The Green Car Payback Question

article image
Calculate how long the green car payback period will be for any car at any projected gas price to help you decide if the return on your hybrid or electric car investment is worthwhile.

Who doesn’t want clean air, clean water, a comfortable climate and a healthy environment for today and for future generations? Although most folks agree that hybrid and electric cars contribute to all of these societal blessings, if they also save us money, they’ll grab a bigger share of the market.

But their higher initial price tag can be hard to swallow or even impossible to pay for some, especially during these unstable economic times. The deciding factor for some comes down to the expected return on investment, or ROI: How long will it take to make back your investment with at-the-pump savings?

To help you envision that payback period, we’ve compared six sets of comparable cars in a range of prices, styles and miles per gallon ratings. The payback periods range from less than four months (keep reading to see this gem!) to more than 17 years (eek!). In short, predicting green car ROI is a complex task with many variables, but doing so is useful if you’re in the market for a new car.

Real-Life Return on Electric Car Investment

Each person’s green car payback will be different. Our comparisons are based on an average of 15,000 miles driven annually, with 45 percent of that on highways and 55 percent within cities. If you drive more than that in the city, you could stand to save a ton of dough by driving a hybrid or all-electric car. Stop-and-go driving and relatively slower speeds require less energy from the cars’ batteries, maximizing the already stellar energy efficiency of electric drive (see How Much Does It Cost to Power an Electric Car? in the article “Why Electric Cars Are Cleaner”). If you drive more than 15,000 miles a year (that’s about 1,250 monthly, 312 weekly or 45 daily), you’ll definitely break even sooner. Gas prices are volatile and it’s difficult to predict their roller coaster rides. But there can be no disputing that the faster gas prices rise and the higher they go, the more you’ll save with a high-mpg car. We’ve devised a simple worksheet to help you calculate your own potential payback period with whichever vehicles you’d like to consider and whatever gas price you want to input. Your old clunker only gets 18 mpg these days, you say? You’re in for a treat. (See How to Calculate Your Own Green Car Payback.)

Our calculations and worksheet consider only prices and gas mileage, but you should also look at the cost or savings associated with insurance, maintenance (keep reading), and local incentives.

Saving money doesn’t have to be the only determining factor when it’s time to buy a new car. People consider comfort, safety, performance, capacity, reliability, resale value, style, color and even whether a car has an iPhone dock. The bottom line is how well does a particular vehicle meet your particular needs and desires? The American Council for an Energy-Efficient Economy says it best: “The decision comes down to cost versus value: How much are you willing to pay for the features you want to get?” What about the early adopters of the personal computer, Palm Pilot or iPad? They probably hoped those devices would serve their needs, but we’ll bet they didn’t expect those gadgets to pay for themselves. Many consumers simply enjoy the ability to invest in technologies they value.

Some think it’s not fair to expect green cars to prove themselves in terms of ROI. Paul Scott, who sells the Nissan Leaf and is a founding board member for the advocacy group Plug In America, questions whether these cars should have to justify their higher costs because they provide important environmental benefits. “We never calculate the payback for high-priced luxury cars, like those from Mercedes, BMW or Lexus,” he says. “People are assumed to have made the purchase based on a multitude of factors. So why do we demand that cars with plugs pay us back?”

Many of the benefits of investing in green transportation are difficult to quantify in our current economic models. Read Why Buy Green? for a breakdown of the environmental benefits of increased fuel efficiency.

Another benefit is savings beyond the pump. Electric car aficionados joke that the most regular maintenance they do is replace windshield wiper blades. But that’s no joke. Cars with batteries and electric motors instead of engines have fewer moving mechanical parts that need to be maintained or replaced. Most of the maintenance you’re used to literally isn’t necessary — no new spark plugs, belts, hoses, mufflers or filters; no oil changes; the list goes on.

Resale value is nothing to sneeze at, either. Kelley Blue Book (KBB) reports that a 3-year-old Honda Civic Hybrid goes for more than half of its original selling price. After five years, it still earns back about 35 percent of its initial cost. That’s comparable to the Toyota Camry, which KBB ranks as a 2012 Best Resale Value for a mid-size car. After both three and five years, the Camry will earn back slightly less than the Civic Hybrid.

A Hood-to-Hood Challenge: The Verdict on Green Car Payback

Greener cars have been proven to be well made, durable and long-lasting (read Expensive Hybrid Car Battery Replacements Not Needed to learn more about the stellar battery life of hybrid and electric cars) and to save their owners thousands of dollars. Depending on the price of gas and what you want or need out of a good set of wheels, you may have to wait a few or even many years to realize your savings. How long will you have to wait? When it comes to green car payback, it all depends. But as they say: Patience is a virtue.

Read more: Read Green Car Payback: When Will I Break Even? to discover the payoff period for a handful of green car models at different gas prices.