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July 29, 2009

With gasoline and diesel fuel prices staying low -- and uncharacteristically consistent -- as the summer progresses, data analysts at Edmunds.com, parent of AutoObserver, did a recent crunch of the often-discussed payback times for the nation's two competing fuel-saving drivetrains: hybrid-electric and diesel-engine vehicles.

The latest round goes to diesel.

There are two factors currently working in diesel's favor. First, diesel fuel prices have dropped precipitously since last summer's explosion to $4 per gallon (and beyond) and normalized to pricing quite near regular unleaded gasoline.

Second, the price "premium" for diesel technologies is low -- and in a few cases, combines with federal tax credits to make the diesel-powered vehicle actually cheaper than a comparable gasoline-engine variant of the same model. For those vehicles, diesel engine payback time is immediate.

Gasoline Price Low, Hybrids Lose

Conversely, Edmunds.com analysts point out that as gasoline prices stay low, hybrids struggle to justify their typically higher initial-cost premium.

The average premium for all hybrids is $4,981, with premiums ranging from just a few hundred dollars (Toyota Camry Hybrid: $289) to big-bucks upcharges such as the GMC Sierra Hybrid ($7,493) and perhaps the ultimate hybrid, the Lexus LS 600h L ($15,969) from Toyota's upscale division.

The average diesel engine premium, meanwhile, currently is just $2,360.

The cost premium for both technologies is derived by including all available incentives and tax credits and uses Edmunds.com's proprietary True Market Value (TMV) to determine each vehicle's "real-world" cost, which often is less than its actual MSRP.

Hybrids: Still a Costly Choice

Using current gasoline and diesel-fuel prices -- $2.53 per gallon for gasoline and $2.54 for diesel - hybrids can't touch the payback times for diesel-powered models.

Using a 15,000-mile annual driving figure, the lowest hybrid payback time is slightly more than six months for the Camry Hybrid. The Lexus RX 450h, one of the market's most popular hybrids, requires six years' worth of 15,000-mile-per-year driving to pay back its $2,792 premium.

But most hybrid models take longer to recoup their initial extra cost at today's gasoline prices. One typical example is Ford Motor Co.'s 2010 Fusion Hybrid: its $4,175 premium over a conventional Fusion requires 8.1 years to achieve payback, say Edmunds.com data analysts. A Honda Civic Hybrid:13.3 years.

The longest hybrid payback time: the already mentioned Lexus LS 600h L -- 70.3 years at current gasoline prices. 2010 Toyota Prius Red - 240.JPG

And one intriguing "special" comparison comes between Toyota's redesigned 2010 Prius and Honda Motor Co. Ltd.'s all-new Insight. Consumers and hybrid enthusiasts have argued about each car's "value" compared with the other, but judged strictly by their price in relation to their EPA fuel economy, the Prius costs $4,030 more than the Insight and would require 26.2 years of driving to recover its "premium" over the price of the Insight.

Diesel Payback: Can't Touch This


Thanks mostly to markedly lower cost premiums and the widespread availability of tax rebates, diesels currently are a much better payback proposition. Current market conditions also mean many diesels are selling for less than MSRP.

The best deals in diesel (with one exception) are in the Mercedes-Benz showroom: generous tax credits have diesel-powered variants of the GL- and R-Class currently with True Market Value figures less than their gasoline-engine counterparts.

A diesel-powered 2009 GL320 CDI is a giant $2,745 less than the GL450 (which uses a gasoline V8), leading to a payback immediately upon purchase of the diesel model.

The same is true for the 2009 R320 Bluetec, which ends up costing $136 less than the gasoline V6-motivated R350. And Mercedes' 2009 ML320 Bluetec also is a fine deal in relation to its gasoline-engine counterpart, with a premium of $508 that is paid back in just 1.4 years of 15,000-mile-per-year driving.

Other diesel payback times include Volkswagen's popular Jetta TDI, at 4.1 years to pay back its $1,760 premium; BMW's 335d, at 5.6 years to pay back a $2,558 premium; and BMW's X5 xDrive 35d at 4.6 years to pay back its $1,732 premium.

The longest diesel payback time is for a Mercedes, however. Because of large incentives to clear out gasoline variants of the now-superceded 2009 E-Class - incentives the diesel variant didn't require - it would take 20.6 years to pay back the 2009 E320 Bluetec's diesel premium. -- By Bill Visnic

1 - Diesel-powered vehicles like the Mercedes-Benz's GL320 CDI represent a great deal at the moment because diesel pays back at the moment of purchase. (Photo by Mercedes-Benz)

2 - The longest hybrid payback time is for the Lexus 600h L at 70.3 years at current gasoline prices. (Photo by Toyota)

3. In the much-argued measure of which hybrid delivers more efficiency in relation to its cost, Honda's new Insight hybrid whips up on its chief rival, the Toyota Prius. It would take 26-plus years of driving to negate the Prius' higher price...​
 
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