I went through the same thought process.. my conclusion was that there will always be a newer and greater on the horizon. I need a car this year, so I'll choose this years models. Cars are used and are eventually replaced. I'll get something better next time.

I went back and forth between the HCH and Prius. I don't favor one over the other really, but due to basic economics I ordered an HCH. It costs less, and they were discounting the HCH for me while all the Toyota dealers in my area were peddling above MSRP. The few grand I don't spend will go into the baby diaper fund ;P I won't even get into the environmental issues with that.

Now.. my Honda dealer may be playing games with me on my HCH order. I think he's stringing me along and not giving me any delivery/ETA information as his dealership is trying to dump out new HCH arrivals at or above MSRP for walk-in customers. He quoted me not much over invoice, so i'm not going to be as profitable a customer. I'll tell you now. I can guarantee they are going to pull a curveball and try to charge me more than they quoted when it does arrive. In that case i'm going to tell him to take the original deal, or leave it. I'll then be getting a Prius at or near MSRP in spite of the increased cost.

Whatever you do, be extra cautious when buying a hybrid. The dealerships are being quite slimy. They say 'they are super popular and are never in stock'. They want you to think that. What it comes down to is.. production is limited, and that is why stocks are very limited. Not because they are selling millions of these things. Any excuse to gouge the customer...

>1) Will the HCH 2007 version have any changes that bring it closer to the Prius >capacity of handling more storage (i.e. Fold Down Rear Seats), or any other changes >of significance for that matter?

I doubt it. Honda however has an early announcement out that they have another hybrid car in the works for release in another 1-2 years. Not much details out, but apparently a lower cost hybrid.. but maybe smaller than the HCH. No idea. Maybe a hybridized Fit? If you want 'uber' gas milage today and a super small car is ok with you. Go with an Insight. If you want mid range price/performance with somewhat smaller cargo, go HCH. If you want larger cargo with slightly better fuel economy, like the gadgets and are willing to pay a premium (over the HCH), go Prius.

>2) Will the Prius Hybrid Drive VERSION 3 and it's reported *significant increase in >battery strength at lower weight and cost, be out any time soon, or is this a bait and >hold tactic that may be some time coming to fruition (I've heard 2008 and also heard >2009)?

Toyota has no plans for a new Prius in the next year or two, as I have heard. If they do I expect it will be minor modifications. The Prius2 is still new, so I doubt they are going to release anything drastically different in the near future. Rumors are that they will be implementing a Lithium Ion based battery system sometime in 2010. That is just second hand knowledge.. so its not for certain. The new battery system will be lighter and have 2x the power capacity. Maybe we'll see 90mpg?

As far as cars go, both the HCH and Prius2 are well above the curve for efficiency. You can't go wrong with a current, existing model.

>3) How much of a hit might I take if I drive the current HCH for a year or two (low >mileage use) and then trade it in/sell it, and buy a version 3 Toyota Hybrid (or >another brand) when they do actually hit the streets? Guestimates anyone?

Think of it this way.. cars lose value and you get the use out of it. They are never an investment. If you want an HCH, just get it and use it until the next Prius comes out. Then decide if its worth switching at that point in time. I truly believe you won't see much of an improvement on the Prius2 for the coming few years. In 3+ years. Yes.