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Hybrid Cars – Let’s do the analysis

March 17, 2011

A couple of years ago I was in the market for a new car.  I studied many options and, because I work in Boulder, Colorado, that included the new Hybrid cars.  Recently I got into a discussion about this again, so I figured that it’s time to look into this again.

There is a lot if hype, expectations, and misinformation about hybrid cars.   Are they really better for the environment? Does the effects of making those batteries outweigh the fuel efficiency?  How long will those batteries last?  Are the benefits worth having the same performance as a Big Wheel?  Most of us are not able to accurately answer those questions.  But there is one question that we can make a good stab at:  Will a hybrid car save me money over the life of the car itself?

The calculations are relatively easy.  Figure out how much the car will cost to purchase, figure out how much it’ll cost to run for X miles.  Guess how much gas will cost.  And Bingo!  Ok, while it’s relatively easy for those who like math it could be beyond most.  So here is an Excel spreadsheet that does it for you:  Hybrid Car Cost/Benefit Spreadsheet

Using this spreadsheet you can run your own what-if scenarios to see what savings you may or may not get.  First, any number with a yellow background can be changed to reflect your scenario.  You can change things like MSRP, interest rate, loan duration, sales tax, and when you have to replace the batteries in the Hybrid.

I set up the spreadsheet to be as much apples to apples as possible.  For this I compare a normal Toyotal Camery LE to a Camery Hybrid.  These two cars are as similar as possible, with only the engine being different.   I chose not to compare a Prius, but you can always change the numbers and run your own comparison.

The numbers that I put in for MSRP, sales tax, loan rate, etc. are typical numbers for the Denver/Boulder area.

There is another field where you can change the ratio of highway vs. city miles.  The default value is for all city driving– the best case scenario for a Hybrid.

Near the bottom of the worksheet is a listing of miles traveled, and how much the car has cost (purchase price plus gas and battery).  When the numbers for our two cars are roughly even, then you’re at the break even price for the Hybrid.

Also included is a column for the not so insignificant expense of a Hybrid battery replacement.  The default value is for $3000 at 150K miles.  There doesn’t seem to be any good guides for when or how much this is going to cost.  A quick Google search says that it’ll cost anywhere from $2000 to $6000, and happen anywhere from 71K miles to 200K miles.

Using the default values, and $4/gallon gas, the two cars break even at 80k miles.  But if you drive 50% on the highway then the Hybrid never breaks even.

But what if gas goes up to $6/gallon, with no highway miles?  Then it breaks even at 60k miles.  At 50% highway it breaks even at 130k miles (and again at 170k, due to the battery replacement).    But is it reasonable to do the calculations with $6 gas?   Historically, even when adjusting for inflation, it isn’t.  Of course that is no guarantee that it won’t.

What can we conclude from this?  Well, it’s all up to personal opinion.  But my opinion is that  total cost of ownership of a Hybrid car is not a lot better than a normal car under most scenarios.  And for that “not a lot better price” you get higher maintenance costs, lower performance, and not as much room or comfort.  In short, it’s not worth it.

Of course things can change.  Gas could go to $6 or $7 a gallon.  Battery technology could be more proven.  The government could put a huge tax normal engines.  But until then, I will enjoy driving in the mountains while zipping by the Prius that can’t go faster than 40 mph while going up hill at altitude.

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6 comments

  1. The battery replacement is the big unknown. What if it costs $6000 after 71,000 miles? Doesn’t that make the cash register ring a little bit?
    And … congratulations, David, you have at least one reader.


  2. Thanks for the consumer aspects of this issue. A deeper ecological analysis (not just good for the individual, but good for all, including future generations) needs to consider the embedded energy in manufacture of the two types of cars, and the eventual cost of disposal (in terms of waste and pollution mitigation).

    I often use this full lifecycle analysis to justify hanging on to my 1997 Subaru Outback that gets about 23MPG and has 130,000 miles, instead of purchasing a new hybrid that gets twice the mileage.

    Another important consideration along these lines is Jeavon’s paradox: Increased mileage of hybrids may result in longer trips becoming “affordable” and over times this behavior could erase any actual reduction of fuel consumption (albeit with greater fuel efficiency).


  3. James,

    You’re comments are right on, but show the deeper problem with an analysis like this. Many of the factors that determine the benefits of a Hybrid car are simply unknown, and there are too many factors to analyze. In my post I chose to ignore all of these and focus only on what most people would consider when buying a car: their wallet. After all, if the car isn’t economical at this level then its long term viability as a consumer product is in doubt. And if the Hybrid’s go away then the other factors are irrelevant.

    I should point out that the same spreadsheet can be used to compare the cost differences between a gas and diesel VW Golf. There are a lot of people promoting diesel cars as an alternative to hybrids, but no realistic comparisons. The comparison results using my spreadsheet are interesting. It doesn’t look good for diesel either.

    I’m hoping that all electric cars really start becoming viable, but we’re not quite there yet.

    -David K


  4. One other thing to think about… When I was shopping for a car recently I was told by salesmen at multiple dealers that the headroom on the price of Hybrids is much smaller then that of a normal gas car. Because of this, when it comes down to negotiation time you will usually be able to get a much better deal on a normal gas car over a hybrid when comparing to MSRP. This just does nothing but hurt the hybrid in your calculation.

    On the note of batteries, in my research I cam across a few sources that said all new hybrids have a battery fail rate that is almost identical to a transmission and are about the same cost as a transmission as well. The eased my concerns about battery life some, but it is still a cost to consider.

    In the end our decision was the same as yours, it’s just not worth it to go with a hybrid right now.


    • No edit button to fix my typo. Oh well, life will go on.


  5. […] technology blogger David Kessner wrote in his analysis of hybrid vehicles that gas prices could still rise to $6 per gallon and battery prices for hybrids could increase as […]



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