Hybrids: Heart Over the Head

Until we found out that the old minivan had a few miles left in her, we were on the verge of buying a new SUV. It would have been a hybrid.

We knew what we were getting into if we pulled the trigger. Not only was the hybrid's MSRP $8,450 higher than its regular counterpart, the manufacturer and dealer discounts on the regular SUV but not on the hybrid would have raised the hybrid's premium to at least $10,000.

Under the most favorable assumptions regarding gasoline usage and prices the hybrid purchase is a break-even proposition: 1) Assume we would drive either vehicle 100,000 miles (over the next 7-10 years) and that the average price of gasoline during the SUV's lifetime will be $5 per gallon. 2) From the manufacturer's specifications, assume that the mileage for the hybrid is 28 mpg and the non-hybrid is 18 mpg. The cost of gasoline: Hybrid $17,857 (100,000 / 28 x $5) Non-hybrid $27,778 (100,000 / 18 x $5). Of course, we're not considering the time value of money, since the $9,921 in gas savings will be realized over the next 7-10 years.

In the hybrid's favor we need to recognize that it also confers intangible benefits. Driving a hybrid: 1) Helps the environment; 2) Promotes energy independence; 3) Raises our social status, especially in the Bay Area; 4) Makes us feel better about ourselves. And yes, because we have enough saved up to pay the $10,000 difference now instead of over time, we would have bought the fuel-efficient alternative.

However, most Americans appear to have decided that those intangible benefits aren't enough:

Car sales are up again, but despite rising gas prices, few consumers are buying hybrids. Instead, they’re choosing less fuel-efficient – and less costly — subcompacts and mid-size vehicles. [snip]

Despite the large swings in gas prices, hybrid sales have barely budged: they made up just 2.1% of market share last month, almost unchanged from a year ago. Of the 1.4 million cars that sold last month, less than 30,000 of them were hybrids. “Interest in hybrids is not as high as one would think especially in light of high gas prices,” says Jesse Toprak, vice president of market intelligence at TrueCar.com.