Uh DOIEEEEEEEE.... Payoff For Efficient Cars Takes Years

[sportyaccordy]

http://www.nytimes.com/2012/04/05/business/energy-environment/for-hybrid-and-electric-cars-to-pay-off-owners-must-wait.html?_r=3&pagewanted=1&adxnnl=1&adxnnlx=1333743878-bCCnR3YqOzNTOZZGWKrMDA

Payoff for Efficient Cars Takes Years
By NICK BUNKLEY

DETROIT ? Ed Moran?s new Toyota Prius was programmed by the dealer to make him feel good about his gas savings. A dashboard display compares the fuel consumption of the Prius and his 2001 Ford pickup truck.

?Every time I go to the store it will tell me how much money I saved,? said Mr. Moran, a horticulturist in Ames, Iowa.

Like more and more Americans, Mr. Moran is looking to a fuel-efficient car to help soften the financial blow of ever higher gas prices.

Shoppers have more options than ever to fight back, including hybrids, plug-ins, electric vehicles and ?eco? or ?super fuel economy? packages.

But opting for models that promise better mileage through new technologies does not necessarily save money, according to data compiled for The New York Times by TrueCar.com, an automotive research Web site.

Except for two hybrids, the Prius and Lincoln MKZ, and the diesel-powered Volkswagen Jetta TDI, the added cost of the fuel-efficient technologies is so high that it would take the average driver many years ? in some cases more than a decade ? to save money over comparable new models with conventional internal-combustion engines.

That is true at today?s pump prices, around $4, and also if gas were to climb to $5 a gallon, the data shows.

Gas would have to approach $8 a gallon before many of the cars could be expected to pay off in the six years an average person owns a car.

Analysts say the added cost of the new technologies is limiting the ability of fuel-efficient cars to gain broader appeal. Hybrid sales have surged more than 60 percent this year, but they still account for less than 3 percent of the total market. Plug-in cars represent a minuscule fraction of sales, with General Motors even halting production of the Chevrolet Volt in response to less demand than it expected.

?The point where a car can actually go after a mass-market audience is when the pricing starts making sense on paper,? said Jesse Toprak, vice president for market intelligence at TrueCar. ?If they want these technologies to be mainstream, pricing still needs to come down.?

The Prius and Lincoln MKZ are likely to produce overall savings within two years versus similar-size gas-powered cars from the same brand, but other hybrids, despite ratings 8 to 12 miles per gallon better than conventional models, will cost more to buy and drive for at least five years.

The data assumes an average of 15,000 miles driven a year and a gas price of just under $4 a gallon.

If gas cost $5 a gallon, the TrueCar data estimates that the payback period for a hybrid Ford Fusion over the conventional Fusion would be six and a half years, compared with eight and a half years at $4. At $6 a gallon, the hybrid Toyota Camry, Hyundai Sonata and Kia Optima are likely to generate savings within four years.

So why do some buyers pay more for advanced technology that might not save them money? Many never do the math, analysts say, or they tend to overestimate how much the added miles per gallon translate into actual monetary savings. Some view the higher mileage as better for resale value, hoping to come out better on the back end.

?The price of the vehicle, you only pay it once and then soon forget about it,? Mr. Toprak said.

Others clearly view saving fuel and doing something better for the environment as their ultimate goals, regardless of cost. The Prius, for example, became a success in part because drivers wanted to drive ? and be seen driving ? a hybrid.

?Fuel economy has become a social attribute,? said Tom Turrentine, an anthropologist at the University of California, Davis, who has studied car buying habits and is the director of the university?s Plug-In Hybrid and Electric Vehicle Research Center. ?People want to have good fuel economy because if they have poor fuel economy they might look stupid.?

The low price tag and high mileage rating of the new Prius C hatchback persuaded Mr. Moran, the horticulturist, to buy one in March.

He paid a little over $22,000 for the car, which is smaller and less expensive than the regular Prius, with an identical 50 miles-per-gallon rating. That is about the same price as a Toyota Camry sedan, which gets about 30 miles per gallon.

Mr. Moran, 34, knew his fuel savings would be overshadowed by his new monthly loan payment, but driving a hybrid just felt right. ?I thought, ?I try to save plants every day, so why am I not doing my part?? ? he said.

Early in March, Toyota said that it had sold more Prius C cars in its first three days on the market than Chevrolet sold plug-in Volts and Nissan sold battery-powered Leafs in all of February. The statistic highlights that even within the fuel-efficient car market, hybrids have a big leg up on electric cars, which are far more expensive.

According to TrueCar, a buyer who chose the Leaf instead of a Nissan Versa would need to drive it for almost nine years at today?s gas prices or six years at $5 a gallon before the fuel savings outweighed the nearly $10,000 difference in price.

The Volt, which cost nearly $40,000 before a $7,500 federal tax credit, could take up to 27 years to pay off versus a Chevrolet Cruze, assuming it was regularly driven farther than its battery-only range allows. The payback time could drop to about eight years if gas cost $5 a gallon and the driver remained exclusively on battery power.

The Lundberg Survey, which tracks fuel prices, said in March that gas prices would need to reach $12.50 a gallon for the Volt to make sense purely on financial terms. It said the Leaf would be competitive with gas at $8.53 a gallon.

Still, in a recent survey by Consumer Reports, the most satisfied drivers owned Volts. The survey said 93 percent of Volt owners would definitely buy the car again ? though there are only 12,000 of the cars on the road.

?If you provide consumers what they want, they won?t mind paying a premium to get it,? Mr. Toprak said.

Marcus Schuh, the general manager of Terry Lee Honda, a dealership near Indianapolis, said shoppers were not necessarily looking to save money when they shopped for a fuel-efficient car.

Many just want a vehicle that consumes less gas, and some are willing to pay a modest premium for a hybrid if they want to reduce their fuel use even more, he said.

?There?s probably a percentage that is aware of the cost and benefit,? Mr. Schuh said. ?It?s about helping the environment and it?s a good feeling to do it.?

Right now, the biggest reason people are not buying many hybrids, he said, is that they are in short supply, because of production cuts caused by last year?s tsunami in Japan, where Honda makes all of its hybrids. So if someone comes in asking for a hybrid, Mr. Schuh can make the argument that their overall costs might be less by going with a conventional car.

The TrueCar data shows that upgrade packages like the ?eco? trim level on Chevrolet?s car lineup generally take even longer to pay off than hybrids. Such upgrades cost less than a hybrid powertrain, but the increase in gas mileage is much smaller.

Even so, Matt Melliere, 25, decided in January that the Chevrolet Cruze Eco was the right car for him. At 42 miles per gallon in highway driving, it is twice as efficient as the Subaru WRX he had previously.

?The miles per gallon was definitely the driving factor,? said Mr. Melliere, who lives in St. Charles, Mo., and commutes 20 miles each way to his marketing job with an online retailer.

?Every day when gas goes up,? he said, ?I feel better and better about my purchase.?

[TurboDan]

I'm not against any type of technology, but it has to make sense. For me, it wouldn't be price that would dissuade me from buying an EV but the range limitations. If I feel like getting in my car in my driveway in New Jersey and driving to Florida, I want to be able to do that. I don't want to buy a vehicle with restrictions of any kind.

Personally, I don't feel as if there is any passenger vehicle on the market today that would truly be unaffordable due to "poor" gas mileage. Even at $4/gallon, I don't see a significant difference in true spending on fuel between my old Passat and my new LR2, which has about a 10-15mpg difference in real-world driving applications for me. So you spend $60 a week instead of $40 on gas. In the grand scheme of things, what's the big deal?

[ifcar]

Personally, I don't feel as if there is any passenger vehicle on the market today that would truly be unaffordable due to "poor" gas mileage. Even at $4/gallon, I don't see a significant difference in true spending on fuel between my old Passat and my new LR2, which has about a 10-15mpg difference in real-world driving applications for me. So you spend $60 a week instead of $40 on gas. In the grand scheme of things, what's the big deal?

A thousand bucks a year is a big deal for a lot of people.

[GoCougs]

A thousand bucks a year is a big deal for a lot of people.

Should those people be buying new cars? Plus, with a ~35 mph/ave compact, the hybrid advantage isn't going to be 50%, and as the years march on, IC-only will close the gap on hybrids.

[ifcar]

Should those people be buying new cars?

You think that the only people who should buy a new car are those who don't care about, say, $5,000 over five years of ownership? I didn't say they can't afford to spend that extra money; I said it's a significant enough sum that most people would probably pay attention to it.

[GoCougs]

You think that the only people who should buy a new car are those who don't care about, say, $5,000 over five years of ownership? I didn't say they can't afford to spend that extra money; I said it's a significant enough sum that most people would probably pay attention to it.

But wouldn't they be far better off financially buying a slightly used quality non-hybrid compact? (Yes.) Hybrids and plugin-ins are a net financial loser (when buying new, admittedly I'm not sure how hybrids fair used).

[ifcar]

But wouldn't they be far better off financially buying a slightly used quality non-hybrid compact? (Yes.) Hybrids and plugin-ins are a net financial loser (when buying new, admittedly I'm not sure how hybrids fair used).

New vs. used almost always wins. That ignores the various benefits to buying any new car; it's not specific to hybrids.

[sportyaccordy]

New vs. used almost always wins. That ignores the various benefits to buying any new car; it's not specific to hybrids.

If people are looking to save, going new is pretty much a guaranteed losing proposition. Say they save that $1000/yr in gas. What about depreciation? Transaction fees/taxes? They might take a bath on the trade-in, and have to jump from liability to full insurance coverage. And then there's financing interest...

Math wise going new is pretty much a losing bet all the time, outside of a few circumstances.

[ifcar]

If people are looking to save, going new is pretty much a guaranteed losing proposition. Say they save that $1000/yr in gas. What about depreciation? Transaction fees/taxes? They might take a bath on the trade-in, and have to jump from liability to full insurance coverage. And then there's financing interest...

Math wise going new is pretty much a losing bet all the time, outside of a few circumstances.

Sure, but fuel-efficient new beats not-fuel-efficient new. There are other benefits to buying a new car after all.

[2o6]

It depends on how you do your math.

If people are looking to save, going new is pretty much a guaranteed losing proposition. Say they save that $1000/yr in gas. What about depreciation? Transaction fees/taxes? They might take a bath on the trade-in, and have to jump from liability to full insurance coverage. And then there's financing interest...

Math wise going new is pretty much a losing bet all the time, outside of a few circumstances.

If no one ever bought new cars, there would be no used cars.

[sportyaccordy]

Sure, but fuel-efficient new beats not-fuel-efficient new. There are other benefits to buying a new car after all.

Yea but non-hybrid new pretty much always beats hybrid new. Thats the whole point of the article.

[2o6]

Yea but non-hybrid new pretty much always beats hybrid new. Thats the whole point of the article.

It depends on how you do your math.


Hybrids will have limited interior space and performance for the same price of a traditional car, but if you take the trade off in performance or space, you benefit with increased MPG.

[ifcar]

Yea but non-hybrid new pretty much always beats hybrid new. Thats the whole point of the article.

That's not what the article says. It says that you pay less in total for the more expensive hybrid if you keep it for four to six years for several of the cars they looked at, even assuming no increase in gas prices.

What do you expect, that the more expensive car is instantly less expensive?

[GoCougs]

New vs. used almost always wins. That ignores the various benefits to buying any new car; it's not specific to hybrids.

True on the latter, but if finances are a cornerstone of hybrid ownership color me unconvinced that a one-year-old Civic or Corolla with 10,000 miles is materially less financially beneficial (condition, reliability, warranty, life) than a new hybrid.

[ifcar]

True on the latter, but if finances are a cornerstone of hybrid ownership color me unconvinced that a one-year-old Civic or Corolla with 10,000 miles is materially less financially beneficial (condition, reliability, warranty, life) than a new hybrid.

If you're okay with a used car, buy a used hybrid.

[MrH]

That's not what the article says. It says that you pay less in total for the more expensive hybrid if you keep it for four to six years for several of the cars they looked at, even assuming no increase in gas prices.

What do you expect, that the more expensive car is instantly less expensive?

With current gas prices, the pay back tends to be over 6 years for most.

And that's not considering the time-value of money either.

[ifcar]

With current gas prices, the pay back tends to be over 6 years for most.

And that's not considering the time-value of money either.

Most?

From the article:
Prius is two years.
MKZ is two years.
Camry is four years.
Sonata/Optima is four years.
Fusion is 6.5 years.

No other hybrid is mentioned, but that only leaves a handful of vehicles. A high number of nameplates -- including the best sellers -- have short payoff times. It's the electric cars they're skeptical about.

Edit: It also doesn't mention the GM sedans, but there's a reason GM doesn't even bother to try and call them hybrids anymore.

[sportyaccordy]

Most?

From the article:
Prius is two years.
MKZ is two years.
Camry is four years.
Sonata/Optima is four years.
Fusion is 6.5 years.

No other hybrid is mentioned, but that only leaves a handful of vehicles. A high number of nameplates -- including the best sellers -- have short payoff times. It's the electric cars they're skeptical about.

Edit: It also doesn't mention the GM sedans, but there's a reason GM doesn't even bother to try and call them hybrids anymore.

Sonata/Optima/Camry are 4 years with gas at $6/gallon. Same with the Fusion. Prius is an exception because it is a ground up hybrid paradigm. MKZ benefits from the fact that the only gas model is a 3.5L V6. Think about it... why would the Fusion have such a longer payback?

As is, for most manufacturers the technology is DOA on all its promises.

[68_427]

How is the MKZ two years?  Hybrid is a no cost option.

[giant_mtb]

I feel like it's fairly well-known to people like us that hybrids/electrics/bullshits aren't worth the money...people buy them because it makes them feel awesome and because they have the money to spend.  They see the price of gas as an instantaneous cost for the most part.

[ifcar]

Sonata/Optima/Camry are 4 years with gas at $6/gallon. Same with the Fusion. Prius is an exception because it is a ground up hybrid paradigm. MKZ benefits from the fact that the only gas model is a 3.5L V6. Think about it... why would the Fusion have such a longer payback?

As is, for most manufacturers the technology is DOA on all its promises.

Ah, I missed where each car is discussed with gas at a different price. (Fusion is $5 not $6, for reasons unstated.)

[Morris Minor]

I think the point of this article is that people buy hybrids for the feel-good factor, a bit like paying extra for vanity plates or appearance packages.

Frippery.

[hounddog]

If people are looking to save, going new is pretty much a guaranteed losing proposition.

Volkswagon TDI pays for itself in about 5 years. 

Why?  Because it only costs about $4k more then its gasoline sisters and gets about 15mpg or so better.

Otherwise, I completely agree.

[ifcar]

Volkswagon TDI pays for itself in about 5 years. 

Why?  Because it only costs about $4k more then its gasoline sisters and gets about 15mpg or so better.

Otherwise, I completely agree.

That's an exaggerated mileage improvement, and the higher cost of diesel fuel offsets a lot of that.