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  #1 (permalink)  
Old 03-05-2006, 10:41 AM
akt0001 akt0001 is offline
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Real Name: Arun Trikha
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Default Blunder in Hybrid Car Cost Comparison by Consumer Reports

I mailed the following letter to Consumer Reports about the blunder they made in their Hybrid Car versus All-gas Car Cost Comparison article in April 2006 issue and am posting it here because of potential interest of the greenhybrid members.
Quote:
It is too bad that after doing a good job of estimating the cost of the various individual factors in owning a hybrid car and an all-gas car model, Consumer Reports (CR) made a blunder in calculating the bottom line in their related report in April 2006 issue. For example, correct calculations of the bottom line would have shown a net saving of $450 instead of an extra cost of $5250 figured by Consumer Reports for owning a Prius instead of Corolla over a 5-year period. There would have been similar differences in the other models compared by Consumer Reports.


The problem lies in the way both the difference in the purchase cost and the difference in the depreciation cost are simply added together (besides the other factors) to calculate the difference in the ownership cost.


The extra purchase price of a car is important for calculating the extra sales tax, finance cost, insurance etc, but once that has been done, only the extra depreciation (along with sales tax, finance cost etc) need to be considered in calculating the ownership cost: the difference in the purchase price must not added to that in figuring out the difference in ownership cost.


For example, using CR data for expenses over 5 years, let us say that Corolla LE depreciates by $8000 (say) from the new price of $16,607 to $8607 in 5 years. Then, the Prius will be estimated to depreciate by $11,200 ($8000 plus $3200 differential estimated by CR), resulting in decrease from new price of $22,305 to $11,105 in 5 years. The capital cost associated with the owning the cars (besides financing, sales tax etc) is only $8000 for the Corolla LE and $11,200 for the Prius for a differential of $3200 over five years. The differential in capital costs is not $8900 ($3200 plus the difference in purchase price of $5700).

Last edited by Jason : 03-05-2006 at 10:58 AM.
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Old 03-05-2006, 02:52 PM
Tochatihu Tochatihu is offline
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Default Re: Blunder in Hybrid Car Cost Comparison by Consumer Reports

I think you've got them, Arun. Hope you get an answer to the message.

DAS
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  #3 (permalink)  
Old 03-05-2006, 03:30 PM
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IMAhybrid IMAhybrid is offline
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Real Name: Katie
Location: WPB, FL
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Default Re: Blunder in Hybrid Car Cost Comparison by Consumer Reports

Good point if they were looking at cost of ownership, not the total cost of the cars. I haven't actually seen the article so I don't know which they were trying to do.

Welcome to GreenHybrid!

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Old 03-06-2006, 02:07 PM
Adelwyn Adelwyn is offline
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Real Name: Amy
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Default Re: Blunder in Hybrid Car Cost Comparison by Consumer Reports

I saw that article just this weekend. I glanced over it in the few minutes I had and I was bothered by their calculations, though I couldn't put my finger on it, and put it aside to look at more closely when I had more time. I'm glad you are taking them to task about their error.

I had thought that the error was in the tax deductions. I thought they added, rather than subtracted them. Figuring in my $2000 deduction when I first bought my HCH as well as the ~$750 savings in Gas each year for 2 years starts to make up for the extra cost of buying the Hybrid rather than the standard Civic.

Also, I have heard from dealers that some used Priuses (Prii?) actually sell for MORE than their original purchase prices; instead of DEpreciating, they actually Apreciate. Although this is hearsay (and I did see an article on his wall to the same effect), it could indicate that the standard depriciation that Consumer Reports uses needs to be reconsidered for the Prius, and maybe for other Hybrids as well. That could affect their calculations as well.

--A
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Old 03-06-2006, 05:04 PM
enp83 enp83 is offline
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Real Name: Eric
Location: Overland Park, KS
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Default Re: Blunder in Hybrid Car Cost Comparison by Consumer Reports

A lot of people seem to think all hybrids cost atleast $4k more than same car in a non-hybrid trim (I even had one girl ask why I would spend $40k on a car just to save gas for other people). I like to point out that an '06 Civic Hybrid's MSRP is $2,790 more than the MSRP of a Civic EX sedan w/automatic transmission. You could subtract about $500 from $2,790 if you want to include the HCH's standard rear spoiler and floormats (and automatic climate control), but I don't since theres no sunroof on the hybrid. Anyway, $2,790 minus the $2,100 federal income tax credit bring it down to just $690. Let's round down and say the average person drives 12k miles per year and gas is only $2.25 cents per gallon, and the hybrid gets 50mpg vs the EX's 35mpg...you'd save $231 per year in fuel costs. $690 divided by $231...3 years to recoup the costs of upgrading to the Hybrid version of the Civic.

I also remind people that the second generation Prius is a midsize car like the Camry and not a compact like the corolla...and that the prius starts at $22,955, a lot of people think it's a $30k car.
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Old 03-07-2006, 06:23 PM
Tochatihu Tochatihu is offline
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Default Re: Blunder in Hybrid Car Cost Comparison by Consumer Reports

Busted! Consumer Reports recants:

http://www.mercurynews.com/mld/mercu...l/14041566.htm

Bask in it, me hearties.

DAS
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Old 03-07-2006, 07:36 PM
John M. Dwyer John M. Dwyer is offline
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Default Re: Blunder in Hybrid Car Cost Comparison by Consumer Reports

Quote:
Originally Posted by Tochatihu
Busted! Consumer Reports recants.
Yes, it admits the computational error. But how about the hidden assumptions?

.

'06 FEH 2WD "Sainte Marie"
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Old 03-07-2006, 09:33 PM
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Thumbs up Re: Blunder in Hybrid Car Cost Comparison by Consumer Reports

Quote:
Originally Posted by Tochatihu
Busted! Consumer Reports recants:

http://www.mercurynews.com/mld/mercu...l/14041566.htm

Bask in it, me hearties.
Mistakes happen and I take no schadenfreude. What seperates responsible, trustable journalism from propaganda is admitting mistakes and correcting the record. This is their strength and it makes them worth reading time and time again.

Bob Wilson

.

Operation Iraqi Oil Freedom:

Automatic, stock, project car.

My
other 1500 cc car:

Automatic, stock, backup car.
Free speech, dialog and knowledge thrives without the poison of SPAM.
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  #9 (permalink)  
Old 03-08-2006, 05:49 PM
Tochatihu Tochatihu is offline
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Default Re: Blunder in Hybrid Car Cost Comparison by Consumer Reports

I'm not sure it is malicious to enjoy a happy ending. Meanwhile, searching CR website for depreciation will lead one here:

http://www.consumerreports.org/cro/c...m=depreciation

Where the error persists. But they'll get around to it, no doubt.

DAS
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Old 03-08-2006, 06:44 PM
John M. Dwyer John M. Dwyer is offline
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Real Name: John M. Dwyer
Location: Southeast Michigan
Hybrids: '06 FEH
Posts: 194
Default Re: Blunder in Hybrid Car Cost Comparison by Consumer Reports

Quote:
Originally Posted by Tochatihu
I'm not sure it is malicious to enjoy a happy ending. Meanwhile, searching CR website for depreciation will lead one here:

http://www.consumerreports.org/cro/c...m=depreciation

Where the error persists. But they'll get around to it, no doubt.

DAS
I'm not sure we have an ending yet - happy or otherwise.

In referencing the above link, I noticed some things with reference to the FEH:

1) the mileage given was 26 mpg. Even in the cold weather we have had here in Michigan, my tanks have never been below 30. In the summer I have gotten 40+ tanks. The article dropped the mileage from the EPA estimates for the FEH when it should have increased them. I'll bet they didn't discount the EPA estimates for the FEXLT.

2) The author(s) assume that the vehicle was bought in California in January 2006. How typical is a January 2006 purchase? I don't know and I'll bet the author(s) don't either. I think there is sufficient evidence that California, being a green state, is not typical.

3) The difference in vehicle purchase price for the FEH compared to the FEXLT is larger than actually occurs - at least here in the Great Lake State. I defy anyone to get a FEXLT for less that $25K in Michigan. The price of the FEH is approximately correct, (perhaps a little inflated) for Michigan.

4) The maintenence is estimated for a five year ownership period, but the FEH has only been available for two years. I fully expect the maintenence on my FEH to be substantially less (not by just a few %), in part because the hybrid components - including substantial parts of the power train - are covered for eight years. I believe that the rest of the FEH will prove to be more reliable than the FEXLT. I consider any claim that the maintence will be substantially the same for the two vehicles to be at odds with reasonable expectations.

5) The article claims that insurance is higher for the hybrid models, presumably reflecting their respective replacement costs. But some insurance carriers are offering discounts for hybrids, and I don't know of any which charge higher rates for a hybrid. I would also expect that hybrid drivers are less likely to be involved in accidents - and the ones they do get into will tend to be less severe in terms of injury and property damage. This would also tend to reduce insurance rates.

The above specifically refer to Michigan. This is the only state for which I have direct information. Perhaps it is atypical and the article (as corrected) is spot on - but I doubt it.

.

'06 FEH 2WD "Sainte Marie"
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