Are Hybrids Worth the Extra Cost

By David Plowman

As gas prices continue to escalate, more and more people are looking into buying a hybrid vehicle. It is understandable, as gas prices approach $3.50-a-gallon in California (nationwide prices average $2.97-a- gallon), investing in one of these fuel-efficient vehicles just seems to make sense. But does it make cents? With prices for hybrids averaging $3,000 or more than their less-fuel efficient gas powered counterparts, does the savings at the pump justify paying a premium on the sticker price?

That depends on the type of hybrid you buy, and if you are able to take advantage of a limited-time tax credit from Uncle Sam, according to an analysis by Consumer Reports.

The non-profit research organization found that not all hybrids were created equally in terms of fuel economy, a factor that played a key role in determining whether the fuel savings counterbalanced the higher MSRP. After a five-year period, only the two most fuel-efficient hybrids, the Toyota Prius and the Honda Civic, would realize a fuel savings that outpaced the additional cost of the cars. Of the remaining four models Consumer Reports tested (The Ford Escape Hybrid, The Honda Accord Hybrid, The Lexus RX400h and The Toyota Highlander Hybrid Ltd), could actually cost $1,900 to $5,500 more than their all-gas counterparts over a five year period.

Moreover, all of these equations factor in a temporary tax credit from the IRS. The credit, which currently ranges from $250 to $3,150 depending on the make of the hybrid and its fuel efficiency, will gradually be reduced after a manufacturer has sold 60,000 vehicles and will be eliminated by 2010. That means that tax credit on the Toyota Prius, the nation's top-selling hybrid, could be reduced by the end of the year.

That said, many hybrid enthusiasts say there are many other advantages to their vehicles beyond the cost. They cite the benefits to the environment, low maintenance costs and a higher than average customer satisfaction among the benefits.

Depending on your preferences, hybrid vehicles could be a practical option. But when it comes to dollars and cents, you may never save enough on fuel to recoup the increased cost for the fuel efficient vehicles.