Friday, July 11, 2008

Do hybrids now make dollars and sense?

Do hybrids now make dollars and sense?

As gas costs soar, owners of gas-electric vehicles are able to recoup their extra cost

Gerry Malloy
Toronto Star

Jul 11, 2008

A couple years ago, Consumer Reports magazine conducted a study of the potential cost savings that could be realized by a number of hybrid vehicles then on the market, and compared those figures to the extra cost of the hybrid.

The conclusion: for the most part, payback on the extra premium for hybrids was several years away after purchase, if ever.

But that was then and this is now.

The price of some hybrids has come down; more hybrids are now available, in some cases at lower prices; additional purchase incentives are available in many areas; and perhaps most significantly, the price of gasoline has increased more than 50 per cent.

As a result, according to a recent study by the British Columbia Automobile Association (BCAA), several hybrids not only make sense, they make dollars and cents.

The auto club compared hybrid and regular gasoline model pairs. Studying the costs for all 13 hybrids available in B.C. over a five-year period, and factoring in fuel costs, that province's alternative fuel rebate program and the federal ecoAUTO Rebate Program, the analysis showed that in seven of the 13 vehicle pairs analyzed, the hybrids turned out to be cheaper overall over five years.

But there are differences between B.C. and Ontario, in terms of taxes and rebates, for example.

So we crunched the numbers in an Ontario context and came up with slightly different results.

(We also calculated fuel consumption on the basis of 55 per cent city/45 per cent highway driving, which is standard industry practice, rather than the 50/50 split BCAA used. We priced gasoline at $1.30/L, rather than $1.40.)

As in the B.C. case, seven of the 13 hybrid models showed a payback on total investment over the five-year period.

Those models included the Honda Civic Hybrid, Toyota Highlander Hybrid, Saturn Vue Hybrid, Toyota Camry Hybrid, Lexus RX 400h, Ford Escape Hybrid and Chevrolet Malibu Hybrid.

But wait! Where is the Toyota Prius?

It's not there, primarily because there is no non-Hybrid Prius to compare it too. The BCAA compared it to a Toyota Matrix, presumably because both are hatchbacks, but there is a $6,000 price spread between the two (even with Prius's recent $1,000 price cut), and that difference was just too much to overcome (although at $1.40 a litre gasoline, it would do so).

We, instead, compared it with a four-cylinder Camry, to which it is closer in interior size and function, although better equipped. In that case, it did show a payback – of $5,103!

That situation highlighted an important point when shopping for a hybrid. How much you can potentially save depends on what vehicle you compare it with.

In many cases, the hybrid packages come with a lot of features and equipment you may not want or need. In that case, even though the fuel consumption may not be as good with a lower-priced and less well-equipped model, you may ultimately save more by buying it and taking the savings up front.

By so doing, you may also be able to leverage those savings by financing a lower amount. For our calculations, to match the BCAA example, we assumed a 20 per cent down-payment with the rest financed at 9 per cent interest.

While there aren't many financing incentives out there on hybrids, you may be able to do much better than that on otherwise comparable models. And financing charges can make up a significant portion of your five-year costs.

The flip side of the analysis is that other hybrids – primarily higher-priced models with significant price premiums – did not.

As Trace Acres, BCAA's director of corporate communications and government affairs, writes on the association's website, "The price premium charged to own some higher-end hybrids won't be recovered regardless of the price of gas."

That said, consumers should be cautioned not to look at costs as the only determining factor in choosing a hybrid, Acres points out.

"We know from surveys that hybrid buyers are more likely to do so for environmental reasons than cost concerns," he writes.

In that case, buyers should also consider emission ratings as well as sticker prices. All hybrids are not created equal when it comes to emissions reductions.

Indeed, some hybrids are certified only to the same level of emissions certification (for smog-forming pollutants) as their non-hybrid counterparts, offering no significant improvement in that regard.

Unlike CO2 (a greenhouse gas), which is emitted in proportion to fuel consumed, smog-forming emissions are not directly dependent on the amount of fuel used.

One final point: A significant portion of the money saved with some of the vehicles in this analysis (up to $2,000) comes from the rebate provided via the the federal ecoAUTO Rebate Program, which is being phased out at the end of this model year.

So if you are considering a hybrid, this may be the time to buy.

Applications for the rebate on eligible vehicles can be submitted until March 31, 2009; but the rebate applies only to new vehicle purchases and 2009 model-year vehicles will not be eligible.

More details of the BCAA study can be found online at BCAA.com/Hybrids.

Getting the real deal on going green

BCAA crunches the numbers on buying and operating hybrid vehicles
(Burnaby): B.C. is a hotbed for gas-electric hybrid vehicle sales – one-quarter of all hybrids sold in Canada are sold here. And with surging gas prices and concerns about global warming, the hype around hybrids is expected to intensify. Still, questions remain about whether gas savings in a hybrid are enough to offset its higher sticker price. How much “green” will you save by “going green” in a hybrid – if any?

BCAA compared the purchase, financing and operating costs of all 13 hybrids available in B.C. with comparable conventional models over a five year period. A number of variables were incorporated: fuel costs, the provincial Alternative Fuel Vehicle Tax Concession and the federal ecoAUTO Rebate Program. With these factors in play, the analysis revealed that, in seven of the 13 vehicle pairs analyzed, the hybrid option worked out to be cheaper over five years.

Some models were thousands of dollars less expensive, including:

  • Honda Civic Hybrid ($3,868)
  • Toyota Highlander Hybrid SUV ($2,765)
  • Toyota Camry Hybrid ($2,135)
  • Lexus 400h Hybrid SUV ($1,816)

“What this analysis shows is, at current gas prices, most hybrids will end up being either less expensive over five years or within a few hundred dollars of their conventional equivalent,” says Trace Acres, BCAA’s director of corporate communications and government affairs. “On the other hand, the price premium charged to own some higher-end hybrids won’t be recovered regardless of the price of gas.”

Consumers are cautioned, however, that price shouldn’t be the only determining factor in choosing a hybrid. “We know from surveys that hybrid buyers are more likely to do so for environmental reasons than cost concerns,” adds Acres. “If that is the case, potential hybrid buyers should be sure to examine emission ratings as well as sticker prices. Some models may appear cost-effective, but offer only modest emission reductions.”

When BCAA completed its first five-year hybrid cost analysis in 2005, most of the hybrids were more expensive than their conventional counterparts – as much as 25 per cent. Today, this picture has reversed, in large part due to skyrocketing gas prices and government incentives such as the federal ecoAUTO Rebate Program and the provincial Alternative Fuel Vehicle Tax Concession.

“If you’re interested in buying a hybrid and maximizing your savings, 2008 may be the best year to buy,” advises Acres, “The federal ecoAUTO Rebate Program is being phased out at the end of this year, cutting the cost savings on some hybrids by as much as $2,000.”

Applications for the federal ecoAUTO Rebate Program on eligible hybrid vehicles can be submitted until March 31, 2009. The rebate applies only to new vehicle purchases, and 2009 vehicles will not be eligible. The provincial Alternative Fuel Vehicle Tax Concession is scheduled to be in place until April 1, 2011.

Click here for the detailed cost analysis.

About BCAA
BCAA is dedicated to meeting the needs of its members and customers throughout B.C. and the Yukon, connecting them with a team of membership, automotive, travel and insurance professionals. With over 780,000 members and $120 million in revenues, BCAA is the largest organization of its kind in B.C. and the fourth largest CAA-affiliated association in Canada. In 2007 and 2008, BCAA was named one the 50 Best Employers in Canada by international HR consultants Hewitt Associates and the Globe & Mail’s Report on Business magazine. To learn more about BCAA’s products, services and member advocacy, visit www.bcaa.com. For more information on the BCAA Traffic Safety Foundation visit www.tsf-bcaa.com

For further information or interview requests, please contact:

Trace Acres
Director, BCAA Corporate Communications and Government Affairs
Tel: (604) 268-5029, Cell: (604) 788-3753
E-mail: tracea@bcaa.com

Jennifer Timm
BCAA Media Relations Advisor
Tel: 604 268 5342; Cell: 778 228 8859
Email: jennifer.timm@bcaa.com

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