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| The Economics of Hyping Hybrids |
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 Have you ever wondered if a Hybrid vehicle was worth it? For all the environmentalists out there the answer is of course a resounding yes. However everyone else seems to be a bit more down to earth pragmatic when it comes to saving money. To those regular folk it thus becomes more of a question of if the total long term benefits out weigh the total upfront cost. Alright, I wondered about the real benefits of owning a hybrid myself and couldn't come up with any satisfying answers on a web search so I complied my own data off of my own Honda Civic 2005 Hybrid. Take a look and see how the reality is that Hybrids do make an excellent case if you're in a tax bracket that could use a couple thousand dollar write off :-)
Let's start with the Kelly Blue Book Value comparison of what is at it's base and with similarly configured features very much the same car. Note that the prices on the Kelly site vary over time and mine below reflect the prices when this article was published. In reality I payed several thousand dollars less than list price for my car, but we're looking for a common ratio here.
A Honda Civic Regular Manual 2005 at 32/38MPG is $15,261.00
A Honda Civic Hybrid Manual 2005 at 46/51MPG is $20,041.00
The premium you pay for Hybrid technology is the difference in price: $4,780
Assume the Regular fills up for gas once a week
13.2 gal tank * $2.35 per gal * 52.177457 weeks in a year = $1,618.54 for gas per year
A Hybrid week fill up is every (46+51)/(32+38) = 1.385714286 weeks
13.2 gal tank * $2.35 per gal * 52.177457/1.385714286 fuel efficient week = $1,168.02 for gas per year
That's $1,618.54-$1,168.02 = $450.52 savings in gas a year for the Hybrid
Assume a car lifetime/battery lifetime of 8 years (because that is how long the battery is warranted by the manufacturer before you have to spend =< $2,000 to replace it). That's 8 * $450.52 = $3,604.16 in total gas savings. Alright at first glance that means you paid $4,780-$3,604.16 = $1175.84 more for your Hybrid car than your Regular car. Ah but that's what you would think at first, however not exactly! Also you have to factor in the time value of money because a hybrid is an investment that only pays off itself slowly over time. So let's do that.
Let's say that $4,780 (difference in car price) is the the initial borrowed principal for a time value of money "account" that must be payed off. According to my constants above you pay 13.2*2.35= $31.02 for Regular gas per a week and 31.02/1.385714286= $22.39 for Hybrid gas a week. That is (31.02-22.39)*1.385714286= $11.96 placed into your pocket every Hybrid week paying into that time value of money "account" that currently has a deficit. Assuming a 3% average yearly inflation rate we're going to see what the left over deficit of the "account" is after 8 years and 37.653834941*8= 301.230679528 payments of $11.96 have been made using a loan balance equation.
A= beginning deficit, i= interest, n= # of payments made, P = payment amount
3% inflation interest a year is 0.0796732% per a Hybrid week, so i = 0.000796732
Balance = A(1+i)^n - (P/i)[(1+i)^n 1]
Balance = 4780*1.000796732^301.230679528 - (11.96/0.000796732)*(1.000796732^301.230679528-1)
Balance = 4780*1.271127834 - 15011.321247295*0.271127834
Balance = 2006.004031263
Using this more accurate time value of money adjusted equation shows that after 8 years you really paid $2,006.00 more total for your Hybrid car than the Regular car. Ah, but what if we mess with the constants in a realistic way? For instance gas prices have been a bit higher than average adjusted for the consumer price index and also inflation is just now rising above the average (think the tail end of the 70's except not quite as bad). Let's set 4% inflation and $2.75 per a gallon of gas at the pump. That's now (36.3-26.20)*1.385714286 = $14.00 gas savings every Hybrid week.
Balance = 4780*1.001062309^301.230679528 - (14.00/0.001062309)*(1.001062309^301.230679528-1)
Balance = 1614.53
First it was $2,006.00 and now it's $1,614.53 for a difference of $391.47. Future gas prices do seem to have somewhat of an impact. Since I bought a new Hybrid car this year I'm eligible this year only for a one-time Federal tax deduction of $2,000. The law changes after this year so if I would have bought my hybrid car in 2006-2009 I'd get a $1,700 one-time Federal tax credit. See how close my above calculations are to those two tax break numbers, interesting no? The after 2005 credit is variable depending upon the fuel efficiency of the specific Hybrid vehicle. It's nice to note as long as incentive laws remain on the books I'm allowed to ride in the Virginia HOV lanes without any passengers. Not to mention the Hybrid Civic's engine is whisper quiet. In my example the car traveled a total of 176,318 miles in 8 years. If perhaps you believe that the Hybrid car and battery can last 10 years then it would travel 220,398 miles and using our first equation again this time would only cost $1202.13 more than the Regular car. Sooo now how about taking account of the tax credit... once more, with feeling:
Balance = 4780*1.000796732^37.653834941 - (11.96/0.000796732)*(1.000796732^37.653834941-1)
This leaves you with $4,468.54 of deficit left to pay after one year and then subtract $2,000 worth of tax credit and you only have $2,468.54 of deficit left to pay.
Number of payments left = -log(1−iA/P) / log(1+i)
Number of payments left = -log(1−0.000796732*2468.54/11.96) / log(1+0.000796732)
225.584875057 payments / 37.653834941 Hybrid weeks = about 6 more years for zero balance to equal a grand total of 7 years until parity. The last couple of months the hybrid makes you... *drum roll*
Your profit = (P*[(1+i)^n-1]) / i
Your profit = 11.96*(1.000796732^37.99196953-1) / 0.000796732
A gain of $461.14!!! Amazing!!! Now go buy one ;-)
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| Welcome neophyte, to all things new |
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“The thing that hath been, it is that which shall be; and that which is done is that which shall be done: and there is no new thing under the sun.” (Eccl 1:9). By the way, that’s a notable quote because it’s from the Bible except, interestingly, the book of Ecclesiastes was originally written by a Greek philosopher. It could probably stand as a paper all by itself, indeed, it is not totally in equal rapport to the other more religious connotations in the Bible. The Bible is very much worth a read here and there because of the fact that all topics relating to philosophy have already been covered over 2,000 years ago in this book. Yet still neo philosophicals perpetuate their “new” ideas, perhaps in their latest New York Times best selling self-help book. However, there are intrinsic humanistic passions to try “new” things out to be sure those who already tried the “old” thing before did not somehow fail comprehensiveness. Albeit fully comprehensible, the bible is not. Still one could argue the same for any neo philosophical’s ramblings, myself included ;-)
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This very day I had, indeed, some spare time with which to expend; or so at least firstly through my mind's eye it did verily appear so. It is, however in the end, not truly the case and more perhaps begetting of an aberration on my part. Though casting equivocations aside, I wish to present a thesis upon a hypothesis upon a pedestal of rambunctious accentuation. Could I but recall a quote I once did happen upon: "Given sufficient time, what you put off doing today will get done by itself." Such began the invariable ineffectual deterministic process of circumbendibus thought in the matter of procrastination and its methods of causation and actualization. So then, marked by my ubiquitously insatiable fraternization with loquacious verbiage, I arrantly proceed.
Some come to call our present subject matter a case of the heebie-jeebies, but my view is one more of a bit of tit for tat, and all that as it were. One would see, consequentially, that as a product of self-masochistic reminiscences the pain irrevocably enacted by the act of waiting until the last minute to complete an act rightly inspires itself to be an act in itself, a realization. This latter feeling being the backing effervescence of the present colloquy, and the former to the latter the paradoxical perplexity. I hereby propose that merely being in a state of being coupled with procreation is transcendent enough profession to predicate consensus upon the most consequential laws of nature.
It is indisputable that in the current state of affairs yours truly stands steadfast drowning in waters that seemly lack dept in their iniquity. The current modus operandi of the educational institutional conglomerate remains quite ineffectual at rousting my motivational propensities. I assure you, my dear readers, that my repertoire is not in the least bit lacking. The protest thusly becomes one of questioning the purpose of attending said establishments. Ah but indubitably my dear fellows, I find my former enlightened status squandered and dissipated along with my wherewithal all stolen and held by the grotesque sacrifice and the shackles decreed by so called "higher learning". From this day, heretofore, I abrogate all tasks unwanted and bite my thumb in an uppish manner to outright brackish fiddle faddle. As Poo Bear once was heard to say "Oh, bother".
Crap, never mind, I gots to get my damn homework done so I can get my damn degree... laterz doods
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