduction, so its federal incentive has already been phased out. But we live in Oregon, so we get a $1,500 credit, which cuts that premium to $6,645.

The regular Civic gets 25 miles per gallon (10.6 kilometers per liter) in the city and 36 miles per gallon (15.3 kilometers per liter) on the highway, while the hybrid Civic gets 40 mpg (17 kilometers per liter) on city streets and 45 mpg (19.1 kilometers per liter) on the highway. According to Environmental Protection Agency (EPA) estimates, the hybrid will save us about $300 a year in fuel costs, and we plan on keeping the car for seven years, so that equals $2,100 in savings. That reduces the premium further, to $4,545. If gas prices rise into the $4 range, as they did regularly in 2008, fuel savings doubles to about $650 a year, which lowers that premium to $2,095 if we keep the car for seven years.

Keep in mind that some hybrid vehicles are cheaper, have a smaller premium or are eligible for more incentives. Then again, some hybrids are far more expensive and might never recoup the initial premium, but they will lessen the impact on the environment.

Individual drivers can also play a role in the cost of the premium: In real life, drivers can squeeze out much higher mileage from their vehicles by driving carefully and taking full advantage of the electric motor in a full hybrid. Some buyers are purchasing hybrid cars now as a hedge against the rise of gasoline prices in the future, a move that works best if they plan to keep the cars for at least five years.

Hybrids are now hitting the market at all price points, including a few under $20,000. At the end of the day, though, most buyers will find the car they want to drive at a price they can afford.

For more information on hybrid cars, take a look at the links on the next page.

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