Hi Dave! I saw your great review of the Toyota RAV4 Hybrid over on your other blog [see Is the RAV4 Hybrid my next car?] and one line caught my eye when you were talking about the surcharge for the hybrid engine: “you can do the math too: at $2.50/gal that’s a lot of driving to pay back the difference”. So how DO you calculate how many miles you need to drive to amortize the cost of the hybrid??
I knew when I wrote that sentence that it’d come back to haunt me! 🙂
The full context was that in the review, I said that the hybrid version of the RAV4 adds about $2000 to the sticker price, giving you 10-12mpg improvement in the vehicle, going from 24 to 35 miles per gallon.
At $2.50 per gallon of gasoline it’d take years for you to earn back the extra cost of the hybrid.
But how many years? How many miles?
Let’s now do the math. First off, to set context, here’s the car we’re talking about, the 2016 Toyota RAV4 Hybrid Limited:
Nice wheels, eh?
Let’s get back to the math, though. We’re going to use the following basis for this math: gas is $2.50/gallon, the RAV4 non-hybrid gets 24mpg and the RAV4 hybrid gets 34mpg. The cost of the hybrid is $2000 USD.
Now, that means that the cost (in gas alone) for driving each mile in the regular RAV4 is
$2.50 per gallon / 24 miles per gallon = $0.10 per mile in gas costs.
By contrast, the hybrid goes a fair amount further per gallon, so that’s
$2.50 per gallon / 34 miles per gallon = $0.07 per mile in gas costs.
The difference is $0.03/mile in gas costs. Now it’s a simple matter of dividing the cost savings per mile by the total cost of the hybrid:
$2000 / $0.03 = 66,666.66
This means that you’d have to drive almost 67,000 miles to start seeing a savings for the hybrid upcharge versus the savings in gasoline consumption. Not so great.
But if gasoline jumps up to $5/gallon, the numbers change. The regular RAV4 then costs $0.21/mile in gas, while the hybrid is only $0.15, a difference of six cents which drops the miles required by half! So with more expensive gas, you’d only have to hit 33k miles to start seeing a savings.
Given that the US Department of Transportation estimates the average car owner drives just under 14,000 miles/year, that’s only 2 1/2 years from purchase that you’re moving ahead, and if you own the car for 100,000 miles while gas stays stable at $5/gallon, your savings could be quite substantial.
Now, is it worth paying the extra for the hybrid? That’s your call.