Prius saves gas money? (follow-up)

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Apr. 17th, 2012 | 08:21 am

Toyota makes the Prius -- a popular hybrid car that gets around 50 miles to the gallon (21 km/L, 4.7L/100km). Presumably, these vehicles save you money at the fuel pump. However, their sticker price is seemingly high. One way to check the economic argument is to compare its total cost with a similar but non-hybrid conventional car and see when driving a hybrid starts saving you money. A convenient and fair comparison is the Corolla also made by Toyota.

Almost 5 years ago, Bill McGonigle compared a Prius with a Corolla and found that only after driving 280613 miles (451603 km) will you start saving money. I confirmed his math with some simple Lisp programming. Has this result changed?

Five years later, the price of gas is up to 4 dollars (US) from 3 dollars but the price point for a Prius is higher. You still need to drive 229354 (369109 km) miles before you start saving gas money. That's 60000 miles (96560 km) less than 5 years ago. Here's the arithmetic in the Emacs Lisp programming language.

(let ((gas-price 4.0)         ;; dollars/gallon
      (prius-price 24000.0)   ;; US dollars
      (corolla-price 16130.0) ;; US dollars
      (prius-mileage 48.0)    ;; miles/gallon
      (corolla-mileage 34.0)) ;; miles/gallon
  (/
   (* prius-mileage corolla-mileage
      (/ (- prius-price corolla-price) gas-price))
   (- prius-mileage corolla-mileage)))

Toyota has introduced a new c model of the Prius this year. A smaller-sized version, it is tuned to get better mileage in the city -- better than it does for highway driving. It's also 15% cheaper than the regular Prius. If you compared a city-driving Corolla with the Prius c you'd only have to drive 38802 miles (62446 km). That's pretty good, but is it a fair comparison? Here's that arithmetic before I answer that question.

(let ((gas-price 4.0)         ;; dollars/gallon
      (priusc-price 18950.0)  ;; US dollars
      (corolla-price 16130.0) ;; US dollars
      (priusc-mileage 53.0)   ;; miles/gallon
      (corolla-mileage 27.0)) ;; miles/gallon
  (/
   (* priusc-mileage corolla-mileage
      (/ (- priusc-price corolla-price) gas-price))
   (- priusc-mileage corolla-mileage)))

Average drivers don't earn 15000 miles (24140 km) a year in the city. Most of those miles are at a highway's pace. Further, the smaller Prius c is more comparable to the Toyota Yaris than a Corolla. Comparing the lower sticker price and highway mileage of a Yaris with the Prius c driven on the highway requires driving 264112 miles (425047 km). Here's the arithmetic.

(let ((gas-price 4.0)         ;; dollars/gallon
      (priusc-price 18950.0)  ;; US dollars
      (yaris-price 14115.0)   ;; US dollars
      (priusc-mileage 46.0)   ;; miles/gallon
      (yaris-mileage 38.0))   ;; miles/gallon
  (/
   (* priusc-mileage yaris-mileage
      (/ (- priusc-price yaris-price) gas-price))
   (- priusc-mileage yaris-mileage)))

After 5 years, the hybrid car still isn't economical unless a typical owner drives one for 15 years. According to Consumer Reports, Toyota's reputation for reliability is extending to the Prius, where a Prius is able to maintain its efficiency and the batteries have held up after 10 years. However, the average Prius owner probably doesn't hold on to the car this long.

More likely, consumers purchase hybrid vehicles because of their reduced environmental impact. It's estimated that just producing a car can be 10 to 20% of a vehicle's lifetime emissions. Presumably, the energy to make a Prius is greater than a conventional car since it has two engines (combustion and electrical) and additional battery. However, Toyota doesn't release the estimated emissions from manufacturing a Prius.

The city-optimized Prius c is a triple threat in metropolitan areas for its lower price, better efficiency and reduce impact on smog. However, these places typically have mass transit. The best way to save money is commute by walking, biking, car pooling or taking the bus or train. These options are better for the environment as well.

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Comments {19}

(no subject)

from: anonymous
date: Apr. 17th, 2012 01:07 pm (UTC)
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I've always thought that was the case, but I never did the math. Do you mind if I post a link to this from The Market Scoreboard? - yrk

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Aaron S. Hawley

(no subject)

from: aaronhawley
date: Apr. 17th, 2012 01:20 pm (UTC)
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Yes, by all means pass it along.

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(no subject)

from: anonymous
date: Apr. 17th, 2012 02:46 pm (UTC)
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21 km/l? It seems like a joke. It's consumption that normal conventional Prius-size cars in Europe have, so even its operation is not more economical and has reduced environmental impact.

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(no subject)

from: anonymous
date: Apr. 17th, 2012 05:35 pm (UTC)
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I think(hope) a larg'ish percentage of Prius owners are thinking they are using less fule not for the savings but to lessen our dependance on oil. That is not to say the Prius actually manages that either.

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Aaron S. Hawley

(no subject)

from: aaronhawley
date: Apr. 17th, 2012 07:36 pm (UTC)
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No that would be valid. I've read calculations that if every SUV was swapped out for Priuses, the US could cut its oil imports in half.

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(no subject)

from: anonymous
date: Apr. 18th, 2012 01:33 am (UTC)
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its important to also recognize the impact a possible trade in vehicle will have on your calculations. For example I recently acquired a hybrid by trading in a 4x4 truck for 15k. It effectively got me into a hybrid at a difference of 10k. The savings for me in terms of increased cash flow per month was immediate. I went from spending $400/mo for fuel to only 100/mo, so in my case the hybrid purchase made economical sense. I don't expect most first time car buyers to purchase hybrids, so please don't ignore the relative effective purchase price of hybrids.

Another factor to consider is the average mpg drivers get prior to moving to a hybrid. The savings on a hybrid may be realised sooner if going from 20mpg to 50mpg.

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Aaron S. Hawley

(no subject)

from: aaronhawley
date: Apr. 18th, 2012 12:32 pm (UTC)
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Yes, you have good reasons to replace an existing vehicle for a more efficient one, but even with a trade-in you'd only save money with a Corolla or Yaris not the Prius.

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Chandan Kumar

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from: Chandan Kumar
date: Apr. 18th, 2012 10:35 am (UTC)
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21 km/liter must be a joke. There are cars selling in India which give better mileage than this. These are not even hybrid.
Skoda (mid size car) which gives 22 to 24 kmpl diesel. And Suzuki zen (Small car) which gives between 18-24 kmpl. For your reference http://www.carazoo.com/article/1206200802/Best-Fuel-Efficient-Cars-in-India

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Aaron S. Hawley

(no subject)

from: aaronhawley
date: Apr. 18th, 2012 12:51 pm (UTC)
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I hadn't heard of that Czech car maker. 24kmpl is over 55 mpg. That's pretty good.

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(no subject)

from: anonymous
date: Apr. 19th, 2012 06:18 pm (UTC)
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To get a more accurate cost you have to look at the depreciation in value of the vehicle over the period.

So, your hybrid is more expensive to purchase, but it may well have a higher re-sell value.

If you want to get really fancy you should add in the cost of the extra cash you have to invest to buy the hybrid.

So the calculation you need to do is something like:

(difference in purchase price) * cost of capital +
(difference in fuel to run vehicle) +
(depreciation in value of vehicle)

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Aaron S. Hawley

(no subject)

from: aaronhawley
date: Apr. 19th, 2012 08:34 pm (UTC)
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This is a good point because a Prius does not depreciate fast.

http://money.cnn.com/2006/03/06/Autos/tipsandadvice/hybrid_resale/index.htm

This is because there is a high consumer demand for used Priuses. California dealerships reportedly have ever paid finders fees for gently used Priuses.

http://frugaldad.com/2011/06/23/buying-a-new-hybrid-to-save-on-gas-smart-move-or-financial-folly/

The kind of comparison you're asking requires the calculus because you'd need to combine the depreciation for each model year with the fuel cost over time and then in all that variability find the sweet spot of hybrid savings.

My hunch is that depreciation savings of a Prius over the Corolla might hold in the first several years but then become the same over time. Selling a Prius in the first several has the side effect of decreased fuel savings since it wasn't driven long enough. The handy comparison with Corollas breaks down here because the Corolla may have depreciated more after the big safety recall made by Toyota a few years back...

Using Kelley Blue Book, I compared a 2008 Prius with a 2008 Corolla at 60,000 miles they both depreciated by $7,000. Unless shown evidence otherwise, I think we can hold depreciation as constant.

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(no subject)

from: anonymous
date: Apr. 22nd, 2012 03:31 am (UTC)
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I would have to say that my family is the exception to everything you have written, at least the assumptions, not the math. I personally drive 63,000 miles per year. My current car a 2005 Mazda 3 has roughly 376,000 miles on it and still counting. I won't be happy until I've gone enough miles to get to the moon and back. It gets roughly 33 MPG. I spend roughly $8400/yr on gasoline. At this point anything with an insanely high MPG on the highway would be welcomed. 98.74% of all miles I drive per year are done so at a speed of 68 MPH or greater. Yes, that includes weekends, leisure, daycare, etc... So in my case , anything at this point with high MPG and hopefully the longevity that the Mazda 3 has had is the goal here. I saw that 230,000 mile estimate and just laugh because it has, seemingly, been forever since I saw that on the odometer.

My wife on the other hand drives the opposite direction to work. It is to the city and no the Southern states in the US do not have mass transit. That's the big problem everyone talks about here. We are so sprawled out that mass transit would be a ridiculous under taking by whoever. People have talked about railroad, but again this is the south. Big railroad companies, like CSX, have rejected allowing mass transit on their rails and refuses to allow anyone to drop new rail near theirs. So until some makes the call to just clear cut some houses, we lack the room to get rail to the interior of cities, without starting some massive project that would cost more than would bring in over a lifetime.

I still don't doubt that most of the assumptions, mass transit / no one drives more than 15K a year, hold true for most people. However, my situation and many like me here in the south of the US, there are those of us that need cars in this niche. That's not to say I'm going to buy a Prius. I intend to keep driving the Mazda 3 until it dies, hopefully that won't be for another 350,000 miles (2017 - 2018, 2020 optimally.)

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Aaron S. Hawley

(no subject)

from: aaronhawley
date: Apr. 22nd, 2012 07:10 pm (UTC)
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Yours is a tough situation. I feel terrible about your commute. Sounds like at least 4 hours a day.

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(no subject)

from: anonymous
date: May. 25th, 2012 02:11 pm (UTC)
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Here is a complete picture from Edmunds True Cost to Own...I hope it shows up. Prius vs Corolla

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(no subject)

from: anonymous
date: May. 26th, 2012 02:06 am (UTC)
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If you can buy a Toyota prius really cheap, like we did, a 2002 model with 75,000 miles,for $5000, living in the suburbs, and can afford replacing the battery, for $2000, it is a great deal. Gets great mileage.

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(no subject)

from: anonymous
date: Jun. 1st, 2012 07:39 pm (UTC)
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I'd like to chip in as I bought a Prius C in April. I fully agree the Prius itself is not more economical, but with the C I have averaged 49mpg over the 4K miles I've put on the vehicle so far (using the built in fuel tacking). On a tank by tank basis I actually get 52mpg, but took a trip from CA from AZ (driving through the mountains) and only got 48mpg average on the trip, bringing my total average mpg down a lot. Given these real world metrics, compared to the EPA ratings, I would assume the Yaris does not actually get 38 either, but probably more like 32-34 (I'm estimating), and that the C will win out economically long before the typical driver would change cars, and gas will continue to get more expensive over the next 5 years as well. Part of the investment picture is insulating yourself from inflation; if gas goes to $5 or $6 I won't have to worry about cutting back on driving, as I get 400 miles per tank at $30 right now and would be getting 400 miles per tank at $40 otherwise. This is not the case for vehicles that get 33% worse millage.

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Aaron S. Hawley

(no subject)

from: aaronhawley
date: Jun. 1st, 2012 08:44 pm (UTC)
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Your experience of 49mpg with the Prius C is right at the mid point of 53 and 46. I find it hard to imagine that the Yaris would have that lower mileage, since unlike the Prius C it is expected to do well at highway speed. I'll give you 49 mpg and the Yaris 35 mpg for the effective rates and even give you $5.50 for the average gas price over the lifetime of the cars. You still have to drive 107689 before you *start* saving money. Look at it this way, you're a 25th of the way there!

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(no subject)

from: anonymous
date: Dec. 1st, 2012 11:32 pm (UTC)
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Hello I have a prius 2007 17000 drive freeway 160 miles every day paid used 18.000
have an average of 50, to 55 mpg . no major problems and one thing nobody tells
In all this math calculation that they make is that in the rsgular prius
you do the oil change every 5000 REGULAR oil ,in the corolla every 3.500
No transmision oil to change often in Prius , also brake pads last average
100.000 or more in many cases and. In my car is true , and they are some prius whith
More than 400.000 original engine and battery. No timing belt replacment
Price dealer in many cars every 60.000 or 100.000 corolla is $ 1.200 of poquet
prius is chain no need to change for the life of the car so , not. Only
You need to see the gas saving but the maintence .
The corolla is a grat car but. You have to pay more if you want. cruise control
smart key and the base prius came with it and you have to rember
also that if you drive better you save more gas .

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(no subject)

from: anonymous
date: May. 20th, 2013 07:50 pm (UTC)
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Does this change for a 2nd owner if he can get the 1st owner to take almost all the new car volume? Looks to me like the resale value of a 2006 is similar between the Prius B and the Corolla.

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