Recently, I was planning to buy a new car. As a loyal consumer of Toyota, I limited my choices between Hybrid and Corolla, which have similar features and specs. I knew a hybrid car does save gas and is good for environment, but the question is whether it will save money for consumers. Then I did some math.
Corolla S: MSRP $16130, Fuel Economy 34/26
3rd Gen Prius: MSRP $24000, Fuel Economy 51/48
According to the U.S. Federal Highway Administration (FHWA), the average American driver logs 13,476 miles each year.  Assume 50 percent city and 50 percent highway drive in the calculation. So, we can get how many gallons of gas they use per year.
Corolla S: 13,476/(34+26)/2= 441.83 gallons
3rd Gen Prius: 13,476/(51+48)/2= 272.24 gallons
When gas price is $3.72/gal, the money each car use is as follows.
Corolla S: 441.83 * 3.72 = $1643.63
3rd Gen Prius: 272.24 * 3.72 = $1012.742
Therefore, a Prius can save $630.89 ($1643.63-$1012.742) per year, compared to Corolla S. But considering the different MSRP, it needs 12.05 years ($7600/$630.89/year) when the Prius actually starts to save money. That’s really a long time.
Let’s do more calculations in different gas price and national average of miles each American drivers drive per year.
In the figure above, we can learn that at high gas price and high driving miles per year, the consumers can get return for their investment more quickly. For example, if the gas price is $5/gal and the driving miles per year is 30,000, the consumers who buy Prius will start to save money after four years.
Therefore, a hybrid car does save gas, but the problem is that it needs too long to get payback for consumers. Gas isn’t expensive enough to justify the switch to a hybrid for costumers like me.
However, there are some reasons why people choose the hybrid even if the gas price is low. They may want to try the new technology. Maybe they are environmentalist and want to contribute to the carbon emissions decrease. Or, most possibly, the government provides a big tax break.