Gas VS Hybrid Model Counterpart Net Present Value Comparison

MonetaryMark Personal Finance, School Projects 0 Comments

Picture attribute to Mariordo (Mario R. Durán Ortiz)

Picture attributed to Mariordo (Mario R. Durán Ortiz)

If you go to a dealer ship with your eyes set on a make and model, the car salesman might try to pique your interest in the hybrid counter part. On the window is the car’s pricing and total savings nicely calculated; but are you actually saving? Maybe, but there is no short answer if you want to know for sure.

I created an excel spread sheet to compute the net present value calculations for the costs of the vehicle during a 10 year period. In doing so, I had to make a few assumptions pertaining to the price of gas, depreciation, and maintenance costs (all of which you can see side by side in the excel spreadsheet).

The main factor that contribute to cost savings in the end are:

1) Gas mileage spread between gas and hybrid model and the price of gas.

My main take away of: Hybrid counterparts of luxury models rarely pay off because the hybrid model doesn’t offer that much better milage. Per example, the Lexus ES hybrid model only gets 9 extra miles to the gallon over the gas version while the ford fusion hybrid gets 15 miles more than it’s gas counter part.

2) Difference in price of the two models

The difference in price is usually gained back through the increase in gas milage; but it is always the price of the hybrid too high or relatively higher than the cost savings  through increased milage. This is where the spread sheet comes in (you are welcome to download it and plug and chug just make sure you carry of the gas calculation from the gas tab; If you have any questions please ask).

 

*The difference in the salvage value.

I didn’t take this into account in my excel spreadsheet, but a hybrid car may need a new battery after eight to ten years or a certain number of miles. I simply worked this cost into the maintenance costs instead

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