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Hybrid lease payments may rise soon

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Hybrids are attractive vehicles in this era of $3-plus gasoline. Even though the revised method for calculating federal fuel economy has knocked down the estimated mileage on all cars, especially some hybrids, gas-electric hybrids still are the most fuel-efficient vehicles available.

But do they make long-term economic sense?

Most savvy buyers know that hybrids cost at least $2,500 more than comparable gas-only vehicles, which means it would take years to recoup the added cost. Many buyers are willing to make that commitment.

But a new study by the company that sets residual values for the leasing industry is forecasting that most hybrids will return a smaller percentage of their value after three years than their gasoline-only counterparts.

For example, a hybrid Toyota Camry will be worth about 51 percent of its original purchase price, while a gas-only Camry will be worth 55 percent, according to Automotive Lease Guide.

Those numbers don’t necessarily mean that a hybrid will be worth less in absolute dollars in three years. Because the hybrid costs more when new, it will be worth more than its gas-only counterpart.

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So what’s the reason behind the discrepancy in residual values?

It all comes down to the difference between what new-car buyers want and what used-car buyers look for.

Basically, used-car buyers shop price first and apparently worry about fuel economy second. The hybrid will cost more used, and that accounts for it being less desirable three years down the road, which cuts into the residual value.

The Automotive Lease Guide didn’t account for whether buyers shopping for used hybrids may be put off by concerns about the long-term reliability of the gas-hybrid propulsion systems. Hybrid cars typically have longer warranties on their propulsion systems, so that shouldn’t be an issue for buyers of 3-year-old hybrids.

What does this new rating on the residual value of hybrids mean to buyers?

It could mean that lease payments on many hybrids will be higher because of the lower residual values. That could make the economic equation of buying a hybrid even more questionable for some buyers.

Still, it’s unlikely that the passion for hybrids will be cooled.

Through the first 10 months of 2007, hybrid sales were up 26.2 percent to 266,182. Incidentally, Toyotas accounted for 81.3 percent of such cars sold.

Here are this week’s questions:
Will hybrid lease payments rise soon?
Should I pay cash for a new car?
How can my daughter lower car payment balance?
Can I renegotiate after signing a contract?

If you have a question for Terry, e-mail him at
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