Hybrid Cars: A Comprehensive Cost-Benefit Analysis

Hybrid cars have become very popular in recent years. Even though these cars are portrayed as a way to save money on gas, you may want to reconsider paying the extra premiums for this car. A hybrid car is one that utilizes a combination of electric and gas power to drive. Typically, the electric is regenerated while the car drives from kinetic energy. The goal behind using a hybrid car is to reduce the amount of gas that is consumed. Many hybrid car manufacturers report large mile-per-gallon estimates. There are hybrid cars on the market that can get 100 miles-per-gallon. 

Extra Cost

If hybrid cars cost the exact same as regular cars, they would be considered a worthy investment. However, as it stands, hybrid cars are typically more expensive than cars with a traditional engine. In fact, you should expect to pay somewhere between $4000 and $6000 extra just because you are getting a hybrid. Because of this price difference, it is difficult to justify spending the extra money for a car that is going to save you money on gas.

Example 

Let's say that you could choose between a regular car that gave you 30 miles to the gallon, or a hybrid that could give you 50 miles to the gallon. Imagine that you drove 12,000 miles over the course of a year and the price of gas was $3.00 per gallon. With those numbers, you are going to spend $1200 with the traditional car and $720 with the hybrid. This only creates a difference of $480.

When you are spending as much as $5000 more for a hybrid, it is going to take 10 years for you to make up the difference between the two cars. Therefore, if you are purchasing a hybrid solely so that you can save money on gas, you are most likely not making the most wise financial decision.

Tax Deduction

If you are thinking about whether to purchase a hybrid, you are also going to need to take into consideration a tax deduction that is offered by the government. When you purchase a hybrid, you can take a one-time $2000 tax deduction. If you were in the highest tax bracket, this is going to save you 35 percent of $2000, or $700. If you were in a lower tax bracket, it would save you even less than that. Even when you take into consideration the potential $700 tax savings, buying a hybrid still does not make much financial sense. In most cases, you would be better off to purchase the same car with a traditional engine if you are interested in saving money.

Additional Considerations

Some states have carpool benefits for hybrid cars that will save you money as well. In many states, you are eligible to drive in the carpool lane with only one passenger in a hybrid car. The amount of time and gas that you can save can be a great benefit to you.