Sunday, February 10, 2008

Life is a Highway... Part II

A friend of my sister's brought up a few interesting articles about the cost/benefit analysis of driving hybrids (see comments to my Life is a Highway... post). They still cost more.

I am aware of the cost issues and have been doing some thorough analysis of my wife and I's actual vehicle usage specs as apposed to consumer and industry averages. I'm an analyst for a living after all.

We hope to have a baby soon and one of our two vehicles (Chevy S10) gets poor mileage and doesn't allow seating for infant car seats. The Chevy S10 is still in working order but is getting long in years and maintenance costs will eventually exceed use benefit value.

Our plan would be to give the existing higher fuel efficient vehicle (Saturn Sedan) to her and replace the S10 pickup with another fuel efficient vehicle for my longer commute and extended family road trips. We will be needing the vehicle soon anyway as the truck wears out.

One of the things I found interesting that was not covered in the cost benefit analysis offered in the articles in the comments section, is the depreciation value of the hybrid over time vs the traditional engine equivelent.

My own research indicates that the value holds up overall. For example, a new 2008 Honda Civic Hybrid is about 20,000 while its traditional equivelent is about 16,000. A 2003 Civic Hybrid has depreciated to about 11,000-13,000 (55%-%65 over new) while the traditional 2003 Civic has depreciated to 8,000-10,000 (%50-%62.5 over new). The difference is still about 4000 dollars. Hybrids are holding their value over the long term, even slightly better than their traditional counterparts. Individual models and conditions can modify these numbers but these were the trends I found.

Now for the results of comparing the current operational costs of our Chevy S10 and our Saturn SL1 vs our Saturn SL1 and a Hybrid, or the Saturn and another traditional economy car. I am assuming the new vehicle is either a Honda Civic Hybrid or a Standard Civic.

Without Tax breaks for clean vehicles:
Hybrid over current vehicle usage becomes less expensive within 4 years (not accounting for potential growing maintenance on the Chevy which would make it even less time).
Hybrid over another newer traditional vehicle becomes less expensive within 5 or 6 years.

With Tax breaks for the clean vehicle, those numbers drop by about a year.
Hybrid over current cars become less expensive within 3 years.
Hybrid over newer traditional car becomes less expensive with 4 or 5 years.

If you plan on driving the hybrid for less than 5 years, it is not cost effective. I plan on driving it for as long as it can safely run, or until a much better one comes along, at which point its resale value is still higher than its traditional counter part.

Other reasons to purchase the Hybrid over the traditional vehicle besides fuel economy are as follows:
1. It is greener (Anna would be so proud of me). We all breath the same air and frankly, the Salt Lake Valley needs all the help it can get to have breathable air.
2. It is cooler. The early adopters can brag about their better mileage and how awesome their new technology is. Isn't that how the SUV craze began? To one up the Joneses.
3. Reduce dependence on foreign oil, or oil in general. Its in our national security interest... or something like that.
4. Promote the auto industry to continue manufacturing more fuel efficient cars and alternatives to gas hogs.

If you care about any of those reasons up to a 4,000 dollar value, it is a better deal (to you) than the same car with a traditional engine.

In conclusion, and with apologies for the length of the post, we won't be making this purchase for at least another 10 to 12 months. In the meantime we will be saving our money for it. We will never buy a brand new car, unless its in the price range of a $2,500 Tata Nano. It will be used. Enough years have passed since the introduction of the hybrids to allow a good used car market to exist. We will be busy saving our money and sell the truck in a private sale since dealers rip you off. We will pay cash for the new car which gives us all of the bargaining chips over the dealer and avoid the hidden cost called interest.

Disclaimer: All of this is my plan. My wife's plan involves more 4x4 offroad capability and lower resulting fuel economy. Many babies can be rocked to sleep with a pleasant car ride through steep rocky hills and mountain gorges.

Drive safe everyone so Mater don't have to pull ya out the ravine.


Blogger Cari said...

That was a great point on the depreciation aspect of Hybrid cars, I had never thought of that! I am a big fan of hybrids myself, and was just hopeing the articles may help you determine which one would best fit your needs. Hope it helped some.

11:37 PM  

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