ValueYourMoney.org
Dumping the Pump
The Savvy Consumer

By Teresa McUsic


Most of us cringe every time we fill up the tank these days. So is it time to trade in our gas guzzler for a hybrid or smaller car with better mileage? 

Many Americans are saying yes. Vehicle sales numbers showed that more passenger cars were sold in the U.S. than light trucks, SUVs and vans combined -- for the first time in at least 20 years, according to analysts at Edmunds.com. And smaller 4-cylinder cars sold in greater numbers than 6-cylinder cars. 

"It's easily the most dramatic segment shift I have witnessed in the market in my 31 years here," George Pipas, chief sales analyst for Ford Motor Co., told The New York Times.

On top of that trend, overall hybrid sales climbed 3 percent last month, even though the market for all car sales in April was the worst since 1995. 

The Toyota Prius became the 11th bestselling vehicle in the country.

 "Three or four years ago, people were concerned more about cup holders than fuel economy," according to Bradley Berman, editor of HybridCars.com, a Web journal and market researcher. "Now fuel economy is the new cup holder."

 Locally, the Prius is more than flying out of dealerships.

Freeman Toyota in Fort Worth gets five or six orders a day for the hybrid, which now has a wait time for delivery of four to five months, said Chris Bernal, sales director at the dealership.

 While some other local dealers sell above the manufactured suggested retail price, Freeman doesn't, Bernal said, so there is no premium over sticker.

How do you choose?
Before you turn in your gas guzzler, be sure to do your homework. Hybrids cost more than traditional cars and trucks.  So even with much higher fuel efficiency, some give you a better return on your investment than others, according to a study by Edmunds.com, a leading online resource for automotive consumer information.

Three factors to consider are fuel efficiency, the premium you have to pay to buy a hybrid and tax incentives. You should also estimate how much and how long you intend to drive the vehicle.

In its first study on the costs of hybrids back in 2005, analysts from Edmunds couldn't make the economic case for any hybrid, even the Prius, which carried a tax credit at the time of $2,000.

But gas averaged $2.29 a gallon that year, according to the Bureau of Labor Statistics. Now, with gas at $3.55 and climbing, the study shows that the Prius and several other hybrids definitely make financial sense, despite price premiums over their nonhybrid competitors.

Making comparisons
For example, the $3,489 more it costs to buy a Prius over its nonhybrid counterpart, the Toyota Camry, pays for itself in a little more than three years with these higher gas prices -- and that's without the tax credit that has now expired for that model. (After 60,000 vehicles of a particular hybrid model are sold, the tax credit phases out.)

Other cars that pay themselves back within five years include the Camry hybrid, Chevy Malibu hybrid, Nissan Altima hybrid and Honda Civic hybrid.

In addition to high gas mileage, all but the Camry still have a federal tax credit of $1,050 to $2,200 you can use to reduce you tax liability, although Honda's tax credit is in the phaseout period and will be cut to $525 at the end of June and expire at year's end.

What's motivating sales
The Prius is still the dominant hybrid in the U.S..

"Toyota leads the market in consumer's recovery of the premium because it started the hybrid market and now has economies of scale so it doesn't cost as much to produce them," said Jesse Toprak, executive director of industry analysis for Edmunds.

While some of the move to hybrids has been from ecologically minded citizens, most of their popularity has come from rising gas prices.

"No tax incentive, whiz-bang technology or Al Gore movie will have the effect of rising gas prices in terms of shifting consumer sentiment towards hybrids," Berman said.

Will they save money?
But hybrids are just one answer to your fuel-cost woes -- and some hybrids are not an answer at all. In fact, just two hybrid models, the Prius and the Civic, get better than 40 mpg and only 12 models get better than 30 mpg, Berman said. The rest, particularly hybrid SUVs and trucks, still have pretty low fuel efficiency.

A number of conventional cars do just as well as hybrids in fuel efficiency for substantially less, Toprak said. Of course, they don't offer the size or storage capacity.

"There are no hybrids under $22,000," Toprak said. "But there are many smaller cars that get more than 30 miles per gallon that cost $15,000 or less."

Among those models are the Ford Focus, Toyota Yaris and Toyota Scion, Honda Fit and Chevrolet Aveo.

Bernal at Freeman Toyota said he has seen a big increase in traffic in the past few weeks for his small, nonhybrid models, like the Yaris, Camry and Toyota Corolla.

Not much for a trade-in
Also be aware that if you turn in your gas guzzler for a hybrid or smaller car, you will not see a great trade-in value, Toprak warns.

"If you are turning in a large SUV or pickup, be prepared for a shock when you go to the dealership," according to Toprak.

"The values are declining so rapidly and dealers are going to be extremely conservative in their pricing."
Bernal agrees that prices on the large models are decreasing.

"There are car auctions all over the country, and the big SUVs like Yukon and Tahoe are not even getting a bid," he said.

HOW MUCH MONEY WILL YOU SAVE?
Here's a cost comparison from Edmunds.com that looks at savings from hybrids and nonhybrids for 2008 models:


Vehicle

Premium cost over nonhybrid

Annual gas savings

Years to break even*

Toyota Camry Hybrid 4-door sedan

$889

$573

1.6

Chevy Malibu Hybrid 4-door sedan

$438

$160

2.7

Nissan Altima Hybrid 4-door sedan

$1,561

$490

3.2

Toyota Prius 4-door hatchback (compared to Toyota Camry LE)

$3,489

$989

3.5

Honda Civic Hybrid 4-door sedan

$2,803

$578

4.8

Mercury Mariner Hybrid 4-door SUV

$4,904

$769

6.4

Lexus RX400h 4-door SUV

$4,407

$621

6.4

Saturn Vue Green Line hybrid 4-door SUV

$4,770

$684

6.4

Ford Escape Hybrid 4-door SUV

$4,161

$568

7.3

Lexus GS450h

$2,722

$353

7.7

Toyota Highlander Hybrid 4-door SUV

$7,495

$625

12.0

Saturn Aura Green Line hybrid 4-door sedan

$2,602

$160

16.2

Lexus LS800h 4-door sedan

$18,630

$271

68.6

*Assuming 15,000 miles per year

IS THIS CAR A GOOD DEAL?
To check for fuel efficiency of all car models, go to a Web site that was designed by the U.S. Department of Energy, www.fueleconomy.gov

To determine the true value market value of the price of a car and have local dealers offer competitive bids, go to www.Edmunds.com

FEDERAL TAX CREDITS FOR 2008 HYBRID VEHICLES
Expired
Toyota Camry hybrid, Prius, Highlander
Lexus RX 400 and LS 600h L hybrid

Phasing out
Honda Civic CVT: $1,050 credit until June 30, then $525 credit until Dec. 31, then zero

$3,000 credit
Ford Escape hybrid, 2WD
Mazda Tribute, 2WD
Mercury Mariner hybrid, 2WD

$2,300 credit
Nissan Altima hybrid

$2,200 credit:
Chevrolet Tahoe hybrid, 2WD and 4WD
Ford Escape hybrid, 4WD
GMC Yukon, hybrid
Mazda Tribute, 4WD
Mercury Mariner hybrid, 4WD

$1,550 credit
Saturn Vue Green Line

$1,300 credit
Saturn Aura hybrid
Chevrolet Malibu hybrid
Source: Internal Revenue Service