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MY FAMILY WILL SOON be in the market for a new vehicle. With gas prices approaching $5 a gallon in California, my gut tells me that we should set our sights on a hybrid. Upon doing some math, however, I get a different answer.
I priced out a few different vehicles, including the Toyota Camry and the Honda CR-V. In both cases, you pay an all-in premium—including taxes—of about $4,500 to own a hybrid over a similarly equipped model with a conventional engine. As the Camry gets better gas mileage, I selected that vehicle to do some additional calculations.
A conventional Camry gets 34 miles per gallon (MPG) compared to an impressive 46 MPG for the hybrid model. Assuming the current California price per gallon of $4.50 holds, you’d need to drive about 130,000 miles to break even on the hybrid, given the premium price. Interestingly, this is about the same number of miles for which hybrid batteries carry a warranty. In other words, once you’ve broken even, you’ll likely incur several thousand dollars to replace the hybrid battery. The upshot: With a breakeven point of 130,000 miles, I don’t see the hybrid as a financially attractive option.
If fuel prices continue their ascent, however, the math could swing in favor of hybrids. For instance, if California prices hit $6.50 a gallon—which is conceivable given current inflationary pressures—you’d only need to drive 92,000 miles to break even with the hybrid and thereafter you’d pull ahead. While that’s quite a few miles, I know I’ll probably rack up that sort of mileage over the next five years.
One other factor to consider: If gas prices do rise, dealers will likely increase the premium on hybrid models. They know the math that folks like us—readers of HumbleDollar—are doing to determine if hybrid models are worth it, and there’s a chance they’ll stay a step ahead of us in their pricing.
“In other words, once you’ve broken even, you’ll likely incur several thousand dollars to replace the hybrid battery.”
As others have noted, there’s the flaw in your analysis. “Likely” is not at all the case.
I highly recommend you buy a barely used CPO (certified pre-owned) hybrid that’s coming off a 3 year lease. Vehicles in ‘perfect’ condition with less than 15,000 miles can be found at 50-60% of original selling price. Someone else has absorbed the depreciation hit and your cost for insurance will be a lot lower on a 3 year old car, too. Get a plug in hybrid and your running costs for the majority of your trips will electricity only. For 3+ years now, the costs to drive our 2015 BMW i3 have been 3.4 cents per mile plus 1 set of tires and insurance. Costs to drive our 2017 Honda pickup are much higher. 😉
When I bought my first Prius in 2006, I asked the Toyota dealers in the Phoenix area if they had replaced many Prius batteries and I couldn’t find any who had replaced the nickel metal drive motor batteries. The Prius also has a small lead acid battery in the rear wheel well which needs replacement every 3-4 years.
I bought a second Prius Prime in 2017, and my effective gas mileage is over 199.9 miles per gallon. I add gas about every 3 months as most of my driving is within the 25 mile range of the rechargeable batteries. I definitely think the plug-in hybrids are great, but I have an electric F-150 truck on order to get the $7500 tax credit next year. I got the same tax credit on my 2006 Prius when they were new.
In sixth paragraph below, the full self-driving feature is a $10,000 upgrade, or $200/month, not $20/mo,