Hybrid car sales are heating up.

Higher gas prices and good word-of-mouth are prompting more Americans to try hybrid cars, which combine gasoline engines with battery-powered electric motors.

Hybrid cars from Toyota and Honda have racked up record sales since early 2003.

Nearly 88,000 hybrid-electric vehicles were sold nationwide during 2004, making up 0.52 percent of the total U.S. light-vehicle market, reports J.D. Power and Associates, a marketing information and research firm based in Agoura Hills, Calif.

Industry experts expect hybrid sales to continue accelerating sharply in the next few years.


Hybrid launch dates in North America
Make and model
Release date
Dodge Ram pickup
2005
Toyota Highlander SUV
Summer 2005
Mercury Mariner SUV
Fall 2005
Saturn VUE SUV
2006
Nissan Altima sedan
2006
Chevrolet Equinox SUV
2007
Chevrolet Malibu sedan
2007
Chevrolet Tahoe SUV
2007
GMC Yukon SUV
2007
Mazda Tribute SUV
2007
Chevrolet Silverado pickup
2008
Ford Fusion sedan
2008
GMC Sierra pickup
2008
Mercury Milan sedan
2008

Hybrid sales are expected to climb to 200,000 this year, 260,000 in 2006 and 535,000 in 2011. The reason? A flurry of new hybrid models, including pickup trucks and sport utility vehicles will be available.

“As hybrid vehicles continue to become available in more segments, they also appeal to a broader range of consumers,” says Anthony Pratt, senior manager of global powertrain forecasting at J.D. Power-LMC. “Hybrids, which until very recently were available only in compact cars, are now available in mid-size cars, SUVs and pickup trucks.

“Consumers have a broader range of hybrid options today than they had just two years ago, and that will continue to grow. We expect the number of hybrid models on the market to grow from 11 this year to nearly 40 by the end of the decade.”

So families that prefer an ultra fuel-efficient and eco-friendly set of wheels will have a lot more choices in the next couple of years.

Right now, folks who want to embrace the new hybrid technology and do their part for the environment have plenty of vehicles to choose from: Toyota Prius sedan, Honda Civic hybrid, a two-seater Honda Insight, the hybrid versions of the Toyota Camry and Honda Accord sedans, Lexus RX 330, Ford Escape and Honda Pilot SUVs and GMC Sierra and Chevy Silverado pickup trucks.

Hybrid vehicles are good for the earth because they suck up less gas and spit out less pollution. But before you dash out and buy one, be sure to consider the cost.

Being an environmental trailblazer isn’t cheap. The hybrid cars available today cost anywhere from $3,500 to $6,000 more than comparable conventional cars.

Despite ultra-impressive gas mileage, you’ll have a tough time making up the price difference at the pump. And that doesn’t include any additional maintenance costs and the possibility that you may have trouble reselling the vehicle.

On the other hand, you do get a substantial tax break by purchasing a hybrid car.

Fuel-cost comparison
Let’s start by comparing the gasoline costs of driving a $19,900 Civic Hybrid with a $15,610 Civic LX. The Civic Hybrid with an automatic transmission gets an impressive gas mileage of 48 miles per gallon in the city and 47 mpg on the highway. The Civic LX gets 36 mpg in the city and 44 mpg on the highway.

We’ll use city mileage figures for both cars because that’s the mileage estimate most drivers are likely to achieve. Let’s say gas is $2.20 per gallon and you drive 15,000 miles every year.

Will you be able to rack up $4,290 in fuel-cost savings with your Civic Hybrid? Not unless you plan on keeping the car forever.

Driving a Civic Hybrid instead of a Civic LX will trim your fuel costs by about $228 a year. After five years you’d save $1,140 at the pump. After 10 years, you’d save $2,280. After 19 years you’d save $4,332, finally just over your $4,290 goal.

Let’s take a closer look at the numbers.

To drive 15,000 miles with a Civic Hybrid, you’ll need to pump in about 313 gallons of gas. Pay $2.20 a gallon and your yearly fuel costs will run about $689.

To drive 15,000 miles with a Civic LX, you’ll need to pump in more than 417 gallons of gas. At $2.20 a gallon, your yearly fuel costs will run about $917, just $228 more than the Civic Hybrid.

Of course, the more gas prices go up, the more money you’ll save driving a Civic Hybrid instead of a conventional Civic.

So let’s say gas prices actually shoot up to $3 a gallon. Yearly fuel expenses with a Civic LX will run about $1,251 compared with $939 for a Civic Hybrid. That’s a savings of $312 a year. After five years of high fuel prices you’d save $1,560. But you’re still a long way from recouping the extra $4,290 you paid for your environmentally friendly set of wheels. Helping the earth can be hard on your wallet.

Tax break
A one-time
federal tax deduction of $2,000 may help soften the blow. Any car shopper who purchases a new hybrid through 2005 is eligible for the full tax deduction. The tax break will drop to $500 in 2006 and disappear in 2007.

And owners of fully electric vehicles get an even better break: a tax credit up to $4,000 for the 2005 tax year, then $1,000 in 2006. As with the clean-fuel deduction, the electric car credit is scheduled to end in 2007.

“It’s a laudable attempt by the federal government to get you to buy a fuel-efficient vehicle,” says Bob Trinz, a senior tax analyst at RIA, a Thompson business providing tax information and software to tax professionals..

Even a hybrid owner who takes a standard tax deduction will qualify for this deduction.

“You need not itemize to claim this,” Trinz says. “It’s commonly described as an above-the-line tax deduction.”

The
above-the-line tax breaks are at the bottom of the first page of the long Form 1040. You claim the one for your hybrid car on the line that instructs you to total all adjustments to your income; be sure to write the words “clean fuel” next to your deduction amount.

Some states also offer tax breaks to hybrid-car buyers, as well, so ask your
state’s tax department about hybrid cars. It could save you some serious cash on a state tax bill.

And Virginia residents who buy hybrid cars get an additional perk — driving in high-occupancy-vehicle lanes at all times, regardless of the number of occupants, until July 1, 2006.

But a lot of car shoppers who would consider buying a hybrid aren’t bothered by the extra costs, according to a recent survey by J.D. Power.

Many say they would go forward with a hybrid purchase if they could recover at the gas pump just half of the additional cost.

For example, they’d be willing to shell out $4,290 more for a Civic Hybrid as long as they could save $2,145 in gas expenses while they owned the car. A Hybrid owner who drives 15,000 miles a year could achieve that goal after five years with the help of the one-time federal tax deduction.

Why do people seem willing to take a financial hit when purchasing a hybrid car?

“Many of the consumers that are buying a hybrid today are doing so because they’re early adopters of new technology,” says Pratt. “They care about and want to protect the environment, they want better gas mileage, or all three, and they’re willing to pay a price premium for a hybrid vehicle to do so.”

Thanks to impressive fuel efficiency and squeaky-clean emissions, hybrid cars are much kinder to the environment than traditional cars.

For example, the Toyota Prius is 90 percent cleaner than the average new 2005 car, according to the California Air Resources Board. This five-passenger sedan is considered a Super Ultra Low-Emission Vehicle (SULEV). And with a gas mileage of 60 mpg in the city and 51 mpg on the highway, you’ll be able to drive quite some time before you even have to think about refueling.

Incidentally, the car gets better mileage in the city because it uses the electric motor more with that type of driving.

The 2005 Honda Civic Hybrid falls under the Ultra Low-Emission Vehicle (ULEV) category, which isn’t too shabby either. A ULEV is about 50 percent cleaner than the average new 2005 model year car.

And while plenty of 2005 cars fall under this category, they don’t match Civic Hybrid’s gas mileage of 48 mpg in the city and 47 mpg on the highway. A Civic Hybrid is about 30 percent more fuel efficient than a conventional, gas-powered Civic.

As for the Honda Insight, this little two-seater is the most fuel-efficient car in the country. Its gas mileage is an impressive 61 mpg in the city and 66 mpg on the highway. Its automatic model, which comes with a continuously variable transmission, has been certified as a SULEV vehicle.

What to ask before you buy a hybrid
Still, as good as these cars may be for the environment, consider the long-term impact on your wallet. Here are some financial questions even the most stringent environmentalist should consider before purchasing a hybrid.

Can you and your family afford to spend an extra $3,000 to $4,000 upfront on a new car?

How long do you plan to keep the car? The resale value of a used hybrid is a big question. It’s possible you could take another financial hit when you sell a hybrid. If you’re not prepared to keep a hybrid for the long haul, think twice about purchasing one.


Hybrids by the numbers
Car
Description
Gas mileage
MSRP
Honda Insight
2-passenger hatchback

61 mpg city

66 mpg hwy

starting at $19,330
Honda Civic Hybrid
5-passenger sedan

48 mpg city

47mpg hwy

starting at $20,900
Toyota Prius
5-passenger sedan

60 mpg city

51 mpg hwy

starting at $20,975
Chevrolet Silverado
Pickup truck

18 mpg city

21 mpg hwy

starting at $30,345
Ford

Escape

SUV

33 mpg city

29 mpg hwy

starting at $29,025
Source: J.D. Power and Associates

Can you afford the repairs? A key concern for long-term hybrid owners is maintenance costs. If you keep a car beyond warranty, you’ll be stuck with the repair bills and they could get expensive.

“At some point the batteries are going to have to be replaced and they’re expensive,” says Larry Webster, a technical editor at Car and Driver. “The cost could be anywhere from $1,000 to $2,000.”

The hybrid parts in a Toyota Prius, including batteries, are covered by an eight-year, 100,000-mile warranty. Honda covers its hybrid systems with an eight-year, 80,000-mile warranty. So in your ninth year as a car owner, you’ll be on the hook for any hybrid repairs in addition to the car’s ordinary maintenance costs.

Intrigued by hybrid cars but not sure if you can afford one? This
hybrid-car decision maker from Bankrate.com will help tell you.

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