Hybrid cars have two motors, one electric and one internal combustion. While they’re generally more fuel efficient, do hybrid cars really save you money?

A HYBRID VEHICLE is one that is powered by two different types of motor, one electric and one internal combustion – the kind we’re used to where a fuel is mixed with air in a confined space to produce a driving force (petrol or diesel as examples). There are several different variations on that theme:
  • petrol/electric – mainly powered by a petrol engine, but has a battery which powers an electric motor.  The electric motor can drive the car by itself, or in concert with the petrol engine for extra power.  The battery is recharged by harvesting energy as the car slows down, or by the petrol engine.   Examples here are Toyota’s Prius and Camry;
  • diesel/electric – same, but uses a diesel engine.  Typically only found on larger vehicles.  Example is the Range Rover Sport hybrid;
  • plug-in hybrid – same again, but you can recharge the battery from an external power source. Examples are the Porsche Cayenne and Panamera hybrids; and
  • generator – a pure electric-drive car, but also have a small petrol (rarely diesel) engine that cannot drive the wheels, only recharge the battery.  This simplifies the car somewhat.  Example is the Holden Volt.
While we’re on the subject, an EV is an Electric Vehicle, or one powered only by electricity, nothing else.  Teslas are the most famous example here.
What’s a hybrid like to drive? A good one is no different to a normal car, or only in such a small way as to be almost unnoticeable by the average driver/owner. There is no technical reason why the hybrid need be any slower than a conventional car, handle worse or significantly compromise on loadspace. However, because hybrids are naturally focused on fuel efficiency carmakers tend to prioritise fuel consumption over handling, for example fitting thin, low-rolling-resistance tyres that are not great for handling, and they don’t exactly go overboard on the power either. Interior packaging is very similar to normal cars, as while there is an electric motor that is small the conventional engine is often a bit smaller than would otherwise be the case. Batteries are hidden out of view too, so the day-to-day compromises are not noticeable for most users.
But does a hybrid make sense if you look at the costs? The short answer is simple – “depends on your situation” as there’s always going to be outliers and unusual factors specific to every owner. However, what we can do here is look at some of the basics which readers can then modify for their own circumstances.
At the moment, hybrids cost more to buy and “may” cost less to run – so from a financial perspective you need to work out how soon, if ever, that additional capital cost will be recouped by lower running costs. Exactly the same maths applies to choosing a diesel car over petrol – higher purchase price, lower fuel consumption.  
But hybrids may not always be more expensive. One of the leaders, Toyota, say that “in the future, Toyota sees Hybrid Synergy Drive technology extending across its full range of vehicles. In Australia, the range will continue to grow.” And it is interesting that the three hypercars of late, the Ferrari La Ferrari, Porsche 918 and McLaren P1 are all hybrids, not for efficiency but for performance.  
McLaren P1. One of the world’s fastest cars… and it’s a hybrid.
Given the ever more stringent emissions regulations, and the improving hybrid technology we can certainly expect to see more and more hybrids – there’s already around 15 on the Australian market, with more to come.  Our visit to the Toyko Motor Show proved that every car manufacturer, without exception, is focusing on hybrids, electric vehicles and alternative power sources.  With that sort of investment we can expect prices to lower, range and efficiency to improve, and hybrids to become the norm. Even off-roaders are embracing hybrid technology, not least because electric power offers superb low-speed control.
Range Rover Sport Hybrid review
Range Rover Sport Hybrid
All we then need is governments at all levels to wake up and provide incentives to clean cars such as lower registration, free or reduced parking, and lower tax.  That’ll help make them more cost-effective, and despite what they say, consumers buy cars with their hip pockets.
So to see what sort of savings could be generated we took a look at the Toyota Camry, which comes in four trim levels, three of which have hybrid options. The base stats are:

Toyota Camry
  Conventional carsHybrid
  AltiseAtara S, SLAltiseAtara S, SL
 Example driveaway cost$ 28,990$ 31,990$ 32,990$ 34,990
Engine 2.5L 133kW / 231Nm2.5L 135kW / 235Nm2.5L 118kW / 213Nm + 105kW electric. Combined maximum 151kW
Dimensions (mm) 4850mm l, 1520mm w, 1200mm h
Weight (kg) 1460kg – 1505kg1575kg1610kg
SpecificationsExtra urban6.
 Co2 g / 100k183183121121
 Fuel tank70L65L
 Towing1200kg braked / 500kg unbraked300kg
 Drag coefficient0.290.27
The stats show the vehicles are very similar. As you’d expect, the hybrid weighs a bit more, and has a smaller petrol engine as there’s an electric to back it up. The hybrid is also marginally more aerodynamically efficient. It can’t tow as much as the normal car, really not much more than a box trailer. Empty.
So what does this mean for your running costs? Here’s the analysis:
  Conventional carsHybrid
  AltiseAtara S, SLAltiseAtara S, SL
`Fuel cost$1,758$1,758$1,172$1,172
AnalysisBuy price difference – –$4,000$3,000
 Fuel cost reduction per annum (1)-$586-$586
 Co2 reduction (kg)-8.68-8.68
 Years to pay off6.85.1
According to the Australian Bureau of Statistics, 14,000km is the average mileage. We’ve added 15% to the combined fuel consumption figures to better reflect real-world use.
As you can see, the hybrid will pay for itself in fuel, after about 5 to 7 years, based on that usage pattern.  If you do a lot of freeway driving your savings won’t be as great, but more if you spend time in slow city traffic.  And of course the greater your annual mileage, the greater the savings.  
There are more factors to consider than just the cost of fuel:
  • Capital costs.  In this case, you’re spending an extra $3000 or $4000.  On a loan, that means greater interest payments.  Or if you bought cash, you could invest the money or use it on a home loan, or otherwise make it work for you.  In a car, than money is just depreciating;
  • Resale.  Hybrids typically don’t have a great resale value, and depreciation is a huge part of running costs;
  • Servicing.  Will your hybrid be as cheap to service as a normal car, or as easy to fix?  Servicing is not a big difference as the hybrid systems are simple and reliable, but hybrids add complexity to a car, and complexity is never cheap to fix.  Servicing is often slightly higher for hybrids;
  • Tyres – hybrids are heavier which means tyres wear out quicker, but in reality the difference is negligble so need not be considered;
  • Brakes – hybrids are heavier, so go through brake consumables quicker, right?  Wrong!  Hybrids slow down by regeneration, so if anything they are easier on the brakes than a normal car. However, the difference is not huge and isn’t a major factor…the average driver does not replace their brakes every year, not even every three years;
  • Registration – hybrids do not yet attract any form of registration discount;
  • Parking – Australia hasn’t really got into offering discounts for hybrids just yet; and
  • Insurance – hybrids are pretty much the same to insure as a conventional car.

The bottom line

A hybrid only starts to make financial sense if you drive enough low-speed kilometers per year to offset the higher purchase price, and the larger the car, the greater the savings.  For example, the Prius c costs around $26k on the road, and a Yaris can be had for under $20k.  You are very unlikely to ever see a financial return on the Prius, but with the larger Camry and a less significant price difference it may work.  But for many owners, the sums will never add up.  
A hybrid will never cost as little as a conventional car, simply because a hybrid has all of the complexity of a conventional car plus additional components, in the same way that diesel engines are more complex than petrols and therefore more expensive. The only way hybrids would become cheaper to buy is if economies of scale kicked in such that demand for hybrids was so great the cost difference was reduced or even eliminated, but that won’t happen until the overall cost of ownership is significantly lower – something that can only be achieved by government action to reduce hybrid running costs.

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  1. No mention of outlander phev which changes the game somewhat. Most weekly commutes can be done at practically zero petrol. That changes the 15k economics somewhat.

    Next generation hydrids that run a fuel engine as a generator or range extender and do away with conventional drivelines ought to be cheaper all dependant on the speed of the battery learning curve.

    Projections are that in 5years batteries will be half the weight,cost, twice the density and 10times as plentifall. I’ve heard 15% been bandied about as the amount of hybrid vehicles. My guess is that’s light and we will see 20℅ with aggressive growth to the point that the majority will be be electrified to some extent by 2025.

    1. Excellent point. I think Robert was concentrating on a specific type of hybrid. The Outlander PHEV is the exception to the rule in that you can conceivably go to and from the shops, school or work on electricity alone. You can’t do that in, say, Camry hybrid, Prius or the Range Rover Sport hybrid. – isaac

      1. Plug-in hybrids are a different class of vehicle from gas-only hybrids such as the Prius. A car with a plug makes no sense unless you have a place to plug it in — many people don’t. A Prius competes with other gas-only cars. Toyota has had the Prius Plug-in and has announced the upcoming Prius Prime for people for whom a plug-in hybrid makes sense. It really depends on your situation and your driving patterns.

    2. No, the concepts in the article apply to the PHEV too.

      The PHEV Outlander is around $17-20,000 more expensive than the standard.

      That is a LOT of extra fuel you can buy, and that amount of cash in the bank earning interest or off the mortgage is compelling. If all you did was drive to the shops then sure it’d make sense, but that’s far too big a price gap to make economic sense for most buyers.

      But yes as I said we can expect to see more and more hybrids.

      1. Reasonable but also unfair you can’t compare the bum dragging Tupperware spec to the phevvy. Which has the accoutrements one comes to expect of the gls or exceed. For which it is much closure in price maybe about 4years of fuel.

        Of course typically buying the upper models means you have thrown all economic modelling out the window and have been caught in a carefully crafted manufacturers specification vortex from which there is no return. Hell I bet they even get paint protection!

        You lost me when you started talking mortgages, had you said spare money to invest in vehicular superannuation maybe not. in any event, when interest rates havent been this low since mini was actually small and winning bathurst now is not the time to buy a poverty spec on economic’grounds.

        Evidence the massive amount of c class and 3series choking up the aldi car parks and double parking outside your local state school. Okay most of those are debagded poverty spec models but you get my drift.

        Jury is out on whether resale favours one or the other in 3 years time if Saudi Arabia loose their nerve or the taps start to run dry I’m thinking hybrids.

        1. Whichever model you choose there’s a big price difference, but PHEV is not directly comparable with standard Exceed/GLS for example XLS/Exceed is 7 seats, PHEVs are 5. If you can make the economics work good luck…most people won’t. But there are other reasons to buy.

  2. As Driving a hybrid (Prius II) vor 7 Years now, I have to state, that the service of a hybrid is much cheaper than the service of an ordinary car. While other cars have had expensive replacements with the given age, the Prius just runs, and runs.
    The most expensive has been the change of the brake disks last year. But there are not clutches, no gearbox. And the CVT drive really switches the gears smoothly, so that the wear is much smaller, than with an ordinary used car.

  3. Useful article, thanks. One aspect you’ve neglected to mention in the pros for the hybrid are that it’s an ethically responsible choice. Ethical choices on mass could make the difference between a healthy vs a catastrophic outcome for the planet. Choosing a cleaner car is a positive investment in the future of our children and grandchildren. For many making that choice will be a very ‘practical’ decision both for the planet and for the well-being derived from doing something positive.

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