How to calculate the cost savings of a hybrid vehicle

Shoppers have to do a little math to figure out if purchasing a hybrid vehicle is cost effective.

Dear Car Talk: At one time, hybrid cars clearly made sense. But with seriously improved gas mileage for all cars, is that still true?

What formula can we use to decide if the extra cost of a hybrid is worth the improved gas mileage? – George

It’s a good question, George.

Now that there are so many hybrids available, it’s worth doing the math. And here’s how you’d do it:

First, you figure out the difference between the hybrid and nonhybrid version of the same car, equipped the same way. Let’s use the Toyota RAV4 as an example. A 2020 LE AWD starts at $25,950. A hybrid version of the same exact car starts at $28,350. That’s a difference of $2,400. Now the question is, how long will it take you to save $2,400 in gasoline?

To do that, you’ll need to know the annual fuel cost for each car. Start by going to fueleconomy.gov and looking up the average miles per gallon of each vehicle. For the RAV4, it’s 30 mpg. For the RAV4 Hybrid, it’s 40 mpg.

Then you take the number of miles you drive in an average year (let’s say it’s 20,000 miles), and divide it by each of those mpg numbers. That tells you how many gallons of fuel you’d need to buy in a year. For the RAV4 (20,000 miles/30 mpg) it’s 666.67 gallons a year.

For the RAV4 Hybrid (20,000/40), it’s 500 gallons a year. Then you multiply the number of gallons you’d buy in a year by the price of a gallon.

That varies, obviously, but let’s say it’s $3 a gallon. So, to run your regular RAV4 for a year, it’d cost you $2,000 in gasoline (666.67 gallons x $3 per gallon). Where the RAV4 Hybrid (500 x 3) would cost you $1,500 a year in gasoline.

Now you can put it all together. You know that you would save $500 a year in gasoline costs with the RAV4 Hybrid. So divide the extra cost of buying the hybrid ($2,400) by the amount it would save you per year ($500), and you learn that it would take about five years for you to “pay off” that premium you spent on the hybrid, before you started banking money.

So if you keep your cars for six, seven or 10 years, it’s clearly worth it. If you keep your car for three or four years, it’s probably not.

Now, there are other variables. For instance, hybrids use regenerative braking, so you’ll spend less on brake pads and rotors with a hybrid. You’ll also be using the gasoline engine less, so your cost of maintenance (oils, fluids, belts, filters) will be spread out over a longer period of time.

The price of gasoline is also a big variable. If the price of gasoline drops to $2 a gallon, it’ll take you seven years to earn back that hybrid premium. If gasoline goes up to $4 a gallon, it only takes three and a half years to pay it off.

And some people believe there’s value in decreasing pollution, increasing American energy independence or simply not having to go to a gas station as often. We don’t have the formulas for that stuff, George.

But you can at least get a rough idea of the basic economics with the above calculations.

 (Car Talk is written by Ray Magliozzi. To ask a car question, visit www.cartalk.com and click on Contact.)

Recommended for you

(0) comments

Welcome to the discussion.

Keep it Clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
PLEASE TURN OFF YOUR CAPS LOCK.
Don't Threaten. Threats of harming another person will not be tolerated.
Be Truthful. Don't knowingly lie about anyone or anything.
Be Nice. No racism, sexism or any sort of -ism that is degrading to another person.
Be Proactive. Use the 'Report' link on each comment to let us know of abusive posts.
Share with Us. We'd love to hear eyewitness accounts, the history behind an article.