Perception versus reality: cost savings of owning a hybrid
PEMCO Insurance's Northwest Poll reveals most Washington residents believe owning a hybrid will save money; research shows owners will have to be patient
SEATTLE – Most new-car buyers in Washington who are likely to buy a hybrid share a common misconception that owning a hybrid car will save them money through better mileage, according to PEMCO's Northwest Insurance Poll. The reality is that while the increased purchase cost of a hybrid can be offset in gas savings, it can take up to five years before the savings pencil out, according to published reports.
PEMCO's poll data shows that 47 percent of drivers who plan to purchase a new car in the next year, and who are likely to buy a hybrid, report the primary reason they would buy a hybrid is to improve gas mileage. Twenty-two percent say their primary reason would be to save the environment, while 19 percent specifically said "to save money."
"New-car buyers can consider hybrids because they reduce pollution and save the environment, but they shouldn't expect to save money in the short-term," said Jon Osterberg, PEMCO's spokesperson. "Our poll data uncovered false expectations. Forty-four percent said a hybrid would cost less than a conventional car to drive and maintain."
Consumers should be aware that in a recent study commissioned by the nation's leading consumer magazine, only two of six hybrid cars that were tested recovered the price premium in less than five years. Five years is also the typical period of car ownership, according to the magazine.
In the coming months and years, virtually every car manufacturer has plans to introduce a hybrid car model. In 2005, hybrid cars accounted for 1.2 percent of auto sales - more than double its market share from 2004. Auto manufacturers are having a hard time keeping them on the lot.
Those looking to save money by purchasing a hybrid car need to know that hybrids can cost anywhere from $2,000 to $8,000 more than their gas-powered counterparts.
The timing of a hybrid car purchase also plays into savings. To help ease higher initial fees, new hybrid-car owners currently can take advantage of federal tax credits ranging from $650 to $3,150. Consumers should know that after each manufacturer sells 60,000 hybrid units, regardless of model, the credits gradually will be phased out.
In most cases, the tax credits offered on hybrids, combined with money saved on gasoline, are not enough to recover the purchase price during the first several years of owning the car.
Despite the perceived cost savings, over half of Washington's residents who plan to purchase a new car this year do not plan to purchase a hybrid, according to PEMCO's poll data.
"With such rapid growth of the hybrid car market, it's important for consumers to have realistic expectations. Hybrid cars can save owners money, but not as soon as most people think," said Osterberg.
Other poll observations:
- Older drivers (age 35+) in Washington state are more likely to purchase a hybrid car than younger drivers (ages 18 - 34).
- 46 percent of Washington drivers who are likely to purchase a hybrid in the next year have a college degree, 37 percent report having some college or technical education, and 24 percent have no college education.
- Washington state drivers who own their home, and who plan to purchase a new car in the next year, are almost twice as likely to purchase a hybrid car as those drivers who rent their home (43 percent of owners compared to 23 percent of renters).
Anyone wanting to compare their answers with respondents to the PEMCO Insurance Northwest Poll can do so by visiting poll.pemco.com, where complete results are posted.
About the poll
PEMCO Insurance commissioned the independent, statewide survey that asked Washington homeowners several questions about automobiles and other issues.
Informa Research Services Inc. of Seattle conducted the poll. The sample size, 606 respondents, yields an accuracy of +/- 4 percent at the 95 percent confidence level. In other words, if this study was conducted 100 times, in 95 instances the data will not vary by more than +/- 4 percent.
About PEMCO Insurance
PEMCO Insurance, established in 1949, is a Seattle-based provider of auto, home, boat, life, and umbrella insurance to Washington residents. PEMCO Insurance is sold by community agents throughout the state, as well as through PEMCO offices. For more information, visit www.pemco.com.