Our New Hybrid: Update #2

It's now been about 13 months since we purchased our 2007 Toyota Camry hybrid. I've had 3 previous posts about it (Our New Hybrid, Update 1, Update 2). It's almost up to 10,000 miles and we have had no mechanical or reliability issues whatsoever (which is what one would expect from any new car).

Economics analysis coming up soon, but I want to make one point loud and clear: IF YOU LIVE IN ARLINGTON AND ARE BUYING A NEW CAR, YOU SHOULD BUY A HYBRID! Why? Because of the tax advantages. I just did my taxes, and it's very likely that the incremental cost we paid for our hybrid will be completely paid for in tax savings over less than the life of the car. That makes the hybrid upgrade free and the gas savings are pure gravy on top of that.

Here's how it worked for our car:

We bought it last March, which qualified it for a $1,300 federal tax credit (we actually hurried to get it before April 1, 2007, because the credit went down to $650). Our Arlington property tax bill was reduced by $750 (first $20,000 is tax free--in our case for 9 months). Total tax savings year 1 - $2050.

Although it's hard to do a perfect apples to apples comparison, I think we paid about $4,000-$5,000 extra for the hybrid--let's say $4,500. Making some reasonable assumptions about future values of our car and a 2007 regular Camry, we will save about $3,000 in Arlington property taxes over 7 years (click here for information about the Arlington tax break). Add in the $1,300 federal tax break for a total of about $4,300 savings, and the hybrid upgrade was free.

Please note that the federal tax breaks are different for different cars and are phasing out on Toyotas and Hondas. Fueleconomy.gov has the details.

How about gas savings? Our experience has been that our mileage is a bit lower than the EPA estimate. We've been getting about 32 MPG. Assuming our driving in the regular Camry would also be a bit lower than average mpg, I'll assume 24 mpg. Last year we drove about 9000 miles.

So our annual savings will be $300-$400 or more if gas prices continue to rise beyond $4 per gallon in the future.

Friends we have spoken with are mostly unaware of the Arlington tax break for hybrids, so clearly the information needs to get out there better. The bottom line is that if you live in Arlington and are shopping for a new car, the hybrid option is much more affordable considering the tax advantages than just looking at the price tags would indicate. Even if you don't live in Arlington, some hybrids are still eligible for a $2,600 federal tax credit, which should be taken into account while you are shopping.