Great Time to Buy a Used Hybrid

Published September 20, 2010

According to Kelly Blue Book, there’s never been a better time to buy a hybrid—if you buy it used.

As you might expect, KBB’s case is a hyper-rational economic argument that calculates the purchase of a hybrid solely as a means to save money at the pumps, with a consumer expectation that a relatively higher upfront cost must be quickly recouped.

As we’ve argued many times, consumers are usually not rational, and saving money at the pumps is only one of many reasons to buy a hybrid. Other vehicles segments—such as high horsepower cars or trucks with towing capacity—are not put through the same return-on-investment schedule. (Even when that horsepower and towing capacity is barely used.) Yet, a hybrid buyer’s desire to invest in cool new technology, use less petroleum or reduce emissions is seen as economically irrational, where performance or luxury items are seen as desirable features worth the money.

Nonetheless, KBB has a good point: Used hybrids are a great deal these days. Here’s the argument:

• Historically, hybrids have retained their value, outpacing the overall market. In fact, $4 gas meant huge hybrid premiums and dealer mark-ups. The times have changed.
• Low gas prices are a major factor. Steady prices at the pumps have resulted in a relative lack of demand for new hybrid vehicles.
• At the same time, technological improvements in gas-powered cars, like the Ford Fiesta and Chevy Cruze, are giving hybrids a run for the money in the new car market—especially during the recession.
• This has put a downward pressure on hybrid residual values and prices on used hybrids.
• In this period of low gas prices, spending less on a used hybrid—rather than a new one—means a quicker payback period.
• KBB says the payback period on used Honda Civic Hybrid is reduced to five years, rather than 16 years supposedly required for a new purchase. (Yet, despite lower gas prices, the premium on a Toyota Prius apparently has held firm and doesn’t help the used buyer as much.)

According to KBB, consumers are recognizing the good deals on used hybrids—which allow car buyers to protect themselves against future gas spikes, while obtaining the environmental, geo-political and high-tech advantages of a gas-electric vehicle at a lower price. The proof? Monthly web traffic for used hybrid vehicles has recently increased by as much as 20 percent.

---