The frustration of spending a minor fortune on your gas tank every week is enough to get many of us paying attention to those oft-advertised hybrids. The complex and efficient engine driving the Prius surely will save our pocketbooks right? Well don't go running for your nearest Toyota dealership yet, make sure to run the numbers on your investment first.
Base 2010 Corolla MSRP: $15,450; MPG: 35 highway
Base 2010 Prius MSRP: $22,800; MPG: 48 highway
This information helps us see that the Prius stands as a considerably higher upfront investment, around $7,350. Logically, this makes sense simply because we are paying a premium for a more advanced and efficient engine. The argument is that we will begin saving money at the gas tank, and over time, these savings will add up to overcome the initial cost.
In order to estimate just how long we have to wait before the Prius begins to pay for itself, we'll have to make some assumptions. The price of gas certainly will play into the calculation, thus we'll have to make some assumption regarding its price over the next couple years. In Los Angeles, gas currently hovers around $3.00 a gallon, so for now, let's use that figure. Additionally, we have to account for how many times we fill up the tank over the course of a year. This is directly related to how many miles we drive, so we'll use the EPA assumption for miles driven per year per vehicle: 12,000.
We now can construct an equation to describe the cost of a car and fuel as a function of years:
Price(vehicle) + Fillup Cost per year * Years = Total Cost
Where Fillup Cost = (miles driven per year) / (MPG) * (Gas price per gallon)
Corolla Fillup Cost = $1,028.57Prius Fillup Cost = $750.00
Hybrid technology is still in its childhood, so to speak. We've seen its popularity boom in the past few years and we expect the sector to continue to grow, hopefully driving down that initial price in accordance with supply and demand. As it stands right now, purchasing a hybrid is not an economically driven decision. Every Prius you see on the road is there for environmentally conscious reasons. For every mile driven in a hybrid vehicle, less gasoline is burned than in a conventional car, emitting less carbon into the atmosphere, and mitigating the effects of transportation on Climate Change. For now, the economics of a hybrid are only favorable for owners with high annual mileage or in economies with exorbitant gas prices. In many cases, it is cheaper to invest in a standard combustion engine, but for the environmentally conscious, hybrid tech means much more than a few extra dollars in the bank.
I'd like to thank Matthew Kahn, Econ Ph.D. for this comparison process.
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