I’ve been driving a hybrid car for almost five years. If I’d had my way, I would have bought one much earlier, back in 2003, but I just couldn’t afford one then. Are hybrid cars worth it?
Driving a hybrid saves you around $400 a year in fuel costs. That makes it difficult to recoup the higher cost of a hybrid when buying new, but it makes used hybrids a bargain, since the resale value of a hybrid is comparable to an equivalent conventional car.
The best time to buy a hybrid car
When I bought my hybrid car, gas cost $2.26 per gallon. While some people will complain that’s expensive, when you adjust for inflation, $2.26 is historically pretty cheap. While I remember paying more like $1.26 per gallon in the 90s, that works out to $2.08 in 2015 dollars and $2.28 in 2021 dollars.
I got a good deal on my hybrid car precisely because gas was cheap. When people can afford to drive oversized trucks that get 12 MPG, that’s what they buy. And at $2.26 a gallon, not everyone can afford one, but a lot of people find ways. So when gas is cheap, selection on big vehicles with low gas mileage tends to be lower, especially on the used market. Fuel-efficient cars are fairly plentiful.
When gas gets much higher than $3 per gallon, the opposite happens. People trade in their big vehicles for fuel-efficient vehicles. Selection on hybrids goes down and prices go up, while large vehicles like pickup trucks become easy to find.
I think the best time to buy a hybrid, especially a used hybrid, is when gas is well under $3 per gallon. I was able to get a Toyota Camry hybrid with around 35,000 miles on it for $17,200. Depending on how old the car is, I can get a similar deal in 2021.
When gas is cheap, I think it’s a good deal.
Is a hybrid car worth it?
When I first got my Camry hybrid, I could get 50 MPG out it. Sometimes I can still do that, but I usually get somewhere between 38 and 42 MPG. To get better than that, I have to go close to the speed limit and be willing to let the car drop under the limit at times, which is a good way to get tailgated.
At the time I’m writing this, the price difference for a used conventional Camry vs a hybrid is about a wash at comparable mileage. Based on what I’m able to find near me, the conventional version will be a year newer. But I’d pay around $18,000 for either car with 35,000-40,000 miles on it. Going hybrid doesn’t cost more money, it just gets me a car that’s a year older.
Factoring in the cost of fuel
The reason people buy hybrids is for the gas mileage. So let’s compare gas mileage and figure out how much it really saves you. We’ll use the Camry as an example, since it comes in both conventional and hybrid versions and it’s a popular enough car that it’s always possible to find comparable new and used examples for sale.
Now, the conventional car will get 23 MPG in the city and 33 MPG on the highway. The hybrid version is rated for 42 MPG in the city and 39 MPG on the highway, which is pretty close to what I get. If you’re careful how you drive, you can do better with either car, but we’ll go with average here.
Now, the average American drives 13,500 miles a year. Let’s split the difference on the two cars and call the conventional Camry 28 MPG, and the hybrid 40 MPG. The conventional Camry will use 482 gallons of gas while the hybrid uses 338. When gas is $2.26 a gallon, the hybrid saves you $325 a year. If gas is $3 a gallon, the hybrid saves you $432 a year. At $4 per gallon, the savings is $576 a year.
If gas is expensive and hybrid cars are expensive, keep that in mind. If the price difference is more than $1,000, remember that it’ll take about 3 years to save a thousand bucks.
Even when gas was $2.26 a gallon, buying that hybrid was worth it for me. And gas didn’t stay at $2.26 a gallon that full year, let alone for three years.
Is a hybrid car worth it when buying new?
Pricing brand new a 2021 Toyota Camry near me, the price difference is around $7,000. Even if gas was $4 per gallon, the payoff is pretty slow. You’d have to keep the car 12 years to make up the difference. If saving money is your motivation, I don’t think it makes sense. The car is more expensive when you buy it, but on the used market, there’s little difference in the value between the two cars. So when you go to trade it in, you might not get any more for it. So you’ll lose almost all of the $7,000 premium in depreciation.
I think people are willing to pay the $7,000 premium because they overestimate what they’ll save. It’s pretty easy for automakers to talk people into making emotional decisions when it comes to gas mileage, rather than rational decisions. When gas is expensive, it’s easy to manipulate people into overestimating what they spend on gas, and when it’s cheap, it’s easy to manipulate them into underestimating what they spend on gas.
Supposedly a 2003 Toyota Prius cost $20,000 when it was new. There were no used ones to be found. I’m not sure if I couldn’t find any new ones either, or if they were still selling for above list. I don’t know anymore what I paid for my 2002 Honda Civic, but I know it was quite a bit less than $20,000. It may have been closer to $14,000. The Civic was more practical. The difference between then and now is the availability of used hybrids. The math on new ones hasn’t changed all that much in 20 years.
Just like a geothermal HVAC system, it takes a while to recoup the cost. The difference between cars and HVAC is the wide availability of used cars.
What about hybrid maintenance?
I’m sure you’ve heard on social media or cable TV that you have to replace the batteries in hybrids, and when you do, they cost $10,000.
But that’s generally a one-time expense, and it comes late in the car’s life. The batteries are warrantied for 8-10 years, and their reasonable life expectancy is closer to 17 years. If you routinely keep cars longer than 200,000 miles, then sure, it’s something worth considering. Oddly enough, it’s the people who trade cars every three years who tend to be the ones who worry the most about the maintenance cost of old hybrids.
I’ve been driving a hybrid nearly five years, and I’m still getting its rated MPG out of it. My battery is fine. The actual cost of a hybrid battery today is more along the lines of $1,000 to $6,000. And used battery packs are available, because cars do get into wrecks and sometimes get totaled. A good independent mechanic can get you a used or aftermarket battery pack for a lot less than the horror story you heard about on social media.
Outside of the batteries, there’s little difference in maintenance costs. If anything, the cost of routine maintenance on hybrids is a bit lower. For example, tires last slightly longer on hybrids because they recover energy from braking that conventional cars waste as heat, and that heat wears down tires a bit faster. Any car will have the occasional maintenance surprise. The tires lasting a bit longer, plus the savings in fuel costs, helps to offset any maintenance surprises.
And some considerations when it comes to hybrid cars are non-financial. I have a neighbor who is fond of leaving his diesel pickup running in his driveway for 30 minutes at a time. That behavior suggests conserving fuel isn’t a priority for him, and he’s probably not going to buy a hybrid any time soon.
For others, conserving fuel is a priority and they’re more concerned about saving fuel than saving money. If they can afford it, good for them. I tend to fall into that category myself, but I also try not to go overboard with it. But if I’m going to be an extremist, I’d rather be an extremist on the side of conserving energy than on the side of needless consumption.
If saving energy is important to you, $7,000 may not necessarily be a ruinous amount of money. The $400 a year you save on gas helps offset the cost. My neighbor with the diesel pickup paid $2,500-$4,000 extra for his diesel engine too, and he’s spending an additional $275 a year idling it in his driveway.
Are hybrid cars worth it: In conclusion
So are hybrid cars worth it? When buying new, arguably not. But I would also argue new cars aren’t worth it. The cost of depreciation is too high. This is also why leasing rarely makes sense.
Whether you buy a hybrid or a conventional car, it makes a lot more sense to buy a used model that’s a couple of years old and has average mileage for its age. Some low-quality cars are used up at 50,000 miles, but the majority of cars today can go 200,000 miles or more. The people who trade in cars every three years because they say they need reliability are really just looking for an excuse to drive a new car.
For peace of mind when buying a used car, run the numbers on any car you’re considering at Dashboard Light. Steve Lang’s background was in finance, but he decided he was happier buying and selling cars. He analyzes cars the same way he used to analyze stocks, and rates cars’ reliability based on data from millions of used cars. At the time I wrote this, he had data on 2.7 million used cars. There can be significant differences in reliability between a 2018 model and the 2017 model of the same car. His data helps you spot those, so you can avoid making a mistake when buying a used car. And he does update the data as cars age. Today, a 2002 Honda Civic has average reliability. When he first launched the site, a 2002 Civic had well above average reliability. After 19 years, those cars are wearing out.
If anything, buying a new car is riskier than buying a used one, because JD Power and Consumer Reports don’t have the mountains of data that Dashboard Light has.