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How Do Hybrid Cars Affect the Economy?

Last Updated: Jan 27, 2015 | By Ian Kenney
Hybrid engines affect micro and macroeconomic trends. Photo Credit Detailansicht Hybrid Motor image by 3rdTwin from

Every U.S. president since Richard Nixon has bemoaned the reliance on foreign oil imports. Several technologies are aimed at reducing consumption, including hybrid electric vehicles. Hybrids maximize fuel efficiency and provide some of the car’s energy with electricity generated by homegrown sources. Enthusiasts hope that hybrids can positively affect not just individual spending but the national economy.

Personal Energy Expenditures

At a cost of $2.75 per gallon of gasoline, a hybrid that gets a combined 42 miles per gallon will result in an annual fuel cost of $982. A gasoline-only car that gets 25 mpg yields an average annual fuel cost of $1,650.

Life Cycle Cost

The true cost of owning a hybrid depends not just on the fuel

savings but also the maintenance costs, insurance and the amount paid over the cost of a standard gasoline model. A hybrid's cost compared to a comparable nonhybrid model is between $1,700 and $11,200 higher as of 2010, according to Edmonds research.

Tax incentives helped to defray some of that cost between 2005 and 2010, but unless a new bill is introduced extending those benefits at the federal level, hybrid buyers might only be eligible for smaller, state-based incentives.

The fuel savings over time is how most of the premium is “paid back.” Because insurance costs are generally 5 percent lower for hybrids and maintenance costs are roughly equal between hybrids and gasoline-only cars, the factors determining the length of time it takes to start saving money by driving a hybrid are the amount of premium paid and the cost of fuel. Higher fuel costs result in more dollar savings, so the payback time is shortened.

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