Hybrid Cost vs. Payback

How long does it take to recoup the extra cost of a hybrid car?

A drawback to all hybrid cars is that they come with a premium price tag compared to their nonhybrid counterparts. For example, the Toyota Camry Hybrid starts at $26,150 while the gas-powered Camry starts at just $19,395, so there's a big up-front premium for the hybrid technology. And while the Camry Hybrid gets significantly better gas mileage in city driving (33 mpg vs. 21 mpg for the nonhybrid Camry, according to Environmental Protection Agency estimates), there isn't much difference on the highway (34 mpg vs. 31 mpg for the nonhybrid Camry). That raises the often-asked question: Is the hybrid version really worth the extra cost?

Several articles have examined that question and the answer is...; it depends. The price of gas is a big variable, as is the number of miles driven annually versus the amount of the price premium. Of course, the payback is faster when the price of gas is higher because hybrid cars save fuel. That's one reason sales of hybrid cars were especially high in mid 2008 when gas was hovering near $4 a gallon. Sales of hybrid vehicles have slowed in early 2009, in conjunction with substantially lower gas prices. Available tax credits make a difference as well. The rules are complicated, and the credits each car is eligible for differ based on how many models have been sold. To generalize, you'll get a bigger credit for hybrid brands that haven't been on the market very long, and little to no credit for brands that have sold more than 60,000 units. Toyota, Lexus and Honda hybrid cars are no longer eligible for any tax credits, while hybrid cars and trucks from General Motors (2008 models), Ford and Nissan may still qualify. About.com has an article listing current tax credits and upcoming phase-outs. (Note: ConsumerSearch is owned by About.com, but the two don't share an editorial affiliation.)

Publications such as Edmunds.com, Consumer Reports and others have calculated which hybrid cars are worth the additional cost, although their conclusions vary. Based on costs such as fuel consumption, maintenance, depreciation and insurance, Consumer Reports says cars that will pay back their price premium after only a year or so include the Toyota Camry Hybrid, Toyota Prius and Chevrolet Malibu Hybrid, compared to similarly equipped nonhybrid cars. Other cars with a longer, but still reasonably quick payback time, especially if they are eligible for tax credits, include the Nissan Altima Hybrid (available in only nine states), Honda Civic Hybrid and Saturn Aura Hybrid. However, this 2008 report bases its conclusions on gas priced at $4 a gallon. Lower priced gas will lengthen the break-even time periods. Pricey luxury models like the Lexus GS 450h generally will not recoup their price premium even after five years.

Edmunds.com performs a similar analysis using a price of $2.91 per gallon in its calculations, and finds that the Toyota Prius makes the most economic sense, but it still takes a minimum of two and a half years to break even compared to a conventional Toyota Camry driven 25,000 miles a year. Most models take much longer, Edmunds.com says. For example, the Lexus GS 450h would take 11.2 years to recoup its additional cost over a nonhybrid Lexus GS 460 (*Est. $53,470), while the enormously expensive Lexus LS 600h (*Est. $106,035) would take a whopping 86.1 years to break even.

Of course, there are other nonmonetary perks to owning a hybrid car. Some states allow hybrid drivers to use car pool lanes with only one occupant. Resale costs after five years are generally 5 to 10 percent higher as the demand for fuel-efficient hybrids remains strong. Most importantly for many hybrid owners, their gas-electric vehicles still offer the highest gas mileage and lowest emissions for maximum benefit to the environment. For some, this alone justifies the premium price.