This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

Why the Jury's Still Out on the Value of Your Hybrid

NEW YORK (TheStreet) -- Drivers attracted to hybrids have long faced a nagging question: Is a hybrid really cheaper to own once the fuel savings are compared with the premium paid for the car?

Over the years, studies have increasingly answered "yes," often because that premium has inched down while fuel prices have gone up. But the analysis includes a lot of assumptions that may not match the car owner's experience -- fuel costs, miles driven per year and the number of years the vehicle is kept.

A study by Vincentric, a compiler of cost-of-ownership data, found that 13 of 33 hybrids are cheaper to own than their counterparts with standard engines. That's two more than in last year's study, but because there are more hybrids this year the percentage of cost-effective models fell to 39% from 44%.

Some of the most cost effective were high-end hybrids such as the Lexus (TM) CT200h, which was $6,300 cheaper to own than its all-gas sibling. But overall it cost $1,338 more to own and operate the average hybrid over five years, assuming 15,000 miles of driving per year.

Vincentric looks at eight factors, including depreciation, financing, fees and taxes, fuel costs, insurance maintenance, repairs and opportunity cost, which is the value of alternative uses for the buyer's money.

So how would you fare with a hybrid?

The most important issue is the premium you'd pay for a hybrid versus the cost of fuel. If you believe gasoline prices will stay high or go up, and if you drive a lot, the savings may be large enough to make the vehicle pay. Vincentric used average fuel prices over the five months before the study.

Lower gas prices mean less savings. No one knows exactly what gasoline will cost down the road, but many experts think new oil sources in the U.S. and Canada will keep gasoline from skyrocketing and could even bring prices down.

For many drivers, Vincentric's 15,000-mile-per-year assumption will be on the high side. That's 288 miles a week -- not much if you drive some distance to work, but probably high if you just bop around a suburban town. The more miles you drive, the sooner the fuel savings will offset the hybrid's premium price.

How big is that premium? At one extreme is the 2013 Mercedes Benz S Class hybrid, which actually sells for $2,489 less than its all-gas counterpart. But the vast majority of hybrids do cost more, with the biggest premium the $11,817 required by the 2013 Volkswagen Touareg. The Toyota Prius C, essentially the granddaddy of hybrids, costs $3,004 more than its closest relative, the Toyota Yaris.

Because the typical hybrid costs more, depreciation and insurance costs are higher. Maintenance costs may or may not be higher depending on the model, but differences over a five-year ownership are generally not great.

Unfortunately, the study does not look at costs further out, which would be key if you're considering a used hybrid or thinking of keeping the car for the long term. It's also hard to predict turn-in or resale values.

That gets to another big issue: the ownership period. While five years is fairly typical, most vehicles can last for 10 or 15 years. The longer you keep your hybrid, the better the odds the fuel savings will more than offset the price premium.

Because many hybrid models are new, there is scant data on long-term maintenance costs. Replacing a hybrid's big battery array can cost thousands of dollars, but studies show that many of the older Prius models are doing just fine on 10-year-old batteries.

Bottom line ... well, there is no bottom line. Some hybrids are cost effective, some aren't, and no matter how carefully you select from among the available models, your results will depend on unpredictable fuel costs and miles put on the car.

But one thing is sure: By using less fuel, the hybrid will be kinder to the environment. For many drivers, that's the most important issue.

Stock quotes in this article: TM 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs