The real truth about hybrid cars
Sure they are great for fuel economy, but will they really save you money? Gerri Willis takes a look.
NEW YORK (CNNMoney.com) -- With the price of gasoline setting new records everyday, more and more people are turning to hybrid cars as a way to protect themselves against price increases at the pump. But are hybrids all they're cracked up to be? We'll tell you what you need to know.
1: Get your bottom line savings
Hybrid cars generally get more miles to the gallon and if you purchase one, you may qualify for a tax break. But you'll pay about 20 percent more for a hybrid car than a traditional automobile.
Most hybrids take at least 2 to 3 years to recoup the purchase costs associated with them. Let's take a look at some hybrids versus traditional cars and see how the numbers stack up.
If you were to purchase a hybrid version of the 2007 Toyota Camry, which gets 39 miles per gallon and costs $26,200, it would take you 2 years recoup the $1,010 it cost you to upgrade to the hybrid model.
If you went with a 2008 Ford Escape hybrid, it would take you 6 years to recover the $4,195 difference in price between the hybrid and the standard models.
Make sure you look at actual transaction prices, though, and not just sticker price, and factor in possible tax credits and other incentives. The differences between hybrid and non-hybrid may be less than they seem.
2: Investigate the tax credits
But consider that there are some tax credits available if you're in the market to purchase a hybrid. The size of the tax credit varies by model and is determined by what kind of hybrid it is and the kind of fuel economy it gets. Right now, the maximum credit available is for $3,400.
But be aware that these credits begin to disappear after the manufacturer sells 60,000 hybrid vehicles. Toyota's Prius has already crossed this threshold.
Remember, you have to buy a new hybrid to get the credit. Buying used won't help you. Check out a list of qualified hybrids, their credit amounts and the expiration schedule at fueleconomy.gov. If you sell your hybrid, it's unclear if you'll have to pay back part of the tax credit you received. But keep in mind that there might be state tax incentives for buying a hybrid.
Also, before counting on that tax credit find out how close you are to having to pay the Alternative Minimum Tax. Having to pay the AMT, or even getting close, can reduce or entirely wipe out that hybrid tax credit.
3: Don't be sold by MPG
A lot of people equate hybrids with great fuel economy. And while that may be true in some cases, it's not always accurate, says Phil Reed of Edmunds.com.
Performance hybrids, for example, don't necessarily save you more gas than a traditional car. Plus, hybrids are notoriously far off from the miles per gallon, or MPG rating, designated by the EPA. For example, the Toyota Prius was given an MPG rating of 60, but in real-world testing that number was more like 43 MPG, according to Edmunds.com.
But remember that EPA estimates are for comparison purposes only. Non-hybrid cars don't get their EPA estimated mileage, in most cases, either. So the hybrid could still end up saving you a lot on fuel.
4: Consider sub compacts
If you're looking to save some fuel, you may also want to consider a sub compact car. Vehicles like the Toyota Yaris or the Honda Fit are priced at $12,000 to $16,000, which is thousands of dollars cheaper than a hybrid car. And by saving $10,000 you'll be able to buy 3,130 gallons of gas, which equals about 100,000 miles worth of fuel.