Posted on 03/18/2008 11:01:12 AM PDT by taxcontrol
I am now considering replacing my vehicle and I was doing an ROI/Break even analysis on a conventional power vs a hybrid to see if the additional cost was worth the effort. So I built the table below in Excel and have come to the conclusion that even with today's gas prices ... it simply is not a smart move.
My assumptions and math is below. If I'm wrong would someone point out my error?
Seems only to be worth it if the Feds subsidize the technology.
Good chart, except that prices for Regular Unleaded are alot higher than $2.79 in many places. I just paid $3.48 here in the San Francisco Bay area, yesterday morning.
Taking that into consideration, with respect to the comparison between the Escape models, the Annual Hybrid Gas Savings figure jumps up to $546, which reduces Years to Break-even down to a more enticing 2.5 years.
(438/2.79) x 3.48 = 546
1,364 / 546 = 2.5
At the day’s end, then, I’d say the decision would have to factor that break-even against your own plans for ownership. How long are you thinking of keeping this vehicle? If the answer is “as long as possible”, then you’ve got to do research into the battery replacement issue as it pertains to your prospective purchase, and determine how that negatively impacts your break-even date.
A $3,000 battery replacement expense incurred in 2013, would drag you kicking and screaming backward over the threshold of break-even, because it would bump your “Hybrid Premium” up to $3,364, which makes your break-even 6.2 years; not 2.5.
So, you’d think you broke even in the fall of 2011, but just two years later, you may find yourself suddenly on the downside, again, over against your cost of owning the non-hybrid model, with break-even pushed out until the middle of 2014.
And, too, gasoline prices will likely continue to rise, contributing to a further increase in annual savings, which would pull that break-even date back in, so that as you leave the repair shop in 2013 with your new $3,000 battery pack installed, you still find that you’ve already broken even.
In the face of all that, I’d simply advise you to get the vehicle that best fits your budget, and your actual needs, and let your “green” conscience go begging until the alternative power technologies mature, and the costs of ownership are truly on-par with those of traditionally powered vehicles. When all of this calculus is obsolete; THEN the decision to buy hybrid or not can be made in complete freedom.
For NOW; get something you truly LIKE, because you truly LIKE it, can afford it, and because it will do what you need done.
Good luck!
Get a scooter. :’)
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.