Gas Guzzler Please

Are you contemplating a purchase of a new hybrid or alternative-fuel vehicle? Depending on your motivation, this may, or may not, be such a good move.

If you’re considering a hybrid and your motivation is to save money in light of higher fuel prices, you’ll be disappointed with the results. According to Consumer Reports findings “two of the six hybrids [in the analysis] recovered their price premium in the first five years and 75,000 miles of ownership. The Toyota Prius and Honda Civic Hybrid provide a savings of about $400 and $300, respectively, when compared with their all-gas counterparts – as long as federal tax credits apply. But extra ownership costs during the first five years and 75,000 miles for the other four hybrids ranged from an estimated $1,900 to $5,500, compared to similar all-gas models.”1 Even though there is a very small savings of $300 – $400 over five years, this isn’t compelling from a cost savings perspective.

What about alternative fuels? While the technology for alternative-fuel vehicles has come a long way, the most accessible option available in the United States is E85 / Ethanol. According to an article in Popular Mechanics it would take 4.5 barrels of crude oil to produce the 97 gallons of gasoline needed to drive a small car from New York to California at a total cost of about $212. In order to make the same trip in an E85 / Ethanol vehicle it would take 53 bushels of corn and a half-barrel of crude oil to make 176 gallons of E85 at a cost of $425. Why the extra 79 gallons of fuel? Unfortunately a gallon of E85 contains less energy than the same gallon of gasoline. To put it simply, to equal the distance traveled on a gallon of gasoline, it takes 1.56 gallons of E85 to travel the same distance. Maintenance costs between the E85 and all-gas vehicle over 5 years and 75,000 should be pretty much the same but, using PM’s numbers, fuel for the E85 vehicle is 50% higher than its all-gas cousin.

While neither of these options are appealing from a cost perspective, both produce less emissions than a gasoline only vehicle. Another positive is both solutions decrease the amount of gasoline used which could, some day, decrease (even if only slightly) the amount of oil needed for import into the United States.

Technology in this space is advancing rapidly and will, no doubt, significantly improve in the future. A lot of folks are jumping into this game early. As long as the motivation isn’t cost savings but an eased conscience then good for them, but I think I’ll stick to my all-gas vehicle for now.