If you are looking to buy a hybrid car thinking it will help you to save money, you better think again. For many people wondering if hybrid cars are worth it, the answer is probably not.
The reality is that in most cases, hybrid cars end up costing you more money than buying a gas powered car.
So then why do so many people buy a hybrid thinking it will save them money?
The likely reason is because most people only focus on the cost of gas as a reason for buying a hybrid car. And this makes sense. Each week you have to head over to the gas station to fill up your tank. Depending on the price of gas, you could be looking at a cost of around $40 to fill up every week.
To relieve this pain at the pump, we focus on solutions to avoid the gas station. The solution that pops into most minds is to buy a more fuel efficient car.
Better fuel efficiency means fewer trips to the gas station, which means you save money.
It’s a win-win-win.
If only it were that simple.
Do Hybrid Cars Save You Money? The Complete Picture
To see whether hybrid cars save you money, you have to look at the complete picture.
This means you need to look at the following:
- Purchase price
- Reliability/On going costs
- Gas savings
- Ownership savings
- Purchase incentives
Once you look at each of these, you will get a much clearer picture of whether you should buy a hybrid car.
Let’s go through these topics in detail.
Hybrid Purchase Price
The first thing you need to look at when determining if a hybrid will save you money is the cost of buying the car. Often hybrid cars are more expensive than other cars.
According to the most recent numbers, the average price of a hybrid is $4,650 more than a gas powered car.
The reason for this is they cost more to build. The manufacturer then passes that added cost on to the buyer.
For example, look at the cost of a 2018 Hyundai Sonata. The base price for the SE model is $22,050. The same car as a hybrid costs $26,000.
So right off the bat, a hybrid isn’t saving you any money. It is costing you more money. In this example, it is costing you $3,950 more to buy.
While the general rule is that a hybrid car is more expensive, the price difference will vary depending on the cars you are comparing.
But this is only part of the picture of whether hybrids are worth it, so let’s move on to reliability.
Hybrid Car Reliability
Since I am comparing the same make and model vehicle, the reliability for both should be similar. So there isn’t any major savings by choosing one over the other.
Overall, hybrid cars are just as reliable as gas powered cars. You shouldn’t expect it to cost you a lot more in terms of routine maintenance.
But there are some differences. For starters, a hybrid uses the brakes to regenerate the battery. This means brake pads on hybrids tend to last longer compared to gas only cars. Again, this isn’t a huge savings, but is worth noting.
Another difference is the cost of insurance. There are some insurance companies that offer discounted rates to owners of hybrid vehicles. Your best bet here is to ask your insurance carrier what the annual premium would be and then compare that to another insurance company. Liberty Mutual is a good choice for comparing.
The other major concern with hybrid car reliability is the hybrid battery. Many people think replacing a hybrid battery will cost tens of thousands of dollars. And that the battery will only last a certain length of time or number of miles.
The truth is car manufactures build hybrid car batteries to last the life of the vehicle. And many offer standard warranties on hybrid batteries that last up to 10 years and cover 100,000 miles.
There are even stories of hybrid taxi cars whose batteries last more than 300,000 miles!
The point is, replacing a hybrid battery is rare. And when it does happen, the cost to replace one is typically $5,000 or less.
When comparing the same make and model, the reliability issue is not a major factor in terms of price. Now if you were comparing a gas powered Audi and a hybrid BMW, then you would dig into how long the car typically lasts as well as the price for repairs to see which one is a better deal, as cars from different manufacturers will have different maintenance costs.
Now we get back to the cost of gas. To determine if there are any savings here, you need to look at the cost of gas and the number of miles you drive your car.
We will assume that the price of a gallon of gas is $2.50 for regular and that you drive 15,000 miles per year.
The gas powered Sonata averages 29 miles per gallon combined. The hybrid version averages 43 miles per gallon combined.
The formula to figure out the cost of gas is annual miles driven multiplied by the cost of a gallon of gas. You then divide this by the average miles per gallon.
For the gas powered Sonata, the formula is this: 15,000 x 2.50. This gets us 37,500. We divide this by 29 and the answer is $1,293.
We will spend $1,293 per year in gas with this car.
With the hybrid, the annual gas cost is $872.
Over the course of a year, the hybrid will save you just over $400 in gas.
Below is a comparison of these two cars and the cost of filling them up.
Sadly, while this gives us a rough idea of the cost of filling up our gas tank, it is not 100% accurate. This is for two reasons.
The first reason is that the price of gas fluctuates.
If the price of gas rises, the savings for the hybrid car will be greater. If gas prices fall, the savings go away.
The second reason is your commute. I took the average combined miles per gallon in my example. If you live in the city, you will want to focus more on the city mileage rating. If you drive mostly on highways, then focus more on the highway mileage rating.
Just know as a general rule, hybrids save you money when it comes to paying for gas. But just like the difference in purchase price, spending money on gas is only part of the picture.
The next thing to consider when determining if a hybrid car is worth it is if there are any incentives.
There are a few levels of incentives to look at. The first is with the dealer. Many times dealers will offer cash back or rebates on various models.
As of this writing the cash back on the gas powered SE is $2,000. On the hybrid, the cash back is $2,500.
After taking the cash back incentive into account, the price of the gas powered Sonata would be $20,050 while the hybrid Sonata would be $23,500.
The next area to look at is government tax credits. In years past, the government offered any type of hybrid cars a tax credit. But this is no longer the case.
The current tax law for hybrid cars allows for a credit when you buy an electric or plug-in hybrid vehicle. This credit is anywhere from $2,500 up to $7,500.
Since the Sonata hybrid in this scenario isn’t a plug-in, there is no government tax credit.
Some states also offer a tax credit. Again, most offer these credits on plug-in hybrids and electric vehicles only, but make sure you check to see if you qualify.
The last area to look at is ownership savings. This area has little to do with money and more to do with other types of savings.
- with a hybrid car, you will save time by not having to run to the gas station as frequently.
- with a hybrid car, you could drive in the HOV lane, escaping traffic, saving time, and avoiding stress.
- you help save the environment as you have a smaller carbon footprint with a hybrid vehicle.
- some companies allow hybrid owners special parking spots and other company perks.
You will have to determine what, if any, of these factors play a role in owning a hybrid car. While you can’t put a monetary value on them, you will have to decide how much not running to the gas station as frequently will improve your life and if that happiness is worth it.
For example, if not going to the gas station as often is a major win for you, is it worth paying an extra $3,000 for a car?
The Complete Hybrid Picture
Now that we know what to take into account, is buying a hybrid worth it?
Let’s look at the Hyundai over a 10 year period.
We see that the hybrid Sonata initially costs more even when we take into account any cash back bonuses from the manufacturer.
There are no extra savings in the form of government hybrid car tax credits either.
So out the door, buying a hybrid puts us in the hole by $3,450.
When looking at the cost of gas, we see that the hybrid will save us money. But it is only saving us $421 each year.
We have to drive the car for just over 8 years to have the gas savings get us back to net zero!
In other words, after 8 years of owning the hybrid, we will have put the same amount of money out of pocket as the gas powered version. It won’t be until after this point that we start saving money with the hybrid car!
And as the chart shows, after 10 years of owning the hybrid, we saved a grand total of $760. If you tend to only keep your car for 6 years, which is the average length of time consumers keep their cars, in some cases you are going to spend more money buying a hybrid than you would save on gas.
But there is one caveat here. And it is all the other savings you get from owning a hybrid car.
You have to determine how much better you life will be not visiting the gas station each week. You have to determine how much you care about the environment.
If these savings are worth it for you, then owning a hybrid car can make sense. But if you are only trying to save the most money possible, you might be better off buying a gas powered car instead.
This is because of how long it will take you to actually begin saving money with a hybrid.
And as car manufacturers meet new fuel efficiency guidelines, gas powered cars are going to increase their miles per gallon. This will only continue to erode the potential savings from fewer fill ups you get from a hybrid.
Finally, while I am looking at the cost of new cars, know that used hybrids command a higher resale price as well. This means you might not come out ahead with a hybrid sooner by buying used.
So this leaves us with two unanswered questions.
- If you think a hybrid is worth it, which ones are the best value?
- If your ultimate goal was to save money, especially on gas, but you don’t think a hybrid is worth it, what do you do?
Below are the answers to both of these questions
Which Hybrids Are The Best Value?
If you run through this guide and feel that based on your numbers and other factors that a hybrid makes sense for you, what are the best hybrid vehicles to buy?
In no particular order, here are the hybrids that get you the most for your money. In many cases, the purchase premium of a hybrid is low enough that you will save money much sooner than the 8 years in the example I provided above.
But again, I encourage you to run your numbers so that you can make the best decision for your wallet and your tastes.
- Audi Q5 Hybrid
- Ford Fusion Hybrid
- Lexus CT 200h
- Lexus ES 300h
- Toyota Avalon Hybrid
- Toyota Prius C
To determine this, I used purchase price, incentives, and fuel economy to take into account versus gas powered alternatives.
Since the purchase price of a hybrid is what makes or breaks any savings, it is critical to get this number as low as you can. I wrote an article on how to save the most money buying a car that can help you with this critical step.
In the event you don’t want to read the entire post, make sure you use Edmunds.com to research car prices and to become an Insider. This lets you get personalized price alerts and specialized car buying experts. You can learn more here.
How To Save The Most Money On Gas
If after reading through this guide you realize that a hybrid car is not worth it to you but you really want to save money on gas, I have some simple solutions for you.
#1. Learn The Ideal Way To Drive
Speeding up quickly after a red light or applying the brakes hard destroys your gas mileage and costs you with added wear and tear on your car. Learn to anticipate red lights by allowing your car to coast to a stop.
When stepping on the gas after the light turns green, apply light pressure to the pedal and slowly increase your speed.
Driving fast also has an impact on your gas mileage.
For every 5 mph over 60 mph that you drive, you are paying an additional 27 cents per gallon on gas.
Using an example, let’s say you drive at 75 mph. That is 15 mph over 60 meaning you are paying an additional 81 cents per gallon. That is huge!
When you get on the highway, just set your cruise control for 65 mph, save money on gas and forget about everyone else.
#2. Reduce Weight As Much As Possible
There is a law of physics that says force equals mass times acceleration. Your car consumes more gas when it needs more force.
And it needs more force when there is added weight. So take an hour this weekend and clean out your trunk and back seat of everything you don’t need.
Doing so will instantly improve your gas mileage.
#3. Pay With Cash
More and more gas stations offer a discount on gas when you pay with cash. This discount can amount to $0.05 or more per gallon.
Before you fill up, be sure to ask if they offer a cash discount.
#4. Use A Cash Back Credit Card
If paying in cash is too much trouble for you, there is another option. You can use a cash back credit card. The one I use gets me a 3% reward. So for every dollar I spend on gas, I save $0.03. You can check out this card in my resources section.
#5. Be Smart And Pay Attention
When you are running errands, be on the lookout for gas stations to see who has the best prices. You can also use free apps on your phone to help with this. Then make it a point to fill up when you are near these stations.
Also, when traveling, know that gas stations near the highway exits tend to charge more for gas. Take an extra 10 minutes and drive into town for a lower price on gas.
At the end of the day, if you want to save money on gas, buying a hybrid car might not be worth it. You will not see a meaningful savings because of the other factors associated with buying and maintaining the car.
The biggest one being that most consumers get rid of a car after just 6 years. While you may intend to keep your car longer, know that it isn’t always in your control. You might get into an accident and total your car. Or you might have a major mechanical failure after the warranty expires making it not worth repairing.
But if you have other reasons for wanting a hybrid, like wanting to save the environment, then you can justify the higher initial purchase price and potential of not saving much money by owning a hybrid vehicle.
The goal of this post isn’t to be anti-hybrid. The goal is to make you think about money over the long term. As I noted, there are some great hybrids out there that do save you money much sooner than the example I provided. But there are also many others that will not save you money if that is your ultimate goal.
Too many times we make money decisions based on the short term and they end up costing us more in the long run.
Learn to look long term with your money and you will make smarter financial decisions that will have a positive impact on your well-being.