How Hybrid Cars Make Our Country Poorer

If the only reason that you use a hybrid car is because of the government subsidy, it is likely that hybrids are making the country poorer. The analysis is no different that for farm subsidies or protecting jobs in the steel industry. In this case, the example below implies that the social loss is $1,271 per car. You want to save gas? Well, the price of the gas already incorporates all the opportunity costs and gives you the right incentive to economize. There are obviously many ways to economize and you weigh those costs against the gains from not having to buy as much gasoline. Worried about the fact that Iran may stop delivery? Well, that risk is already in the price of gas. If Iran were to stop deliveries, the price would rise to some amount. Traders will raise the current price to that expected price. If they didn't, someone could make some money. The point in referencing the example below is that if the cost of gasoline paid for the additional cost of the hybrid vehicle, you wouldn't need a subsidy. That additional cost of buying something that doesn't pay for itself is a loss to the country. Let the Europeans or others adopt these environmental rules. They will pay the cost and we will get a slightly lower price for gas (the effects hardly seem large given that we live in a world market for gas).

Incentives

The incentives of purchasing a hybrid car could be philosophical, financial or environmental. Berman recognizes that not everyone is willing to go completely green right away.

"Everyone should take little steps," Berman told LiveScience. "Buy the most efficient fuel car. It doesn't have to be hybrid. If you don't need an SUV, don't get an SUV."

Some car buyers might want to look at the decision from a purely financial standpoint.

Here is an example of how one choice might work out:

The average American drives 15,000 miles each year, with 45 percent of that on highways. The traditional Honda Civic costs about $17,110, and it gets about 30 miles per gallon in the city and 40 highway. At $2.92 a gallon, this subcompact car costs $1,296 in gasoline in one year.

At $22,900, the Honda Civic Hybrid will initially cost a bit more, but with an average of 50 miles per gallon, a year of gas will cost $878.

In 10 years, taking into account inflation at 3 percent but not factoring in any possible changes in gas prices, the gas savings of a hybrid reaches almost $5,000.

Finally, a new federal incentive program allows you to receive a one-time $2,100 tax credit for buying a hybrid.

Tally up all the extra costs and factor in the savings — not counting additional incentives offered by some states — after 10 years, this hybrid will ultimately save you about $1,229. . . . .