Hybrid car sales are racing ahead as drivers look for ways to reduce emissions without going full-on electric. According to data from car expert Edmunds, hybrids almost doubled their market share in 2023.
For some, hybrids offer the best of both worlds. You can save money on gas and be greener without worrying about where to plug in or how to cover longer distances. Hybrids can also make financial sense and let you drive in carpool lanes. Here are some other hybrid perks that may surprise you.
1. Some hybrids qualify for tax credits
For hybrids and EVs, the tax credits can be confusing — particularly since the rules are constantly evolving. For example, new requirements that came into place at the start of this year require that a percentage of components and minerals be extracted and/or processed in the U.S. or certain countries with free trade agreements. The cars need to be assembled in North America and there are also income limits on who can claim.
Traditional hybrids don’t qualify for the tax credits (worth up to $7,500), but some plug-in hybrids do. Plug-in hybrids, also known as PHEVs, have much larger batteries that act as the main power source for the car. As top auto insurer, Progressive, explains: “A plug-in hybrid’s electric battery can be recharged at home or a public charging station. A full hybrid car recharges its electric battery using its gas-powered engine.”
Actionable takeaway
A $7,500 credit can go a long way to offsetting the higher costs of an EV or PHEV. Even better? You don’t need to wait until you file your tax return. You can claim it as soon as you buy the car and the dealership will do the paperwork with the IRS. You can also get a $4,000 credit toward a used electric vehicle.
However, only a limited number of makes and models qualify. Go to the Fuel Economy website and talk to car dealers to find out exactly which ones.
2. You’ll save money on maintenance
Research by Consumer Reports showed that plug-in hybrids cost less than half as much to maintain as their fully gas counterparts. It puts the average maintenance costs of a gas-powered vehicle at $0.061 per mile over the lifetime of the car. In contrast, PHEVs come in at $0.030 per mile.
Sadly, there aren’t yet enough studies. Even the Consumer Reports one comes with a warning as it used a limited sample size. The logic makes sense though. Hybrids incur less wear and tear on their engines, put less stress on the brakes, and require fewer oil changes.
On the flip side, hybrids often cost more to insure. Not only are the cars themselves often more expensive, but the new and relatively complex technology pushes up premiums. Repairs can be more costly and parts can be more expensive.
Actionable takeaway
To work out the running costs of your hybrid, you’ll need to factor in the fuel consumption as well as maintenance estimates for the specific models you’re considering. Shop around with the cheapest car insurance companies to reduce your day-to-day expenses as much as possible.
3. They hold their value better than EVs
Running costs aren’t the only consideration when buying a hybrid — or any other type of car. Your car will likely be worth a lot less when you come to trade it in or resell it. The good news is that an iSeeCars study showed that trucks and hybrids depreciate less than other vehicle types. On average, hybrids only lost 37% of their value over five years. In contrast, electric vehicle values fell by almost 50%.
Depreciation has a big impact on the total cost of owning a car. Let’s say you spent $40,000 on a hybrid vehicle. Here’s how your costs could add up:
- If it depreciates by 37% in five years, it would lose $14,800 of its value. You might sell the car for $25,200.
- Research from Kelley Blue Book shows that five years of fuel, insurance, financing, and other fees could set you back another $30,000 or so.
- That means the cost of owning the car would still be around $45,000 across five years, or $9,000 a year.
Actionable takeaway
There are steps you can take to preserve your car’s value, such as regular maintenance and trying to keep your mileage low. But the best way to protect yourself is to look for cars with high resale values, meaning the lower depreciation rate is great news for hybrid owners. Use resources like Edmunds or Kelley Blue Book to understand the true cost of ownership.
Bottom line
There’s a lot to consider when weighing the pros and cons of gas, electric, and hybrid vehicles. On top of the environmental and financial considerations, practical questions about driving an EV have caused some consumers to apply the brakes. The many perks of hybrids have made them a popular stepping stone for consumers who aren’t ready to go fully electric.
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