Does plug-in hybrid car really save money?

Chevy Volt PHEV

I have long repeated in conversations with my friends that my next car will work “off of electric outlet”. Let’s get down to earth however and examine what financial benefits the plug-in hybrid (PHEV) actually offers besides the cool factor of investing into green technology and saving environment. Are we bargain hunters or what? ;-)

I will use GM Volt as the basis

GM is probably closer than any other US automaker to delivering their version of PHEV, the Volt. And so I will base my calculations off of the numbers I dug out for this car.

Volt is claimed to be capable of going up to 40 miles on electric charge. Assuming average electricity rates these first 40 miles will cost you around $0.85 (source). If you don’t recharge it, the car will yield around 50 mpg for the rest of the trip (going on gasoline).

Annual savings of owning PHEV

I used the numbers above and compiled a table of annual savings of driving Volt compared to a gasoline car with fuel efficiency of 30 MPG (want to know how? Here is the excel spreadsheet. Feel free to tweak it). For simplicity I assumed that you use the car for 250 work days in a year. Savings will be 20-40% more if you drive it more often (on weekends as well).

Gas price Daily commute (miles)
($/gallon) 30 40 50 60 70 80
$3.00 $590.63 $787.50 $887.50 $987.50 $1,087.50 $1,187.50
$3.50 $715.63 $954.17 $1,070.83 $1,187.50 $1,304.17 $1,420.83
$4.00 $840.63 $1,120.83 $1,254.17 $1,387.50 $1,520.83 $1,654.17
$4.50 $965.63 $1,287.50 $1,437.50 $1,587.50 $1,737.50 $1,887.50
$5.00 $1,090.63 $1,454.17 $1,620.83 $1,787.50 $1,954.17 $2,120.83

Where do I stand on this table?

I live around 15 miles from work (30 miles daily commute) and gas prices in the area are currently at $3 per gallon. This brings me to the top left corner of the table with annual savings of $590.63.

If GM sets the price for Volt at around $30,000 (as they say they might) it will mean that I will have to own my Volt for over 10 years before it recoups approximately $8,000 premium I will have to cash out for it compared to a regular car. I am not even sure Volts are designed to last that long…

Is plug-in hybrid really worth it?

Financially… Not at gas prices of $3. For my commute (30 miles) the breaking point will probably be $5 per gallon. I will then know for sure that I will be able to recoup the premium I pay for PHEV in approximately 5 years. If gasoline prices go up then I will start saving sooner.

Do you plan to buy PHEV when they become available? What is your breaking point? Please take this poll and let me know.

See also:

12 Responses to “Does plug-in hybrid car really save money?”

  1. 1 Mike G. Aug 23rd, 2007 at 11:36 pm

    I’m waiting for the compressed air car

  2. 2 more conclusions Aug 24th, 2007 at 6:10 am

    I checked your numbers and agree with them. Obviously allot of people will be higher on the scale as far as driving more mileage (30 miles for 250 days is only 7500 miles per year). Like you show the cost of gas can have a very large effect as well.

    If you want to get really crazy, some other factors that come into play are resale value of the vehicle, government grants or tax breaks for purchasing the vehicle, maintenance costs of the vehicle, the extra taxes and interest you pay with the estimated $8,000 plugin hybrid premium (probably amounts to thousands if you finance, if you don’t finance and pay cash upfront you have to look at the opportunity cost of not having that $8,000 to invest in stocks, etc…).

    Instead of giving myself a headache over this, I look at the fact that I often pay thousands of $$$ for options that either don’t pay for themselves at all (alloy rims, power windows, etc) or that actually cost me more money over time (larger engine).

    In the end I think we can all agree that the electrification of vehicles will benefit most people in the long run. Although we rely on artificially low oil prices for now, that will be hitting the fan soon enough.

  3. 3 MarkdownMonkey Aug 24th, 2007 at 8:24 am

    Interesting article Yan.

    Clearly, many buyers will need to be motivated by environmental reasons to buy these cars. From an environmental standpoint, 55% of all electricity in the US comes from Coal (followed by Nuclear [22%], Natural Gas [10%], Hydro-power [10%], and Oil [2%] source: http://www.environmentaldefens.....entID=774) So, my question to anyone out there who knows is this; is Coal a more environmentally friendly source of energy than gasoline?

    I’m also curious about how much energy gets lost in the process. Oil gets refined into gasoline, then it gets burned in the engine to produce energy. So from what I can tell, there’s only one time the energy gets transferred (which is where some of the energy gets lost as heat). Coal gets burned at the plant to make electricity (first energy transfer), then it gets stored in the car battery (second energy transfer), then it gets used when you drive (third energy transfer). How much energy is lost and how does this affect the “green-ness” of such a car?

    Maybe I’ll just ride my bike.

  4. 4 XynamaX Aug 24th, 2007 at 8:56 am

    Hybrid’s just aren’t worth the premium. It’s new technology that’s bound to get cheaper as time goes on, but for a depreciating asset like a car, it’s a horrible investment.

    You’d be better off investing in solar panels for your home. It increases your home’s value and it pays itself off in 7 years.

    A hybrid car will never pay itself off.


  5. 5 more conclusions Aug 24th, 2007 at 10:30 am

    “A hybrid car will never pay itself off.”

    First, what we’re talking about is only paying off the hybrid premium, not the whole car.

    Secondly, the higher gas prices go above $3/gallon the more untrue your statement becomes. Also it is not true for people who drive allot of miles per year, especially in stop and go traffic.

    There are allot of city drivers logging 15k to 20k miles per year who pay off the hybrid premium within 5-6 years at today’s high gas prices.

    Obviously if all you care about is mileage and you don’t care about performance or storage, it makes more sense to go get a Yaris or Versa right now. But even this won’t be true if we have a large enough gas spike.

    Trust me, in 25 years we will not be using the solely internal combustion engine cars of today running on fossil fuel gasoline. The problems with the supply of oil are identified by engineers in the industry, it’s not just a green hippy movement scare tactic.

  6. 6 Yan Aug 24th, 2007 at 1:15 pm


    Good point about environment friendliness of hybrid cars. I will expand & correct your considerations.

    1. Hybrid cars use electric motor only in the mode when gasoline engine really sucks (has low efficiency), that is acceleration. At other times hybrid car runs off of a regular smaller displacement gas engine and in that essence it is not different than a regular car.

    2. A hybrid car uses the electric motor at break time which improves efficiency somewhat.

    3. The battery and extra motor add weight to the car which is a drawback.

    4. If we consider plug-in hybrid, you can run 40 miles off of the battery charge alone (I assume you charge it in the garage of your home) which eliminates one bit in the energy transformation chain you described. That bit is back in when your battery runs out of juice DURING the trip.

    I don’t have numbers regarding what is more efficient, coal burning plant and electric motor vs gasoline engine. I would like to find out.

    more conclusions:

    I agree, overall there are many more things to consider when switching to alternative kind of vehicle. Here is a list of my pros and cons of buying a PHEV. Feel free to add your own.

    Pros: possible government subsidy (tax breaks), convenience factor (less trips to gas station), cool gadget factor (I like playing with new technology)

    Cons: cost of maintenance (third party maintenance largely not available), parts availability (parts are in scarce supply), after-market value (unless extended warranty in place, I wouldn’t buy pre-owned PHEV because of limited battery lifetime and overall complexity of the car)

  7. 7 David Aug 24th, 2007 at 6:27 pm

    It’s not that coal is “better” than gasoline, it’s that it is burned more efficiently in a power plant than in our cars. So using electricity to power our cars is a. cheaper than gas and b. cleaner than gas.

    Also, don’t forget there will be probably be some sort of tax credit like on the Prius and such of a few grand.

    That being said, I am awaiting the arrival of the Prius plug in/hybrid. I am afraid of the American car manufacturers reliability nowadays!

  8. 8 XynamaX Aug 24th, 2007 at 9:19 pm

    Trust me, in 25 years we will not be using the solely internal combustion engine cars of today running on fossil fuel gasoline. The problems with the supply of oil are identified by engineers in the industry, it’s not just a green hippy movement scare tactic.

    Don’t you think people said the same thing during the 70’s oil crisis? Here we are, 30 years later still making huge v8 engines that get 8-10mpg’s..

  9. 9 Nate Sep 20th, 2007 at 3:03 pm

    Hybrids are still ugly ducklings. Total life cycle environmental impact is very poor. I don’t see a swan growing out of these.
    It still boils down to… forward motion came from conversion of hydrocarbons to CO2 and H2O.
    The best bet for the wallet and for the planet is a decent milage car that lasts a long time and is easy to tune up at home with simple spare parts from Autozone.
    But they are illegal to make now, aren’t they?
    Now we have to lug an extra 300 pounds of stuff under the hood that is designed to improve milage, until it gets a little old and costs a fortune to fix (which we can’t afford, so we don’t). So the real MPG’s go down within a year after it leaves the lot.

    Got carried away.
    But not too far fetched, I think…

  10. 10 JerseyGuy Sep 29th, 2007 at 8:55 am

    Nice work (thanks!), but a little misleading for the following reasons:
    1. While you may only need the car for 7500 miles a year, the number of miles driven per year is typically assumed to be 12,000 miles for passenger vehicles, and 15,000 miles for light trucks ( see:
    Using your table, this would result in a savings of roughly $1100 per year with 7-8 year time to break-even.

    2. As more people buy PHEVs, the added costs for batteries, control electronics, motors, etc. will go down drastically further reducing the time to break-even.

  11. 11 sherrie malik Feb 21st, 2009 at 1:42 am

    Ann Arbor MI replaced some of their bus’s and taxi’s with a Toyota Hybred. Toyota hybred’s have been availabe since 1997 but not in the US. The Toyota Prius is a great automobile. You never have to plug it in as the rotation of the wheels when you are driving charge the battery. It dose run on a gasoline motor. When the car lowers to 12 miles an hour the electric motor then takes over making it ideal for city driving as you stay with the electric motor such as when you at a red light, stop sign, waiting in line at drive through such as McDonalds,
    the bank or stop and go driving to name a few. This car IS available yesterday and gets great gas mileage to off set the cost of the gasoline, the higher electric bill or the cost and resources needed to supply electricity. I do not understand why Toyota technology is so far ahead of ours or why the up and coming American hybred dose not incorporate the rotating of the car’s wheels to charge the battery. The starting cost of the Prius is $22,000 and the 2010 model promises some more improvements. Why have not the US big three auto companies produced hybreds some time back? We all want to buy American cars and keep so many people working but they have been dragging their feet on the kind of vehicles we need to reduce dependency on oil and save our planet. We need new CEO’s as those that head GM, Crysler and Ford motor companies are not qualified to do what is needed. Sherrie Malik

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