Hybrid vs. Gas-only pricing: Joe White gets it wrong.
The inestimable Ben Harris just alerted me to a little interview with Joe White, the Wall Street Journal’s man in Detroit, about the costs of hybrid cars. The ~4 minute interview is available in Realplayer and Windows Media formats.
Maybe I’m crazy, but I think Joe White may have made a mathematical error. He says that he would save $746 in gas per year if he bought a Prius instead of a comparable gas-only car. He also says that the hybrid technology raises the cost of a car by $7000-$8000 by comparing the Prius to a Honda Civic. The Prius is selling for around $21K right now, and only the extreme low-end Civics sell for $7000-$8000 less than that, so it’s not a great comparison, but even using his numbers, don’t you win with a hybrid in year 11? I’m thinking that $746 per year * 10 years = $7460. That’s assuming that you don’t get any tax breaks and the price of gas stays constant in the next 10 years. I am ignoring the interest you’d get on your $7000-$8000 in the bank for 10 years– at 3% interest compounded annually, that’s about $2500, but Joe White claims he was ignoring that too. (That’s still a simplification, as it assumes that you’re paying cash for either car, which people rarely do.)
As a realistic assessment, you break even after maybe 13 years if you buy a hybrid Prius in the US in 2005, assuming you get a $2000 tax deduction, have a tax rate of 30%, would have invested your savings at 3% for those 13 years, and the price of gas doesn’t rise. Plus, you get to drive a car that looks like a spaceship and can drive silently at low speeds.
The interviewer, Steve Inskeep, does a reasonable job of pressing Joe White. Inskeep asks something like “Aren’t there other reasons that people buy hybrids, though?” White’s reply is that buying a hybrid car is “making a statement” that you value, “supporting the development of new kind of technology.”
From my perspective, buying a hybrid is putting value on keeping our planet livable for the future. To me, it’s a moral judgment– I think I shouldn’t ruin resources that we hold in common, e. g. our atmosphere, just because it’s cheaper for me today. If we rule out moral considerations, White’s still wrong. A $13,000 Honda Civic might be cheap, but a stolen Honda Civic is free!
Anyway, enough of this– I have to get back to my regular Friday morning routine of watching street performers in Harvard Square, but ducking out before they pass the hat. Then I’m going to shoplift 4 packs of Reese’s Peanut Butter Cups from the Brooks Pharmacy on Mass Ave, eat all 7 cups, and throw the wrappers in the street. Ah, what a life!