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Study: Used Hybrids and Electric Cars Retain Value

Study: Used Hybrids and Electric Cars Retain Value

The economics of buying a fuel-efficient car can be misleading.  Critics of hybrids and electric cars often say, “They’re not worth it.”  That’s because their calculations about payback period—how long it takes to recoup a higher upfront cost—often exclusively look at fuel savings, based on higher MPG.  What number crunchers fail to consider is resale value.

According to FuelEconomy.gov—a consumer information website managed by the U.S. Department of Energy and U.S. Environmental Protection Agency—the MSRP of a 2012 Toyota Prius is $4,315 more than a 2012 Toyota Matrix. But given the Prius’s 50-MPG rating, compared to the Matrix’s 27.5 MPG, a buyer will see a payback of the extra upfront cost in 4.7 years.   A Ford Fusion Hybrid versus its 2.5-liter gas sibling means a payback in 4.4 years.  And for some model comparisons, like the 39-MPG Lincoln MKZ Hybrid and its gas version that carries an identical price tag, the payback is immediate.

But these payback calculations completely change when you take resale into consideration. Especially when gas prices are high, hybrids and EVs can retain thousands of extra dollars of resale value compared to less efficient models.  In other words, when it comes time to sell, any extra upfront cost comes right back.  The gas savings during the ownership period becomes a bonus. Conversely, owners of large inefficient trucks and SUVs can be fleeced when they sale their gas-guzzlers, usually in a rush when the price of gasoline skyrockets.

A 2011 Carnegie Mellon University (CMU) study, using auction data from Manheim Auctions, validated the high-MPG resale advantage.  CMU showed that after three years of ownership, the Toyota Prius and Volkswagen Jetta TDI (an efficient clean diesel vehicle) retained greater percentage of their initial purchase price than the conventional gasoline vehicles.  Researchers observed a resale ratio of approximately +0.3 in the summer of 2008 as gasoline and diesel prices rose to record levels.

More recently, the June 2012 edition of the National Automobile Dealers Association’s Used Car Guide declared that the average trade-in value, after one year, for a typically equipped 2011 Leaf SV electric car would be $23,975—or 95 percent of its sticker price of $25,280, after the $7,500 federal tax credit. (NADA considers tax credits and rebates just like any traditional cash incentive.)  The projected trade-in value of the 2011 Chevrolet Volt, according to the NADA guide, is $29,325—or 90 percent of its post-incentive $32,780 sticker price.

The values for Leaf and Volt are projected to decline a bit more in the five-year time frame—mostly based on an expectation that more capable plug-in cars are expected by mid-decade.  But hybrids, which have been on the U.S. market for more than a decade, are projected to continue retaining high resale values in coming years.

When you add everything up—the luxury features that come standard on many hybrids and EVs (creating an uneven comparison), tax incentives usually not included in ROI calculations, and strong resale values—the economics tilt even more strongly in favor of the most fuel-efficient cars on the road.  Also, there is the added societal and environmental benefit of reduced emissions and less dependence on foreign oil.  To a growing number of consumers, that’s priceless.

Photo Credit: gvgoebel

 

 

Related:
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Read more: Conscious Consumer, Green, Technology, Transportation, , , , , ,

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eBay Green Driving

eBay Green Driving helps drivers save money at the pump, and reduce their environmental impact. It offers user-friendly tools and resources, as well as eBay's unique green vehicle and parts inventory, in a single location, to help people determine the best ways to "green" their daily driving routines. The site covers the full range of efficient technologies: electric vehicles, hybrids, clean diesels, compressed natural gas and ethanol vehicles, as well as high-MPG gasoline vehicles. Green Driving's Fuel Type Comparison Tool was developed in cooperation with the Department of Energy's fueleconomy.gov. World-class content is provided by leading writers and researchers in the field of eco-friendly automotive technology.

11 comments

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5:10AM PDT on May 6, 2014

Hybrid and electric cars are the vehicles of present era, as these cars are fuel efficient and with the rapid increment in the fuel prices majority of the people prefer them over conventional vehicles. Another benefit of having them is the low depreciation value of these cars, even after few years you will get considerable amount in return. There are sources of online auto parts stores like http://www.iautobodyparts.com/autopartsforsale.html out there which buy and sell these hybrid cars.

9:06PM PDT on Sep 20, 2012

After you get up from the sticker shock.

3:40PM PDT on Sep 8, 2012

Thanks

2:56PM PDT on Sep 8, 2012

good to know.....I just wish more were willing to invest in more fuel efficient cars.....

10:55AM PDT on Sep 8, 2012

good.

10:51AM PDT on Sep 8, 2012

Uggg...

9:38AM PDT on Sep 8, 2012

good news.

9:17AM PDT on Sep 8, 2012

SO glad to read this as I bought a a hybrid this year!!

8:12AM PDT on Sep 8, 2012

This doesn't seem to be a surprising finding based on current gas prices, and our need to reduce CO2 emissions.

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