Edmunds.com recently analyzed the time needed to pay back the extra cost for the hybrid version of the Highlander. The article, dated Aug. 17, 2006 is titled “Do hybrids make financial sense yet?” http://www.edmunds.com/advice/fueleconomy/...13/article.html
They calculated that at a gas cost of $3/gallon and 15k miles per year, it would take 15.5 years to pay back compared to a comparable non-hybrid Highlander. This suggests the added cost of the hybrid as a poor financial investment.

The Edmund report has significant errors which should be embarrassing to Edmunds and which does a disservice to it’s readers.

I have calculated on September 10, 2006 that the Highlander Hybrid will pay back in 3.3 years or better when financing is taken into account using Edmunds own calculator. Please review my analysis for error if you are interested – I checked it over but welcome corrections.

Errors:
1)Edmunds calculates the Highlander Hybrid income tax credit at $1300 – It is currently $2600.

2)Edmunds fails to comparatively equip the non-Hybrid Highlander. They do add leather and sunroof cost to the non-hybrid which comes standard on the hybrid but they fail to add the towing prep package for $160 MSRP, the side curtain airbags option for $559, and the heated seats option for $440 all which come standard on the hybrid.

3)Edmunds fails to even consider the “value” of a V8 performance drive train in the hybrid compared to the modest pokey V6 performance in the non-hybrid.
Most vehicles add quite a premium to upgrade to a more powerful engine.

4)Edmunds fails to consider the value of the advanced vehicle stability system only available in the hybrid and not even available in the non-hybrid Highlander. The new system was praised in the automotive press as providing a much greater measure of security during extreme vehicle maneuvers such as avoiding an accident.

I will ignore the dramatically improved engine performance and next generation vehicle stability system for the comparison calculation as the added effective cost is not identified.

Using Edmunds own calculator:
Limited hybrid 4WD MSRP = $39,895, Invoice = $35,803, TMV (Edmunds true cost)= $36,329
Limited non-hybrid 4WD MSRP = $35235, Invoice = $31,270, TMV (Edmunds true cost)= $31446

At this point the hybrid is $36,329-$31446 = $4883 more expensive than the non-hybrid.

However, we must add in the rebates and credits: $2600 tax credit for the hybrid and currently $2000 mfg rebate for the non-hybrid:

Hybrid: $36,329-2600 tax credit=$33,729
Non-hybrid: $31446 – $2,000 mfg rebate = $29,446

For a strict cash sale, the hybrid is $33,729- 29,446 = $4,283 more expensive than the non-hybrid.

From Edmunds calculation for gas savings of $445/ per year at $3/gallon and 15k miles/year:

$4283/$445= 9.6 years payback for hybrid on strict cash sale

Note that this is much less that 15.5 years reported by Edmunds


If we compare the true cost of the car with available financing, the picture improves substantially for the hybrid: The hybrid currently has 0% financing for 36 months!! If we finance the Hybrid for 3 years it will cost nothing for the financing while the non-hybrid will be financed at the market rate of 6% with the $2,000 rebate or 3.6% without the 2000 rebate:

Total 36 month financed cost (including interest) of Hybrid = $33,729
Total 36 month cost of non-hybrid with $2,000 rebate and 6% interest ($2,802) on $29,446 loan=$32,248
Total 36 month cost of non-hybrid with special 2.9% financing (but forgoing the $2000 rebate) on $31,446 loan = $32, 871

Taking the $2000 rebate is the best way to go for the non-hybrid financing (over $600 saved) so we will compare that with the hybrid:

Hybrid total financed cost = $33,729
Non-hybrid total financed cost = $ 32248
Financed Hybrid premium = $33,729-$32,248 = $1481

The total financed cost of the Hybrid will pay back in $1481/$445 saved in a year= 3.32 years

If you wish, you can reduce the $1,445 hybrid premium by what you believe a V8 performance car should cost over a V6 performance car (and don’t forget the advanced stability control and throw in the fact the you won’t be replacing the friction brakes probably for the duration of ownership due to regenerative breaking ( $250 to $400 value)

If you argue that you pay cash and don’t finance cars, you could still get the 0% loan and buy short term CDs at 5% with the cash you would have paid and make a few thousand dollars in interest over the three year loan.

 

Don,

However you spin the numbers, let's say $4,500 over a comparably equiped non-hybrid version of the HiHy, I believe the number of folks that have purchased the HiHy expecting to "break even" sometime in the future is pretty low. Personally, I view the $4K as my contribution to further R&D of new hybrid technologies, to improving our environment and reducing our dependence on oil and from a more selfish perspective, a price I'm willing to pay to use and experience such cool cutting-edge technology. We're part of the club that's willing to forge a better future for society...

-Han-

 

I think Edmunds has their head in the clouds on this one. Their numbers are dead wrong no matter how you look at them. I disagree with their yearly fuel savings number also. I'm guessing that the true number for most drivers would be closer to $500/yr and in my case it's probably closer to $700/yr, assuming a $3/gal average cost.

But I didn't buy a Hybrid to worry about crunching the numbers. I needed a single vehicle that was 4wd, could haul and tow, got excellent gas mileage and had a nice quiet smooth ride. The HH is that vehicle. I'm happy.

 

gang

gas prices are dropping , but should level off at about $2.50 . Currently, gas is $2.08 a gallon in Ohio.

This break even scenerio we talk about in gas savings really isnt the issue.

We are spending 4k extra or so for an equivillant non hybrid.

The hybrid is a superior vehicle to the non hybrd. Hands down.

 

Totally hear you buddy! I will have totally paid for my "hybrid" premium after 3 years, and will begin SAVING money in the 4th year. However I do drive more gently than most, and have ideal commute conditions.

 

I'm with you guys too. My parents bought a Highlander gas model and although it's still nice it doesn't compare to my Hybrid. It's slow off the get go, it's louder and even the Limited Edition still doesn't have the features that came standard with my Hybrid Limited. I also see it as helping the environment and it has helped me control my speed. You're always trying to get the best gas mileage which in turn lowers your speed. If I had a choice even now to go back and buy a gas model I wouldn't.