Nissan LEAF

The new car market currently offers 4 types of cars: Conventional Cars, Hybrids, Plug-In Hybrids and Electrics. Prices vary from about $10,000 to $40,000, with luxury and premium models costing much more. Many manufacturers are offering low interest loans and the federal government will give buyers of certain models up to a $7500 tax credit.

But the cost of ownership of an automobile involves far more than the purchase price. In order to get a true picture of who much you are spending, you must know the purchase price, the finance rate on your car loan, the cost of insurance, the cost of fuel, the cost of repairs, how much local and state taxes you pay on your car and what your car will be worth when it comes time to sell or trade it.

Few people bother to do all this legwork. They only focus on the sticker price and the monthly payment and figure that’s the whole story. They would be shocked to find that repairs, depreciation, fuel, taxes and insurance often amount to more than their monthly payment.

Depreciation is especially tricky, because it can’t be computed with accuracy until the day to trade or sell the car arrives. There are ways to estimate depreciation, but all estimates are only a guide.

Recently, Kelly Blue Book released  information that shows many hybrids, plug-in hybrids and electric vehicles suffer more depreciation than conventional models. For example, they predict that the Nissan LEAF, an electric car, will lose 80% of its value after 5 years. That’s a stunning number, especially when you consider that the average conventional car will cost much less to buy and only lose about 60% of its value over the same period of time. To offset some of this pain, a new study from Germany predicts that the cost to maintain an electric car may be as much as 35% less than for any other type of car.

There is another factor in the equation for hybrids, plug-in hybrids and electric cars and that is the cost of replacing the battery at the end of its service life. That alone can add $4000 to $8000 dollars to your cost of ownership. Right now, no one really knows how long those batteries will last. That unknown may be what is driving down the resale value of these cars, as buyers shopping for a used model don’t want to get stuck with that expense and who can blame them?

For now, all the hoopla and hype about hybrids, plug-in hybrids and electric cars boils down to this: It’s impossible to predict with any degree of accuracy just how much the total cost of ownership of that car will be. Which means it is impossible to calculate whether the fuel savings they offer will ever equal or exceed the higher sticker prices such cars command, with or without federal tax incentives.

I just took my Honda Civic on a road trip this past weekend and got 38 mpg. The Civic has one of the highest resale values in the market and some of the lowest maintenance costs. And it looks good, too!

Despite all the hype about new technology, a well built conventional car still offers excellent value for  your money.