The value of value

The Prius designers hope that you will always approach the car from a crouching position, from which it looks coolest. [official site]

USA Today ran an article on hybrid cars in their June 1 issue called "Cost savings may not offset higher price for hybrids" which cited an Edmunds.com study of hybrid vehicle value that was suspiciously slanted toward the negative.

An eye-catching sidebar table showed the price of gasoline or annual mileage you'd have to drive to "break even," which were improbably high. But the best-known hybrid, the Toyota Prius, was left out. Now, there are three things wrong with that alone, and one big thing wrong with the whole scenario.

Hmm, powdered rhino horn won't help me? I might as well give up.

First, the Prius, as noted a few paragraphs into the story, is more efficient for its price and will break even with ordinary use at today's gas prices (15,000 miles a year at $2.28 a gallon). It should have been included in the table to show that there is a perfectly serviceable alternative. After all, what would you think of a story called "Male enhancement drugs may not measure up" that left out Viagra? Hmm, powdered rhino horn won't help me? I might as well give up.

Second, the table for the three vehicles that were included (Ford Escape, Honda Accord, and Honda Civic) shows both fuel price and annual mileage together, as if both must be met for the vehicle to break even. Fuel prices of $5.60, $9.20, and $9.60 a gallon seem unlikely, and driving the car 37,000; 60,000; or 63,000 miles a year is almost as unlikely. Those mileage figures even cheat the type of driving you'll do. They assume only one third of your driving will be in the city, where hybrids get most of their efficiency gains over conventionals.

But the numbers actually represent an either/or scenario, and fuel prices that are slightly higher than today (say, $2.80 a gallon) together with moderately high mileage (say, 25,000 miles a year) are actually pretty easy to imagine and would probably allow the Escape to break even with their driving assumptions and in their time frame.

UPDATE: Easy to imagine $2.80 a gallon? Who's imagining? Gas spiked to $3.20 after Hurricane Katrina beat up gulf oil refineries and have yet to drop back to $2.28 two months later. Let's "imagine" prices of $3.00 a gallon and mileage of 20.000 a year.

All other things being equal, which would your rather have: Car A that gets 50 MPG or car B that gets 25 MPG?

Ahh, the time frame.... The table doesn't show it, but the text of the article (four paragraphs in) tells us that the study requires a break even point of five years. Later, the article explains that Edmunds chose five years because that's how long owners typically keep a car and because resale value is unknown.

But a little logic can help us out here. It's pretty safe to assume that a used hybrid is going to bring a little more than a used conventional car. All other things being equal, which would your rather have: Car A that gets 50 MPG or car B that gets 25 MPG? How much extra cost can this difference account for? Surely it's worth another year or so of driving (so a six-year-old hybrid fetches the same price as a five-year-old conventional). That means that even the Accord and Civic should be able to break even with moderately higher-than-average mileage. And any mileage after that is paying the owner a profit for being green.

[I]s cost savings the only reason you buy a hybrid?

And that brings us to that big problem with the whole scenario: is cost savings the only reason you buy a hybrid? Car A and Car B aren't exactly equal in everything but mileage: Car A has less negative impact on the environment. After all, if it costs $1 a ream to produce paper by dumping deadly chemicals into our rivers and $1.15 a ream to produce paper cleanly, only a fool would demand lower prices at the expense of polluted waterways.

So, the Edmunds study presents its case as negatively as possible, and USA Today talks it up as dark days for hybrids, with optimism only in the form of quotes from corporate reps. But being honest and calling the story "Worst-case scenario: low-end hybrids may cost slightly more in short run than conventional cars" doesn't make for a very good headline.

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