A Hybrid May Take A Few Years To Pay Back The Extra Purchase Cost, But You May Never Feel The Financial Hit

[NOTE: this is U.S. information, but still relevant to Canadians]

One of the knocks on hybrid vehicles is that it may take you several years to break even on the extra cost of the hybrid technology despite the money you’ll save on gasoline. That’s true.

However, if you add that additional cost to your loan, rather than your down payment, you may never feel that initial financial “hit” that discourages some from purchasing a hybrid. Plus, you could save thousands during the time you own the vehicle.

Fueleconomy.gov has developed a tool to help you decide if paying the extra cost of a hybrid makes good financial sense for you. It allows you to base your analysis on several factors, such as fuel costs in your area, the number of miles you drive each year, and how long you plan to keep the vehicle. It also allows you to calculate how much the extra hybrid cost will add to your total car loan and monthly payment.

One of the interesting things this tool shows is that, given today’s low car loan rates and relatively high gas prices, the monthly fuel savings may outweigh the increase in your monthly loan payment for some vehicles.

For example, let’s say you decided to purchase the 2013 Toyota Highlander Hybrid 4WD rather than the comparably equipped non-hybrid Highlander SE 4WD. Assuming the MSRP for each vehicle, if you added the extra cost to a 60-month loan with a 4.24% interest rate (and plan to drive 15,000 miles a year), you could still come out ahead by about $16 each month during the loan period and about $74 each month after the loan is paid off.

The tool allows you to set the interest rate of the loan, the loan period, and the length of time you expect to own the hybrid. It shows the total estimated savings accumulated over the time you will own the vehicle.

Vehicle price difference is based on MSRP, which can differ significantly from the negotiated price, but you can change vehicle prices to the amount you expect to pay. The tool does not attempt to estimate differences in insurance costs, maintenance costs, or resale value. Still, it can be a useful tool to help you decide whether or not a hybrid vehicle might fit in your budget.

Courtesy of: National Transportation Research Center, Oak Ridge National Laboratory

Also published at: Flagworld