Time for a Hybrid?

Do fuel savings offset the higher cost of a hybrid car?

Although hybrid cars -- which use a combination of gas and electric power -- are hyped as being especially good values when it comes to fuel economy, experts say that in a strict cost/benefit analysis, they don't always come out better than conventionally powered cars in the long run. Consumer Reports magazine ran five-year projections on total costs for hybrid versus similar non-hybrid cars. Estimates included insurance and maintenance costs, purchase price, probable resale value and income-tax credits (which are already being phased out on popular hybrid cars and won't apply to any vehicle purchased after 2010). When it comes to hybrid SUVs and midpriced sedans, there's little question that, for now, a hybrid car is actually more expensive to own and maintain by a significant margin.

A smaller hybrid car may have a slight edge over similarly sized gas-powered cars, but any long-term financial advantage will likely hinge on your ability to claim a federal hybrid-car tax credit. If you're not eligible for a credit, owning a hybrid compact car over a five-year period is generally at least $1,000 more expensive. If you can claim a credit, then the hybrid car may be the better deal overall, but probably not by a large margin.

No one argues that hybrid cars represent forward-looking technology that's better for the environment. However, on an individual basis, most aren't yet more cost-effective than some standard economy cars like the Honda Fit (*Est. $14,750 to $16,260), which gets up to 35 miles per gallon. In ConsumerGuide.com's real-world mileage figures, the Honda Civic Hybrid (*est. $23,650 to $26,850) achieved a mixed-driving average of 38 mpg; the Honda Fit with a manual transmission achieved 34 mpg. See our separate report on hybrid cars for more on hybrid technology and choices.

Cars that run on clean diesel are the latest to the market. One example is the Volkswagen Jetta TDI (*Est. $22,270). The Jetta TDI does get much better gas mileage than gasoline-powered cars, but with the cost of diesel fuel running between 8 percent and 9 percent more than regular unleaded, the Environmental Protection Agency estimates that you'll only save about $150 per year - a savings that's offset by the significantly higher sticker price over a standard Jetta (*Est. $17,515 to $21,345). The Jetta TDI does qualify for a $1,300 federal tax credit, which helps offset the higher cost.