November 30, 2005
Hybrids are growing at the fastest pace of any vehicle class in America - up 97% in total sales from 2003. With the instability of gasoline prices, it's not surprising that consumers are looking to hybrids for relief. The allure of getting nearly 50 miles-per-gallon with little or no sacrifice in performance is attracting a lot of attention.
To gain a better understanding of the economics of a hybrid, Runzheimer International analyzed the costs of the Lexus RX400h sport utility vehicle as compared to the RX330.
The first major difference between the 2006 models of the RX330 and the RX400h is price. Being a far more technologically sophisticated vehicle - and loaded with amenities - the RX400h commands a higher price: $48,410, as compared to $37,770 for the RX330. Since the same options are available in the RX330 for roughly $9,000, a true "apples to apples" evaluation can be performed.Based solely on gasoline savings, the payback model is as follows:
| Description |
RX330 |
RX400h |
| Base MSRP |
$37,770 |
$48,410 |
| Options |
$ 8,890 |
$ 1,645 |
| Destination Charge |
$ 650 |
$ 650 |
| Total |
$47,310 |
$50,705 |
|
|
|
| Market Adjustment* |
($2,075) |
$ 2,900 |
| Price Paid |
$45,235 |
$53,605 |
| Difference |
|
$ 8,370 |
|
|
|
| City MPG |
18 |
30 |
| Hwy MPG |
24 |
26 |
Average MPG
(50/50) |
21 |
28 |
| Mileage Difference |
|
7 |
| Gallons of Gas Consumed |
|
|
| 15,000 miles/year |
714.29 |
535.71 |
| Annual Gasoline Cost at $3.10 per Gallon |
$ 2,214 |
$ 1,661 |
| Annual Gasoline Cost at $2.65 per Gallon |
$ 1,893 |
$ 1,420 |
| Annual Gasoline Cost at $2.29 per Gallon |
$ 1,636 |
$ 1,227 |
|
|
|
| Difference at $3.10 per Gallon |
$ 553 |
|
| Difference at $2.65 per Gallon |
$ 473 |
|
| Difference at $2.29 per Gallon |
$ 409 |
|
|
|
|
| Years to Recover Cost at $3.10 per Gallon |
|
15.14 |
| Years to Recover Cost at $2.65 per Gallon |
|
17.70 |
| Years to Recover Cost at $2.29 per Gallon |
|
20.47 |
Market Adjustment: Currently, buyers are able to pay approximately $2,000 under MSRP for the 2006 RX330. Conversely, dealers are earning a premium to MSRP on the 2006 RX400h of nearly $3,000).
Based on this analysis, the "hybrid premium" is slightly over $8,000 and would take at least 15 years to recover based solely on gasoline savings. Given the simplistic nature of the assumptions, it's likely these costs are understated. For example, if you were going to finance this purchase for 48 months at 6.00% interest with 30% down, you'd pay an additional $1,000 in interest to finance the RX400h over the RX330 during that 4-year period. Insurance premiums are about 10% higher for the RX400h versus the RX330, and the true market depreciation on a 4-year-old RX400h is unknown because the 2005 was the first model year. Current depreciation schedules (and lease residuals) of both vehicles share the same characteristics, however, the future market environment is unknown. Also unknown are long-term maintenance costs. While Lexus is legengary for its quality and reliability, there is no long-term data to substantiate the maintenance costs for the RX400h.
So, if you are seeking financial savings through lower gasoline costs alone, purchasing the RX400h instead of the RX330 probably doesn't make much sense. However, there are other factors that may motivate you to consider a hybrid vehicle. First and foremost, hybrids are extremely low emission vehicles. If you want to do your part to keep air pollution down, a hybrid will accomplish that objective. Secondly, if you do most of your driving in urban areas and brake often, you'll benefit more than someone who tends to drive more highway miles.
About Runzheimer International
Founded in 1933, Runzheimer International serves 60 percent of the Fortune 500. Recognized for providing innovative solutions relating to employee mobility, Runzheimer is a global leader in employee-provided business vehicle reimbursement programs, employee compensation and relocation, and travel management.
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For more information, contact Luella Dooley at Runzheimer International, Runzheimer Park, Rochester, Wisconsin 53167, (262)971-2277, ljd@runzheimer.com, www.runzheimer.com.
