Hybrid cars have become a hot item over the past few years. In 2000, the number of hybrid cars sales barely toppled 9,000 units. In 2004, sales had reached 88,000 units. And in 2005 a huge explosion…. 205,000 units were sold. Coincidently this sudden burst of hybrid vehicle sales occurred the same year in which the feds passed Energy Policy Act of 2005.

As a part of the Energy Policy Act of 2005, consumers could receive a tax credit of up to $3,400 when they purchased a fuel efficient car before December 31^st of 2010. Nearly all hybrids fall under the category of fuel efficient. But not all qualify for the credit. Other factors were taken into account such as gross vehicle weight rating and the vehicle inertia weight class.

And there was another small caveat… only the first sixty thousand qualified cars produced by each manufacturer were eligible for the credit. And also, the credit began phasing out depending on when the vehicle was purchased.

Here is an example of the phase out schedule for the popular Toyota Prius:

If purchased between 1/1/06 and 9/30/06… $3,150 tax credit

If purchased between 10/1/06 and 3/31/07… $1,575 tax credit

If purchased between 4/1/07 and 9/30/07… $787.50 tax credit

If purchased after 10/1/07… does not qualify for a tax credit

In 2006, 7 different makes and 15 different models qualified for the credit. In 2008, the list dwindled to only different makes and 4 different models.

It has been known since the beginning that the credit would be a temporary tax incentive, but now I’m left to wonder… without the incentive, are these hybrids worth the trouble?

The based price for a 09 Toyota Camry is $21,495 and it gets 31 mpg (highway)… for the hybrid version, the cost is $25,650 with 34 mpg (highway). For the 2007 models, you could have gotten up to a $2,600 tax credit for buying the hybrid Camry. but for the 2009 model, there is no credit.

I think that it would hardly be worth it to spend an extra $4,100 to get an extra 3 miles per gallon. But I’m not sure, so I’ll do the math right quick.

Let’s say you drive 12,000 miles a year, in the regular Camry, that’s 387 gallons of gas… in the hybrid, that’s 353 gallons of gas. You save 34 gallons of gas by driving the hybrid. At $4 a gallon… that equates to a whopping $136 savings per year. To get back the extra $4,100… you’ll need to drive the car for more than 30 years!

Ok 12,000 miles a year is a bit low… but even if we double the miles to 24,000 a year (which is on the high end), it will still take 15 years to recoup the hybrid premium. So, is it really worth the extra strain to your pocket? You can use some of the suggested found here and you’ll save that much and possibly even more. So from a strictly consumer finance perspective… it is definitely not worth it.

But there are other reasons people chose to drive hybrids. Aside from the perceived fuel efficiency… another reason is that hybrids are less damming to the environment. And though more expensive than regular cars, they are far less expensive than other eco-friendly alternatives.

I am not saying, don’t buy a hybrid car… An Inconvenient Truth scared me green. But I think that you should take the whole picture into account when evaluating the benefits of the hybrid.