Hybrids Moving from Making Environmental Sense to Economic Sense

In case you don't own a car or have been in hibernation the past several months, you may be surprised at the price of a gallon of gasoline these days. The average price in the U.S. was $3.67 as of last Friday according to AAA. Talk of a gas tax holiday by presidential candidates would do absolutely nothing about the fact that expensive gasoline seems to be here to stay. There is simply too much demand, both in the U.S. and abroad, as well as unfriendly oil producing countries such as Iran, Russia, and Venezuela that have little motivation to ease our pain at the pump.

Hybrid vehicles have been touted as one possible solution to both help the environment and spend less on gas. The combination gas and electric engine have miles per gallon capabilities that are more than 30% better than gas-only engines. That statistic would suggest that people should race down to the local car lot and buy a hybrid. Not so fast! Hybrid models come at a price premium anywhere from several hundred to a few thousand dollars over a gas engine version. This price differential has been a deterrent from hybrids gaining widespread adoption as the gas savings often would take too long too offset the higher price of a hybrid vehicle. Until car manufacturers aggressively work to narrow the price difference between gas and hybrid vehicles, adoption of hybrid vehicles will not realize its potential.

The long payback period is shortening thanks to soaring gas prices. Now, some hybrids have payback periods of 2-4 years. This shortening of the breakeven point means that hybrid owners are more likely to realize savings. Of course, this assumes gas prices remain high. While it would be nice to see prices retreat below $3.00 a gallon, there will be little reason to lower prices as long as demand does not decline substantially. This means that buying a hybrid vehicle might no longer be the wise environmental choice, but it could be the wise economical choice, too!

Link: USA Today "Hybrids Recoup Higher Cost in Less Time"

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