Friday, August 30, 2013

When Not to Buy a Hybrid Vehicle

Hybrid vehicles were considered a great idea when they first came onto the market. They were supposed to be both environmentally friendly and a good way to save money. However, recent studies have shown that hybrids may not be all they are cracked up to be. 

According to a recent study from Polk, only about 65% of consumers who purchased a hybrid said they wouldn’t make the same decision again. One of the biggest reasons they were disappointed was that their vehicle didn’t pay off financially. This is a particularly important concern for older consumers living on a tight budget.

Many hybrid owners never recoup their investment. Anyone nearing or living in retirement should understand the financial costs associated with buying a hybrid before deciding to purchase one. Sometimes buying a fuel efficient car isn’t always the best idea.

High Upfront Cost

Hybrids can cost up to 20% more than other vehicles. The most affordable hybrid on the market costs about $20,000 while other versions cost about $100,000. Can you really afford to pay an extra $3,000-10,000 plus interest to buy a hybrid vehicle?

This is a huge investment for anyone on a limited budget. If you are over 50 then you are probably trying to save money during their final working years or are already retired. You also need to factor interest when you use an auto loan calculator. 

May Not Make Up the Cost

Despite the higher initial cost, many people think that buying a hybrid is still a good long-term investment. They believe that their car will pay for itself in gas savings down the road. However, that may not always be the case.

You will probably need at least three years to recoup your investment even if you purchased one of the most fuel efficient hybrids. Some hybrid owners never break even. According to one study, consumers who bought the Lexus LS600h would need about 100 years to break even.

Lower Return on Investment for Seniors

Fuel efficient hybrids tend to make sense for people who are on the road a lot. Young people who travel long distances for work and enjoy going out for a night on the town can pay off their investment in a couple of years. However, they don’t make as much sense for older people who are living a quieter life. You may want to pass on the investment if you don’t drive very often, because it is unlikely that you will ever break even.

Fuel Savings Aren’t Guaranteed

One of the biggest reasons people buy hybrid cars is because they want to save money on gas. Unfortunately, many people don’t save on fuel costs. You will need to know why some people don’t save money before committing to the purchase.

Your savings depend on largely on your driving habits. Hybrids are usually more cost-efficient at speeds below 40 miles per hour, because they are powered by the electric motor rather than gas. However, they become considerably less fuel-efficient at higher speeds. They are often even less fuel efficient than a regular vehicle. This means that drivers who spend a lot of time on the highway may not save anything.

Many of the newer clean diesel vehicles also have better mileage than most hybrids on the market. You should always research all of your options before you decide what the benefits are.

About the author: Kalen is a financial writer with an MBA from Clark University. He shares tips on saving money, budgeting and investing. He also writes about the benefits of choosing money from U Pull & Pay.

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