Do Hybrids Equal Savings?

May 28, 2008 – 12:14 am

With gas prices going through the roof, many people have contemplated buying a new car, particularly a gas/electric hybrid, to drastically improve their gas mileage and lower their gas bill. But are the savings people are getting really all they're cracked up to be?

Don't get me wrong. I'm all for saving the environment and I've been making some lifestyle changes to help lower my carbon footprint (though you can have my long, hot showers when you pry them from my cold, dead fingers), but this post isn't about what's environmentally or morally or ethically right. It's about what makes economic sense for you and what doesn't. Is getting rid of your old car and buying something new with better gas mileage really going to save you money?

To your right is a calculator that will help you figure out exactly how much money you'd save on gas if you got a car with better mileage. You may have seen some calculators like this before, but mine is different in two ways. First, all the values have sliders, so you can quickly and easily adjust for different annual driving patterns, gas prices, and mileage differences. Second, instead of showing you how much you'll save per year, it shows you how much you'll save per month.

Why does it show your monthly savings?

First, because the yearly figure is going to be 12 times higher and much more impressive, but most people rarely think of things they buy regularly in terms of yearly cost. Do you think of your phone bill in yearly costs? How about your grocery bill? How about how much you're spending on gas? Most people think in more immediate terms.

Second, because it creates a better number for comparing against the costs of that new car. I drive a 7 year old Hyundai that's paid off. It gets around 24 miles to the gallon and right now I'm driving about 280 miles a week or 14,500 a year. Let's say I was going to trade it in on a Toyota Prius. According to Edmunds.com, the 2008 Prius base model with no options is going for $21,549 in my neck of the woods. With a realistic trade-in estimate on my Hyundai, a 5.99% loan for 60 months, tax and license (note: the federal tax credit for hybrids is no longer available for the Prius) and I'm looking at a monthly payment of $368.54 a month.

If we figure I'd get 47 miles per gallon from the Prius, at current prices ($4 a gallon), I'd only be saving $98.55 a month. Now at $1182.60 a year, it might seem more impressive. But when you compare the $98.55 a month savings to the $368.54 a month I'd have to pay for the Prius, it doesn't make sense. As much as my wallet is hurting, it would be hurting $270 more a month. I'd be much happier at the pump, but if I looked at the overall impact on my budget... not so much.

But the sliders are there for you to play with the numbers. If you've got a street-tank that's getting all of 15 miles per gallon, but it has a higher trade-in value, so you could end up in a Prius for $200 a month, it started making economic sense when gas hit $3.65 a gallon. On the other hand, there's always quality of life issues to consider. Maybe you go for the midground and move from that street tank to a crossover, preserving some of that "haul my kids and all their crap in comfort" element. You may have to wait until gas crests $6.50 a gallon before you're in the economic black, but you may consider that extra few bucks a month worth the smaller carbon footprint and lower numbers at the pump.

I'm not saying that you shouldn't dump your Suburban for a Prius if that's what you want to do. But if you're going to have to take on a new car payment or raise your car payment, it's worth using this calculator to see if the monthly savings on gas are going to even come close to the extra money you'll be spending on car payments.

Automatically assuming that a higher mileage car equals saving money is a very Rough Equivalent. Do the math.