The Toyota Prius New Year's Rush; Deduction Bias?

Are you planning to buy a new Toyota Prius hybrid car in 2006?

If you have been waiting for the New Year because the hybrid tax deduction for the Prius is bigger than in 2005, then you are not alone. There have been numerous reports of Prius buyers telling dealers to wait until 2006.

So, will this make it hard to buy a Prius in 2006?

Sometimes the beginning of the year can be a slow time for car sales, and this might have an effect on hybrid cars as well. Nonetheless, demand for the Prius has been, and continues to be, far greater than supply. Since the tax deduction for the Prius is both bigger in 2006 and capped, some Prius buyers will not qualify for the hybrid car tax deduction.

All this makes me wonder whether some hybrid vehicle buyers will look at other hybrids such as the Civic hybrid or the Accord hybrid, instead of the Prius, after the Prius deductions meet their cap.

Additionally, since hybrid deductions are capped by manufacturer, the Toyota Highlander hybrid will also be affected by Prius demand. Consequently, the Ford Escape hybrid or the Mariner hybrid could become a better deal simply because they will continue to qualify for the tax deduction longer than the Highlander hybrid.

If you are in the market for a Toyota Prius and the new deduction is a primary concern, you better buy your new hybrid as soon as possible to ensure that you will qualify for the deduction. Unfortunately, many hybrid buyers will already have this in mind, which could make finding a Prius more difficult than ever.

If the hybrid tax deduction won't have a big effect on your return, it might not be a bad idea to shop for a hybrid in these last few days of the year.

It's kind of ironic that Toyota's hybrid success could be to Honda and Ford's gain. The caps for hybrid vehicles are both far too few and too biased. If the government wants to get hybrids on the road as quickly as possible, then the free market approach to caps would have been to cap the total number of hybrids eligible per year, not to cap them by manufacturer.

Now Toyota hybrids will probably meet their cap before GM even starts selling real hybrids. That's a shame.