Do Green Cars Really Save You Money?
Although the Chevrolet Volt and Nissan Leaf arrived with relatively high sticker prices, both offered something buyers could easily overlook: potentially low long-term ownership costs.
That matters. After all, the price on the window only tells part of the story.
Hybrid and Electric Car Sales Surge
Sales of hybrid and electric cars jumped nearly 40% during the first quarter of the year. Moreover, rising gasoline prices gave consumers a powerful reason to consider alternatives to conventional gasoline vehicles.
Fuel economy quickly became a major buying factor.
In fact, more than one-third of consumers said fuel economy ranked as the most important consideration for their next vehicle purchase, according to research from Maritz Research.
Therefore, automakers weren’t simply selling environmental benefits. They were increasingly selling something consumers understood immediately: the opportunity to spend less money on fuel.
Green Cars Still Cost More Up Front
However, buyers faced a major obstacle. Greener vehicles generally carried higher sticker prices.
At the time, hybrids cost roughly $3,300 more on average than comparable gasoline-powered models. Similarly, diesel vehicles carried an average premium of about $2,800.
Meanwhile, the difference became much larger with early electric vehicles.
The Chevrolet Volt and Nissan Leaf each carried sticker prices more than $18,000 above comparable gasoline-powered vehicles.
At first glance, those numbers could make going electric look expensive.
However, sticker price alone doesn’t determine what a vehicle actually costs to own.
Ownership Costs Change the Equation
Instead, consumers need to consider the total cost of ownership.
That calculation includes much more than the purchase price. Fuel costs matter. So do maintenance, insurance, depreciation and financing.
Moreover, electric vehicles eliminate several routine expenses associated with gasoline engines.
There are no conventional engine oil changes. There are no spark plugs to replace. In addition, EVs eliminate many components associated with exhaust and traditional engine systems.
Regenerative braking can also reduce wear on conventional brake components.
Therefore, an EV’s higher purchase price can tell a very different story once drivers begin adding years of operating expenses.
The Chevrolet Volt Offered Another Approach
The Chevrolet Volt took a different path.
Rather than operating solely as a battery-electric vehicle, the Volt allowed drivers to complete many everyday trips using electricity while retaining a gasoline engine for longer journeys.
Consequently, owners could dramatically reduce gasoline consumption without depending entirely on public charging infrastructure.
For commuters with access to home charging, that combination offered a compelling advantage. They could drive electrically during routine trips and still take longer journeys when necessary.
The Nissan Leaf Eliminated Gasoline Entirely
The Nissan Leaf pushed the concept further.
As a fully electric vehicle, the Leaf required no gasoline at all. Instead, owners charged its battery from the electrical grid.
That changed the economics of everyday driving.
Electricity prices can vary significantly by location. However, electricity on a per-mile basis can cost considerably less than gasoline, especially when fuel prices climb.
Additionally, home charging gives drivers another advantage. Instead of visiting a gas station, owners can plug in overnight and start the next morning with a charged vehicle.
High Gas Prices Strengthen the Case
Gasoline prices can dramatically affect the ownership equation.
When gasoline becomes expensive, efficient hybrids save more money. Likewise, plug-in vehicles become increasingly attractive because drivers can substitute electricity for gasoline.
Therefore, comparing only sticker prices misses one of the biggest financial benefits of electrification.
A driver covering thousands of miles every year isn’t buying just a vehicle. That driver is also committing to years of energy purchases.
Consequently, the cost of powering the vehicle deserves serious consideration.
Buying Green Is About More Than the Sticker
Ultimately, consumers should compare vehicles based on how they actually plan to use them.
A higher-priced hybrid might make sense for a high-mileage commuter. Similarly, an EV can deliver significant operating savings for someone who charges at home and drives predictable daily distances.
Meanwhile, another buyer might not drive enough miles to recover the initial price premium quickly.
That’s why total ownership cost matters more than sticker shock.
The Chevrolet Volt and Nissan Leaf helped introduce American consumers to that idea. Yes, early electrified vehicles could cost considerably more at the dealership. However, their fuel and operating costs could change the financial picture once the vehicles hit the road.
And as gasoline prices rise, that equation becomes increasingly difficult to ignore.
Conclusion
Setting aside their environmental cred, are hybrids, diesels and electric vehicles actually wallet-friendly? Prices on hybrids run about $3,300 higher on average than stickers on their gas-engine siblings. The diesel difference is about $2,800 more. And the two EVs on the market — the Chevrolet Volt and Nissan Leaf — are each more than $18,000 pricier than their closest gas-engine match. But the long-term ownership costs are the real measure of whether buying green is worth it.
Running the numbers.
Using five-year ownership costs from Vincentric, an automotive data firm, we compared 2011 hybrid, diesel and electric vehicles with their closest gasoline-engine counterparts. In most cases, that’s the same model with a different powertrain; when a hybrid (like the Prius) had no counterpart, we chose the closest match from the carmaker’s lineup.
The numbers assume you drive 15,000 miles a year and that regular gasoline costs $3.64 a gallon, premium is $3.91, and diesel is $3.97 — the average prices nationwide in early summer — with a 3.5% annual increase for each fuel. In addition to fuel costs, depreciation, maintenance and repairs, the math also includes finance costs for a five-year loan after a 15% down payment, insurance and
variant.
Volt and the Leaf
The Volt and Leaf are both eligible for the $7,500 tax credit for electric vehicles, and that, too, is factored in.
Pump prices have a lot to do with making green cars a good. Two years ago, when gas prices were hovering close to $2 a gallon, few hybrids and diesels earned back their premium price with savings at the pump. But with gas prices now closer to $4, more buyers will save green by buying green.
Perhaps the biggest surprise is that although the Volt and Leaf have stratospheric sticker prices — nearly double those of the gas-engine Chevrolet Cruze LTZ and Nissan Versa S hatchback — both have pretty low five-year ownership costs. The Volt’s costs come within $1,600 of the Cruze’s and the Leaf is only $800 more than the Versa over five years. (Run your own comparisons of these models and many more.)
Source:http://www.kiplinger.com/columns/car/archive/green-cars-make-cents.html#ixzz1X7DoAoEA
By Jessica L. Anderson, Associate Editor, Kiplinger’s Personal Finance
