Plug in – and pay up?

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Will plug-in hybrids save us from $3 per gallon fill-ups – or at least, ease the pain a little?

The hype about these vehicles – which differ from the current crop of gas-electric hybrids in that they can run on pure battery power for longer and, when their batteries run down, can draw power from a household outlet instead of an internal combustion engine – is that they have the potential to lower fuel consumption by as much as 20-40 percent (so it’s claimed) over what the best conventional hybrid cars like the current Toyota Prius or Ford Fusion hybrid can deliver.

But, there’s a catch.

Several, actually.

The first is that while it’s true a plug-in hybrid such as the 2011 Chevy  Volt or the all-electric Nissan Leaf can deliver impressive fuel efficiency, it’s important to keep one’s eye on the total operating costs of the vehicle – including its purchase price. Almost no one ever talks about this. The Volt’s MSRP is a stupendous $40,280  – about fifteen thousand dollars more than the cost of the Toyota Prius – which is otherwise similar to the Volt in terms of its physical size, layout and passenger-carrying capacity. It is also in the same ballpark, price-wise, as a current-year mid-level luxury sedan such as a loaded BMW 3 or even a base model Mercedes E-Class.

That’s not a cheap date. 

And that’s the Catch-22: People who are worried – really worried – about the cost of fuel are necessarily worried about the cost of everything. If you are anxious about having to spend an extra $15-$20 to fill-up your vehicle because gas prices have gone up a buck or two then wouldn’t you be at least as leery about buying a new car that costs $40,000-plus? No matter how “efficient” it may be. You still have to make those monthly payments – no matter how much you’re “saving” on fuel. And the payment on a $40,000 car is probably going to run you around $500 per month, for four or five years. Then you’ll be paying the property taxes and insurance on a $40k car. That can be another $2,000 annually, easily.   

But you’ll make it up in reduced fuel costs – right? Well, you might. Six or seven years down the line. Maybe. 

First, though, you’ll have to spend a huge amount of money to buy that “efficient” new hybrid or electric car.  

Call me vacuous; maybe I’m missing something. But isn’t money spent money spent – whether it’s for fuel or to buy an “efficient” but massively expensive new car?

Even if gas gets to $4 or $5 per gallon – and it might, for sure – $40,000 buys a lot of it. Do the math. Five bucks per gallon times, say, 15 gallons – the typical capacity of a current-year compact sedan. Ok. That is $75 for a full tank. Assume a tank lasts one week. That means a monthly fuel bill of $300 – which works out to about $3,600 annually. Let’s round it off to $4,000 per year. That means – roughly speaking –  you’d need to drive the Volt for about three years before reaching the “break even” point relative to a new Prius. If the comparison is Volt vs. a non-hybrid economy compact like the 2011 Ford Fiesta – which gets 41 MPGs highway and costs about $15k – then you’re looking at twice that long, at least, before you “break even” and the Volt begins to actually save you money. 

That is a long time to wait for a return on your “investment.” And don’t forget that the huge pile of money you sank into the Volt could have been used to finance a real investment – one that appreciates in value – like a 401k, Gold or land, etc. 

But after 3-6 years, hey, I’m in the black at last … right? Yes – if you begin with the assumption that you have spent at least Prius-equivalent money on a new car. If instead you bought a two or three year old standard (non-hybrid) economy compact – something like a used Toyota Yaris or Corolla, a Honda Fit or Chevy Aveo, etc. – the numbers are not with you. Cars such as the foregoing can be purchased for under $10,000 with very low mileage and in near-new condition, with a good portion of their original warranty still in effect. Buy such a car and you have spent only about a fourth as much as you’d have spent on a new Volt – and about half the amount you’d have spent on a new Prius. How many years will it take the Volt owner to make up the $30,000 (and up) price differential?

You get the point. I hope.

If the object of the exercise is to save money vs. saving gas then it is hard to see the sense in buying a new hybrid, plug-in or otherwise. A low cost – and better yet, paid-for – car of any type is hard to beat, even if it doesn’t get the world’s best gas mileage.

But wait. There’s another issue with plug-ins (and electric cars). 

It is simply that electricity isn’t free anymore than gas is free. You may not be paying at the pump, but unless you’ve got a solar array, count on getting a bill from your utility provider. Juicing up a plug-in hybrid is like running any other appliance – it is going to cost you money. Why is it that we rarely hear this mentioned, either? You’d be crazy not to factor the cost of kilowatt-hours into the total operating expenses of owning a plug-in hybrid vs. keeping and driving whatever you’re driving now – or driving a low cost/paid-for economy compact.

There are also concerns about what may happen in the event large numbers of plug-in hybrids and electric cars begin to tie into the grid. Our electrical generating capacity is already at or very near maximum capacity and unless we begin building new plants/adding capacity we can expect three things to happen: Brownouts (or even blackouts) and/or restrictions on how much power we may use – and when. That plus higher electrical bills for everyone. It’s the inevitable side effect of rapidly upticking demand that cannot be met by a commensurate increase in supply.

The nut of it is, we may soon be paying a lot more for utilities each month. And, again – money spent is money spent. It doesn’t matter, in the final analysis, what we spent it on. Only that it has been spent.

I don’t mean to dump on plug-ins and electric vehicles; the technology is brilliant – and the intent is probably honorable. But the economics of it is a mess. 

If the cost of hybrids and electric cars can be brought to within 10 or 20 percent of the cost of an otherwise equivalent conventional car, then ok.  If we build more generating capacity so that the cost of electrical power doesn’t become the next Energy Outrage, fine.   

But until that happens, it’s hard to make a dollars and cents case for hybrid cars – plug-in or otherwise.

Throw it in the Woods?

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1 COMMENT

  1. Not mention depreciation! Sure, you’ll have depreciation with any new car, but can you imagine how obsolete these things will be in a years, just like a 5 year-old computer is near worthless today? Not only will they be obsolete as the technology improves, but with aged batteries which will only hold a diminished charge (if any charge at all), and which will render the range and performance more and more feeble as time ticks by, AND as the complex electronics start to age and fail….and/or persih the thought that the manufacturer stops supporting the software at a given point (which is just a question of “when” not “if”) these things are gonna depreciate worse than a pile of doody on a Las Vegas sidewalk in July.

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