Hybrids: The math doesn't work
 

Real Debt Help - Get out of debt with Dave Ramsey's Total Money Makeover Plan.

Dave, should I get a hybrid to save on gas? They make financial sense in the long run, right? Gas prices are killing my budget…a hybrid is the only answer!

I’ve been getting so many questions recently from people all over America about these cool, new hybrid cars. Let me tell you straight up – don’t get one!

Since hybrids are new, they’ll get better rapidly… and also go down in value rapidly. You don’t want to try to be selling a high-mileage, first-generation model in 5 years because the value will plummet.

Do you really want to lose money?
The Math Doesn’t Work

Let’s say you currently drive a vehicle worth $10,000 that gets 15 miles/gallon. There’s this $25,000 hybrid you’re thinking about buying that gets 25 miles/gallon. That’s a $15,000 price difference just to get 10 more miles a gallon. If you drive 100 miles a week, that’s about a $10 difference a week.

So that would be about $40 extra you’re spending a month in gas if you stuck with the current car. A monthly car payment is MUCH more than that! To get your money back at current gas prices, it would take you almost 29 years to save $15,000 in gasoline! Listen to Dave explain this

The math DOESN’T work! You’d have to drive to the moon and back to make it worth it!
What You Can Do

* Get a different car. If you want to sell your gas-guzzling car, buy another car worth no more than the previous car’s selling price – this means no car payments!

* Move closer to work. Write down all the specifics to see if it makes sense in your unique situation.

* Change jobs. No one says you have to work where you do. There’s always the option to work close to home – or even start a home-based business.

Don’t use this high-gas thing as a rationalization to go get yourself a new car or spend a dime more on one. Just think and make smart decisions before you rush out to buy something like this that’s really going to lose you money.

The hybrid Toyota Camry I bought for the wife consistently gets 45mpg in town and 40mpg or better on the highway. I had to get her a new car before I transfer to Bahrain and for a couple thousand more I got the hybrid. She's happy which make my life a little bit easier. :)

I disagree with that sentiment. First of all, like CPOonfinal said, if you go from say, a car that gets 15 mpg to a hybrid, you are gaining more like 30 mpg, not 10. Also, if you do more city driving than highway, the hybrid is being used to it's full potential (A hybrid gets in the 40-45 mpg range highway and 45-50 city). So he definitely under-exaggerated that part.

Secondly, his depreciation idea is frankly, flat out wrong. My neighbor is a Toyota dealer in Manhattan Beach and just had a customer trade in a 2005 Toyota Prius with 30,000 miles on it. He sold it the next day for $24,000, just above the original sticker price. Yes, value will eventually drop for hybrids as auto makers eventually catch up with our demand. However, if you are in the market for a new car, if the hybrid is in the same price range, there's no reason not to go for it (from a purely economical standpoint).

PS CPOonfinal: Enjoy the Las Vegas of the Middle-East!

I sure will if it's anything like Dubai. I love Dubai so much so that I would move there in a heart beat.

I Guess it depends on what new hybrid... that Tahoe hybrid is not really impressive. I hear that the next gen Toyota hybrids will get around 90mpg.
As far as the Math goes it will probably get to be a better deal once used hybrids start to come into the market more.
One thing that was not mentioned, if my memory serves me correct, was that you get a substantial tax credit with the purchase of a hybrid so it may be a better buy.

I haven't checked into the tax incentive yet. I didn't even think about it when I bought the car. All I knew was I was going to be gone for two years and the wife and kid needed a reliable car. She wanted a hybrid so she got a hybrid. The car is in my name so win win for me if there is in fact a tax incentive/credit! :)

I think it's an income tax credit of up to $3400 depending on the model, date purchased. Don't quote me on it but if the manufacturer sold 60k cars prior to your buy, I'm not sure if the credit is possible... but worth looking into!

I think the tax credit expired in 06?

Yep, you're right. Oh well.

I'm not an expert, but my understanding of the credit was that certain vehicles had certain phase out dates. (i.e. prius-purchased 4/1/07-9/30/07 to receive $787) What kind of hybrid did you buy for your wife?

Summary of the Credit for Qualified Hybrid Vehicles