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The (lack of) economics in most hybrid SUVs

Recently, we were in the market for a new car, well, not car but SUV. My wife really likes small to mid-size all wheel drive SUVs, so we started looking for one to replace the car she's been driving.

But she also prefers hybrids, both for the environmental and economic benefits (using less gas, spending less money) and for the "not having to wait in Oregon's ever-present gas lines" (because we're too stupid to pump our own gas) benefit. Having now done lots of research, I have to say that looking for a SUV that's also a hybrid greatly reduces the choices available.

The environmental question This analysis completely ignores the environmental side of hybrids: Using less gas means emitting less pollutants, which is good for the environment. However, producing batteries can be a dirty business, and batteries consume rare metals. So are they an environmental net loss or gain?

On the question of plug-in hybrids, which recharge from the power grid, it gets even messier: How is the electricity used to recharge created? In the northwest, much of the power comes from hydro and wind, which are cleaner than the coal used in other areas of the country.

In short, I've completely ignored the environmental issue here because it's very complicated. If someone's aware of a good "green impact" metric that works across hybrids, please let me know.

After doing a lot of reading and searching, and not really worrying about budget just yet, we only found a handful of options (excluding some super-high-end vehicles):

There's also the BMW X5 xDrive40e, but (a) it's not out yet, (b) it's a plug-in hybrid not a straight hybrid, and (c) it's going to be really wacko expensive when it comes out. So I'm ignoring that one, too.

What I found as I started to analyze the various hybrid SUVs is that—with one amazing exception—they don't make any economic sense even for the most long-distance of drivers.

To compare the hybrid and non-hybrid versions of each SUV, I used each manufacturer's web site to build as near-identical versions of each as possible. I noted the cost, and from Edmunds, recorded the city/highway gas mileage and fuel type. I then made a spreadsheet with each vehicle, and some assumptions on miles driven, types of miles, and cost of gas.

For annual miles driven, I used the Federal Highway Administration's average, which is 13,476 miles per year as of February 2015. I used gas prices from a local station as of May 18th, though they change quite regularly. Finally, for the city/highway driving mix, I used a fairly heavily city-skewed ratio of 80% city driving—this reflects our mix, and should give the hybrids an edge, as they (usually) get better city mileage than highway mileage.

When all was said and done, here's how things came out (click for larger)…

If you'd like to play with the above spreadsheet, you can download the Excel file.

Just look at those payback periods! Excluding one choice, they range from a "low" of nearly 10 years for the Lexus 300h to a high of almost 22 years for the Subaru Crosstrek Hybrid. That's insane. If gas prices return to $5 a gallon (unlikely in the near term), payback obviously improves (five years or so for most, 10 for the Crosstrek), but are still long.

(The Crosstrek Hybrid is simply a horrible hybrid: For an extra $2,800 up front, you gain four MPG in the city and zero on the highway! You also give up 30% of the cargo space and lose two gallons of gas tank capacity. Seriously, don't buy the hybrid Crosstrek. I say that as a Subaru owner, too.)

But just look at that exception: The Toyota RAV4 Hybrid, even with today's ultra-cheap gas, has a payback of just 1.7 years. Why? Because the RAV4's hybrid version is only $700 more than the non-hybrid version, and there's a notable (56%) increase in city milegae. (Highway mileage is up, too, but only about 6%.)

Combine those two factors together, and the RAV4 makes economic sense. Even with our personal mileage down closer to 8,000 miles a year, the economic payback is still under three years. That's amazing. Clearly Toyota has no problem charging a big premium for hybrids, as they do with the other three vehicles we looked at. But for whatever reason, there's very little cost delta for the hybrid RAV4.

So what'd we decide to do? We test drove the gas and hybrid versions of each of these models—excluding the useless Crosstrek Hybrid. All were really nice, with the $50K+ Lexus models being quite amazing (as you'd expect and hope at those price points).

But we were both very surprised at how well the Toyota RAV4 held up next to its Lexus NX300h cousin (they use the same powertrain and platform). Yes, the Lexus is quieter, and yes it's got some additional features you won't find in the Toyota. But there's nowhere near $15,000 worth of difference in ride quality and features. We were both impressed with how quietly the RAV4 rides and with how much cool tech (surround-view camera, radar cruise control, etc.) you get for the money.

So in the end, we bought the RAV4 Hybrid.


4 thoughts on “The (lack of) economics in most hybrid SUVs”

  1. Clearly the hybrids appeal to the market for reasons beyond personal economics, so just for the heck of it, you might add a row to your spreadsheet that includes environmental cost (use the metric of your choice) and add that to get the net GLOBAL cost delta for the hybrid models.

    1. You're right, of course. I should add something explaining why I left out the environmental bit, at least -- the problem is that I haven't found a good metric that accurately measures start-to-finish environmental cost of every car. Are you aware of a good source?


      1. No, not my specialty - which is why I passed the buck by suggesting “metric of your choice” ;)

        I would probably start by looking at constructing a formula like “cost of carbon/lb * lbs of carbon/gallon of gas * gallons of gas/year”, the tricky bit being coming up with the $-denominated cost of a pound of CO2 emissions. That number is probably all over the map, depending on whose environmental polemic you subscribe to.

  2. While specific to Minnesota (which is rapidly transitioning away from coal to rapidly growing wind generation), this study tried to look at the whole enchilada for electric vs gas cars.

    Being in Minnesota and driving a 2014 Volt using 100% wind source power (Wattson will come off lease next year and will be replaced by a gen 2 Volt) we found it very interesting. It helps put gas use emissions vs car assembly emissions in

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