Why Now Is A Good Time to Buy a Hybrid or Plug-in Car

Have you ever noticed how some people make relatively large long-term financial decisions based on short-term information?

Take for example, a car purchase. A new car may be kept several years up to 10 years or longer. Today it is being reported all over that Americans are back to buying SUVs, trucks, and hybrid sales are down largely because gasoline prices have plummeted.

Sure enough, one big reason to buy a hybrid or plug-in hybrid or all-electric car is to save on operational costs, and if that need is whittled away, so goes the need to save fuel – if that’s the only realty there is to consider.

According to TrueCar, another reality to consider is some hybrids and EVs presently top its list of vehicles selling below MSRP – just because consumers are so reactionary.

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“Fuel savings are not top of mind to many consumers right now, and that makes this a great time to buy a hybrid or electric vehicle,” said John Krafcik, president of TrueCar. “With gasoline prices now averaging just $2.10 per gallon, and vehicle preferences tied so closely to short-term gasoline prices, automakers are heavily discounting their most fuel-efficient cars to clear inventories.”

Actually, fuel prices today are $2.05 per gallon, and may go lower, according to some reports.

The U.S. Energy Information Administration predicts this year gas prices will average $2.33 per gallon, and next year they’ll average $2.72.

In contrast, John Hofmeister, former president of Shell Oil is again – he’s been too pessimistic before, but not altogether wrong – predicting gas is on its way up to $4 and possibly even $5 per gallon by next year.

“The next round of high prices is likely to start later this year, as crude rebounds to the $80s and $90s, perhaps pushing to the $100 level by late in the year or early next,” Hofmeister told a writer for USA Today the other day after a trip to Calgary, where he was promoting natural gas.

“The triggering mechanism will be global demand growth relative to how much capital constraint gets baked into future plans for production this year and next. If new production capital is deferred and demand growth continues at 2 percent or more, we’ll see capacity constraints during 2016, an election year of course, drive prices higher. Whether we reach $4 a gallon or push past, it’s too early to tell.”

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For his part, President Barack Obama this month told Ford workers in Michigan not to get too comfortable with cheap gas because it won’t last.

“I would strongly advise American consumers to continue to think about how you save money at the pump because it is good for the environment, it’s good for family pocketbooks,” said the president, “and if you go back to old habits and suddenly gas is back at $3.50, you are going to not be real happy.”

Not Just About Gas Prices

But regardless which way gas prices go, and the proliferation of conflicting information, alternative-energy cars have reasons for their existence besides energy costs.

These include reducing greenhouse gas emissions, and in the case of plug-in cars, they are a neat alternative way to travel – particularly in quiet, smooth, all-electric mode.

They also stand to save fuel costs regardless, and if you think prices will go back up during the term of your car ownership, alternative-energy cars are a hedge against such future operational cost increases.

Plug-ins More Resistant Than Hybrids

Of the various types, hybrids have seen larger sales volume declines, and reasons may be more than just lower fuel prices, as the drop started before gas prices started to fall.

In 2012, the HybridCars.com Dashboard documented hybrids comprised 3.23 percent of the U.S. passenger market of 14.4 million new vehicles sold that year. In 2013 the hybrid “take rate” fell to 2.67 percent out of 15.5 million passenger vehicles. In 2014, hybrids dropped to 2.22 percent of 16.4 million passenger vehicles.

As Chevrolet Volt marketer Steve Majoros observed in an interview in Detroit, plug-ins by contrast have resisted a shrinking market.

Have plug-ins taken share from hybrids? This is entirely possible given the most-ardent environmentally conscious consumers basing purchases on their beliefs is apparently a minority – and these are moving up to plug-ins.

What ever the case, the plug-in market has grown from 2012 when only 11 plug-in hybrid and all-electric cars comprised a 0.57-percent take rate. By 2013, 16 plug-in hybrids and EVs made up 0.72 percent of the market. And by 2014, we’d broken out PHEVs from EVs to count nine plug-in hybrids comprising 0.26 percent and 13 EVs comprising 0.5 percent.

PHEVs and EVs have held on and grown to around three-quarters of one percent and grown in number of models and units sold while hybrids dropped a whole percentage point – out of only a little over 3 percent total – since 2012.

Act Now … or Later

Those are the numbers, but other numbers possibly of interest is some dealers may be motivated to discount slow-selling alternative energy cars.

Examples include the Ford Focus EV which – despite being a plug-in – topped TrueCar’s discount list, being cut 16.1 percent from $29,995 to $25,168. It’s also eligible for a $7,500 federal tax credit, and potential state credits.

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Another possibility is the Prius Liftback, level two. This is being cut 10.1 percent from $25,025 to $22,498 on average. Another is the Kia Optima Hybrid, discounted on average 10.7 percent from $32,950 to $29,411.

Are there more deals out there? Do you believe gas will be this cheap for the life of your owning the car? Do you accept other reasons to go alternative besides?

However, if you are waiting for new releases like the fourth-generation Prius, or second-generation Volt, for example, then waiting is a good idea, as they’ll be here soon.

Whichever way you decide is up to you, but be advised: deals may be found as cheap gas is making some alternative energy cars as appealing as an ice cream cone on a winter day – or is that hot cocoa on a blistering summer day?