Trading in For a Hybrid Could Be Costly
With gas prices averaging close to $4/gallon, many car owners are considering trading in their gas hogs for a hybrid vehicle. Hybrids of course have the potential to get upwards of 40 miles a gallon (mpg), versus the 15-25 mpg that many of us get with our current vehicles. The savings with the hybrid could potentially amount to around $1,000/year in gas, assuming gas prices do not go down. The catch of course, is the larger price tag that hybrids carry. However, that’s not all. Many think the gas savings is enough to shell out the extra money to purchase the hybrid, but don’t forget about the added expenses a new car brings, the sum of which may mean it is more cost effective to keep driving your gas-guzzler, until fuel-efficient cars drop in price.
Depreciation
Just like many homes have temporarily depreciated in our current market, vehicles will lose value with time. For the most part, cars depreciate the most, the moment they are driven off the lot. Once a car goes from new to used, it drops in value so much so, that at times the car is not worth what your loan is asking for. Because of this, trading in a relatively new car for a hybrid in order to save on gas is a mistake. Why? Well, because when you trade in your vehicle, you will swallow the deprecation that naturally comes with a car that is 2-3 years old. In many instances, this deprecation figure can be around $2,000-$8000 or more – roughly 2,000 gallons of gas.
Interest
Of course, with every car loan comes interest. Let’s say that you trade in your current car, which you have owned for about three years, for a new hybrid. You most likely are starting to see the end of your car payments, assuming it’s around a 5-year loan. By borrowing for a new car, you are essentially extending the life of your loan for an additional 5 years. As each month passes, you are paying more and more to the bank, all to save on gas. If you currently own your car and enjoy no payments, borrowing for a new one to save on gas is hardly logically, mostly because the interest on a new loan will cancel out any gas savings.
Taxes and Title Fees
For me, not buying a new car means not having to visit the DMV for new tags/plates etc., this alone might prevent me from buying a new car, anyone who has waited in line for hours knows what I mean. The costs associated with these fees can be spendy. Let’s say you are charged a tax totaling 5 percent of your new car’s value, for example if your car is worth $20,000, taxes could cost you about $1,200. Also, your state my charge for a new plates or tags.
Before you decide to purchase a new hybrid, make sure you do the math and include all the costs that come with new vehicles. I didn’t mention upkeep, but hybrids – especially with their batteries – may cost more to maintain. $
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Comments
most people don’t think about the fact that even though they may be saving gas, they aren’t going to be saving anything in the long run. In fact they’re probably paying more by getting a hybrid. Great article!
Most people haven’t considered the cost of replacing the battery in a hybrid vehicle. From what I understand they a very expensive! And they are not standardized meaning you can’t go to the nearest auto parts store and buy a generic version. You may very well have to go to the dealer for a new battery and we all know the dealership doesn’t exactlty give you great prices.
Good post. What about buying a 2 years old hybrid that just came off a lease. I think that’s a good option, but I am sure they are more expensive than an equivalent used car.
@ Ronald – I could have worded that better. I was referring to our current housing market, where many homes have depreciated. How about “homes may temporarily depreciate with time.”
@ Pinyo – From what I understand, most hybrids are ordered because of their desirability. Meaning, most dealership can’t even keep them on their lots. Because of this, I would imagine the resale value is very high on them.
@FFB: Agreed. Here is a link to a wrenchers forum on the topic: http://www.eng-tips.com/viewthread.cfm?qid=135399&page=1
You could always just trade in for a more fuel efficient car. Hybrids can be expensive. This is only because its new technology. I have a 14 year old car that gets 36 mpg. You could buy one for $1,000 and it is super reliable (but very small).
@ David – I couldn’t agree with you more. In my opinion, there’s no reason to pay more than about $5,000 on a car. I drive a 1995 Dodge Neon, which gets about 32 mpg. Its pretty sad that vehicles made 12 years ago only lag behind hybrids of now by about 10 mpg.
I agree 100% with this post and have been arguing this subject for months! So many people I know have given in and bought a hybrid. When they brag about their gas mileage I think…well my non-hybrid little Honda Civic is right behind yours at almost 1/2 the price! 
To tack on to FFB’s point – batteries are heavy in these vehicles. Heavy enough to wear your tires 2-3 times faster than in a standard vehicle with the added weight. Don’t forget buying new sets of tires 2-3 times faster than in a standard vehicle, and new tires aren’t cheap either…
Respectfully disagree with hank’s 5/30/08 comment re: tire wear – totally false.
From Honda’s website: the Civic Sedan Hybrid weighs less than 200 lbs. more than the non-hybrid Civic. That is hardly enough to make your tires “wear 2-3 times faster” as claimed.
But I do agree with the basic tenet that hybrid payback is much longer than expected – but that number is diminishing as gas prices continue to climb.
My spouse’s 1989 Honda Civic cost $10,000 in 1988 and gets 30 mpg around town and almost 40 mpg on the highway and it’s almost 20 years old!!
G.
“it is more cost effective to keep driving your gas-guzzler, until fuel-efficient cars drop in price.”
That was pretty much our conclusion when we looked into buying a Hybrid. Thanks – great info.