Friday, May 30, 2008

Hybrid Arithmetic.

If we are to wean ourselves from oil, the proposed solutions must make financial sense for consumers. Let's consider a hybrid vehicle, the Toyota Prius, compared to another Toyota offering with a conventional powerplant, the Yaris. The vehicle costs are based on vehicle configurations that a commuter would want (cruise control, radio, etc)*:

  • Prius: Price = $24,950, Effective MPG = 46.4, 6-years fuel @ $5/gal = $10,360
  • Yaris: Price = $15,600, Effective MPG = 31.7, 6-years fuel @ $5/gal = $15,140

Thus, after 6 years of use, choosing a Prius still has a premium of $4500 over the Yaris. This is also assuming that vehicle maintenance costs are equal, an assumption that probably favors the Prius.

$4500 is a stiff "green premium" to change to a hybrid vehicle. Perhaps a Prius is a hedge against an even higher gasoline price, if so, the breakeven cost of a Prius for six years of operation would require $8 a gallon gas. So is such a hybrid vehicle a realistic solution to offer consumers?

*Vehicle price also assumes: $2000 trade-in, 48 months financing @6.1%. Fuel costs assume 16,000 miles traveled per year with 45% highway travel.

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