Hybrid Cars Draw Attention

High US gas prices making car buyers take a look at hybrids.

Published: 02-Mar-2003

Stunned by the soaring price of gasoline, Sue and Tom Spiersch of Alameda are trying to unload their PT Cruiser, which Sue says gets lousy mileage, so they can buy a Toyota Prius hybrid, which is rated at roughly 50 miles per gallon.

Sue, a 52-year-old hairdresser, is strongly opposed to war in Iraq and also would like to help America reduce its dependence on foreign oil. Tom, a 62- year-old retired machinist, is not against the war, but wants a hybrid for the high gas mileage and low emissions.

So far, hybrids have been purchased mainly by environmentalists, technology freaks and celebrities. Meryl Streep, Ted Turner, Cameron Diaz, Ted Danson, Ed Begley Jr. and Jeff Goldblum own Prius cars. So does Ariana Huffington, who traded in her Lincoln Navigator. Leonardo DiCaprio bought one each for himself and his mom, dad and stepmother.

Now the looming war and soaring gasoline prices are broadening the pool of potential buyers to people like the Spiersches.

Sue Spiersch has researched hybrids on the Internet, admired them on the street and consulted friends who own them, but won't visit a dealer until she sells her PT Cruiser. "I know if I go in to test-drive one, I'll buy it," she says.

Hybrid cars have a battery-powered electric motor and a smallish combustion engine that runs on gasoline. Unlike pure electric cars, they never have to be plugged in. During braking or coasting, energy that would have been wasted recharges the battery. The car is powered mainly by electricity in the city and gasoline on the freeway.

It's not clear whether you can save money over the long run with a hybrid. Although hybrids get about 70 percent better gas mileage in the city than comparable gasoline-only models (15 to 20 percent better on the freeway), they cost about one-third more.

Spokesmen for Toyota and Honda, which make the only hybrid cars currently in production, say they haven't yet seen a surge in U.S. sales. But some dealers in the Bay Area -- the largest market for hybrids -- say they're getting more inquiries.

"Since gas hit $2 a gallon, the number of hybrid calls we have been getting is through the roof," says Gene Ouwe, a salesman with Mike Harvey Honda in Burlingame. "I personally in the last week have taken four calls and had four people come in asking about (the Honda Civic Hybrid). In the two weeks prior, I had two people ask."

David Nelson, sales manager with Toyota of Berkeley, says he "hasn't seen a correlation between gas prices and hybrid sales. What's counteracting that is the general recession. If the economy was going gangbusters and everybody had free cash, we probably would see it."

When the Prius came out in 2000, it sold at sticker price or higher. Today "it's being discounted," says Nelson, who has about 20 on his lot.

In February, the average price paid in the Bay Area for a Prius was $20,169,

compared with $14,653 for a Toyota Corolla LE four-door sedan, according to a survey by Edmunds.com.

The Honda Civic Hybrid, introduced in mid-2002, is harder to find and typically sells for sticker price or a bit higher.

The average price paid in the Bay Area for a Honda Civic Hybrid last month was $20,272, according to Edmunds.com.

The average price paid for a regular Honda Civic LX four-door sedan -- built on essentially the same chassis as the hybrid -- was $15,307.

The average price paid for the Honda Insight, a two-seater hybrid hatchback,

was $21,146. The Insight has been discontinued but is still available on some lots.

The price premium isn't as bad as it seems because people who buy a new Prius, Insight or Civic Hybrid this year (or bought one last year) get a $2, 000 federal-tax deduction. The deduction will be phased out, falling gradually to $1,500 next year and to zero in 2007.

The tax break also applies to cars and trucks approved for city and highway driving that run on natural gas, liquefied petroleum gas, electricity and other designated clean fuels.

The deduction goes on IRS Form 1040, line 34. On the dotted line write "clean fuel" and the amount. (For more information, read IRS Publication 535, available at www.irs.gov.)

There is no state tax break for hybrids in California.

Even with the tax deduction, it would take several years of substantially higher gasoline prices to recoup the added cost of the hybrids, despite their stellar fuel economy.

The stated gas mileage on the Prius is 52 mpg in the city and 45 on the freeway, compared with 30/39 for a Corolla with an automatic transmission.

The Honda Civic Hybrid is rated at 48/47 versus 29/38 for a regular Civic.

The hybrids get better mileage in the city than on the freeway because they're powered mainly by electricity in stop-and-go traffic. Like Muni's electric buses, they're virtually silent when idling.

In real life, the hybrids -- like most cars -- don't get quite the mileage that's advertised.

"The EPA numbers on your window sticker are pretty good for highway, but not very accurate for city driving," says Walter McManus, executive director of global forecasting with J.D. Power and Associates.

He says the ratings are a good tool to compare different models, but "most people get 15 to 20 percent less fuel economy than rated."

J.D. Power asks car owners to rate their satisfaction on a scale of 1 (worst) to 10 (best).

Hybrid owners rate their fuel economy better than owners of comparable standard vehicles, "but the difference is not dramatic," McManus says.

The Prius gets a 9.5 satisfaction rating for fuel economy, while the Corolla gets 9.0.

The difference isn't bigger, McManus speculates, because the standard Corolla gets pretty good mileage and Prius owners may have higher expectations.

Although the dual-engine technology is new, "hybrid owners rate their engines a little bit better overall than owners of gas-powered engines, but again the difference is not dramatic," says McManus.

Prius and Civic Hybrid owners gave their engines a 9.0 rating overall, compared with 8.7 for the Toyota Corolla and 8.4 for the standard Civic.

One difference between the two hybrids is that the Prius can run on electricity alone, while the Civic Hybrid always needs at least a sip of gasoline. As a result, the Prius gets slightly better mileage in the city.

Another difference is that the Prius instrument panel is mounted in the center of the dashboard. The Civic Hybrid's is in front of the driver, where it usually is.

Both cars have a display that shows whether the engine is using gasoline or electricity and what mileage the car is getting.

This is a good tool for people who want to adjust their driving style to enhance their fuel economy, but it could also be a distraction akin to talking on your cell phone while driving.

Both cars have a three-year/36,000-mile basic warranty, plus a longer warranty on the battery of eight years/100,000 miles for the Prius and eight years/80,00 miles for the Civic Hybrid.

On the Prius, there is no charge for scheduled maintenance up to 37,500 miles.

Edmunds.com estimated what it would cost to own the two hybrids and their closest gasoline-powered counterparts over five years. It found that the hybrids would cost more, despite their fuel savings.

The Prius would cost $28,464 over five years versus $26,434 for the Toyota Corolla.

The Civic Hybrid would cost $28,515, compared with $25,656 for the standard Civic.

The calculation did not factor in the tax deduction for the hybrids because the benefit varies by taxpayer.

The main reason hybrids look more expensive is that their projected depreciation is higher.

"The more expensive a vehicle is within its model range, the greater the depreciation," says Karl Brauer, editor in chief of Edmunds.com. The features that make a car more valuable when it's new don't hold their value. "It's the same thing with a hybrid," says Brauer.

That hasn't been a big concern for hybrid buyers so far. Fuel economy was by far the No. 1 reason people say they bought a hybrid, according to J.D. Power. For Prius owners, resale/holding its value ranked 13th out of 16 factors.

Despite the cost, there are good reasons to buy a fuel-efficient vehicle. That's why states such as Arizona and Virginia let people drive a hybrid in the carpool lanes with only one person.

In California, only zero-emission vehicles -- which do not include hybrids - - are exempt from carpool-lane restrictions. A bill pending in Congress would give one-person hybrids access to carpool lanes nationwide.


COST OF OWNING A HYBRID

Estimated cost, over five years, of owning a Toyota Prius or Honda Civic Hybrid compared to the cost of owning the most comparable standard model. The comparison does not include the $2,000 federal tax deduction on hybrids because the benefit varies by taxpayer.

Toyota Toyota Honda Honda

Prius Corolla LE Civic Civic LX

Hybrid 4-door sedan Hybrid 4-door sedan

Depreciation $11,754 7,702 10,429 7,260

Financing 3,702 3,044 4,132 3,123

Insurance 4,276 4,461 4,456 4,640

Taxes & fees 2,273 2,099 2,757 2,176

Fuel 3,108 4,247 3,133 4,295

Maintenance 3,634 4,259 2,986 3,540

Repairs 593 622 622 622

Five-year total 29,340 26,434 28,515 25,656

Source: Edmunds.com

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