V1:

Let's assume you drive 12,000 miles a year:

12,000 / 48mpg = 250 gallons (Prius)

12,000 / 23 = 521 gallons (G35)

521-250 = 271 gallons saved

Average price $4.00/gal=$1084.00 a year for fuel savings.

Now, if the Prius is really going to cost you an additional 12k (28k vs 40k), yes, it will take 12 years to break-even. (Under the assumption of 12,000 miles a year). Of course, if fuel continues to rise in price, the breakeven period gets shorter, but you are correct in your initial math--it takes a long time.

Second, how many people drive a car for 12 years? How many cars even last that long?

Finally, you're not doing anything for the environment--someone else will still be driving your trade-in. The argument can be made that for all the carbon-energy it takes to smelt the iron and aluminum to build a Prius, you are actually doing as much harm (up-front) to the environment as you will help over the lifetime of the car. It's about even.

The only people who profit are Toyota and the salesmen.