Sunday, January 13, 2008

Should I buy a Hybrid car?

I've been thinking lately about hybrid cars. There are several of them already on the market, and more and more coming each year. With the price of gas over $3.00 a gallon, the allure is easy to see. However, it is easy to fall into the trap of "I'll save so much money on gas!" without realizing the other costs associated with buying a new car (sales taxes, registration, more loan interest, and higher yearly depreciation).

So, as I do with most things, I wanted to put this to the spreadsheet test. My current car is a 2000 BMW 323i, worth about $8k.

I will compare this to the 2008 Nissan Altima Hybrid and the 2008 Honda Civic Hybrid -- two hybrids I have considered. Both which qualify for $2k and $1k, respectively, for federal tax credits.

First, let's calculate what our gas savings would be with two new hybrids vs. my BMW.

Since I only drive about 10,000 miles per year, my savings would only be in the $700/year range (depending on the hybrid car).

Next, we need to figure out several calculations to answer the following questions:

Does the hybrid have a federal tax credit?
What is the expected depreciation?
What is the expected maintenance?
What registration and taxes are involved in buying the new hybrid?
What is the cost of the loan?
Are there any incentives from the hybrid manufacturer?

I have plugged the answers to these questions into the pasted spreadsheet.
As you can see from my calculations, keeping the BMW or going for the hybrid produce roughly the same 3 year projected cost.

So as you can see, based on my calculations and assumptions for unpredictable costs (maintenance, depreciation, etc), the Altima should have roughly the same total 3 year cost of around $10,200-$10,400. The Civic Hybrid however, will have a slightly higher 3-year cost at a little over $11,000. All of these, however, are in the same ballpark and within a margin of error on my estimates.

Conclusion: In my particular situation, both of these Hybrids will have roughly the same cost over the next 3 years as my current car.
The upside would be driving a new car and feeling a little better about my carbon output.
The downside is, with all due respect, that neither a Civic nor an Altima compare to the handling or the fun of a Beemer. So for now, the BMW is staying put.

You can try this spreadsheet for yourself below:

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