Consumer Reports and Hybrid Cars: What you need to know

What's the word on hybrids?

Consumer Report's Annual Auto Issue is one of the most important sources for unbiased ratings and reviews of automobiles. So, what can we learn from Consumer Reports when it comes to hybrid cars.?

First, we learned that the Toyota Highlander hybrid is the best SUV over $30,000 and that the Toyota Prius hybrid is the Best Green Vehicle.

Second, we learned that the Prius is the Most Satisfying vehicle according to owners. A whopping 95% of Prius owners would buy another Prius (more).

Third, we learned that hybrid vehicles have thus far proven to be extremely reliable. In fact, the Prius and the Honda Civic hybrid topped CR's rankings of Most reliable, with just 4% of owners reporting problems. In addition, the Highlander hybrid, Lexus RX400h hybrid and the Accord hybrid also did very well in reliability.

Of course, the long term reliability of hybrids is still a question, a question that can only be answered once enough hybrids have been on the road for more than a decade. Ultimately, the reliability of hybrids is extremely important as it is the factor in determining the overall value of hybrids, which brings us to our final point.

Fourth, are hybrid vehicles worth the cost?

According to Consumer Reports, only two hybrids can save you money after the first five years: the Prius and the Civic hybrid. Of course, once the capped tax credits for hybrids expire, these vehicles will then cost more than their conventional counterparts, well, maybe.

The article, Hybrids: Save gas, lose money, notes that "six hybrid gasoline/electric vehicles, will lose 2 percent to 3 percent more in value over five years of ownership than otherwise identical non-hybrid vehicles." While the Prius can save $406 after 5 years and the Civic hybrid saves $317, the rest of the hybrids lose money after five years: Ford Escape Hybrid ($1,883), Honda Accord Hybrid ($4,263), Lexus RX400h ($4,171) and Toyota Highlander Hybrid ($5,508).

Of course, as in life, few things are ever black and white.

To start, there is no "identical non-hybrid vehicle" to compare to the Prius. If the Prius were simply a hybrid Corolla, it would be called the Corolla hybrid. Quite simply, the Prius is a unique vehicle and when you consider performance, reliability and customer satisfaction, the Prius is a unique, awesome vehicle.

As for the rest of the hybrid vehicle segment, it is true that cost is an important concern. Still, for those that care, can you really put a cost on foreign oil dependency or a cleaner environment? Sometimes doing the right thing is neither the cheapest nor easiest thing to do.

Furthermore, the Consumer Reports study makes several important assumptions. For example, it assumes that your auto insurance will cost more. Overtime; however, this might not be true, especially when you consider that some insurance providers have already offered discounts to hybrid drivers.

CR also assumes extra financing costs for hybrids. Already, Ford has begun to offer incentives and better financing deals on its hybrid vehicles, so this 'cost' might not remain an extra cost.

The most important assumption affecting the costs of hybrids; however, is extra depreciation, which CR claims could range from $2,900 to 6,300 after 5 years. These are huge numbers that cannot, at this point in time, be backed by fact.

For example, if hybrid batteries generally last the life of these vehicles, which Toyota engineers claim is quite possible, then these numbers will be horribly wrong. Additionally, as more hybrids are built, hybrid battery costs will come down.

Moreover, it could turn out that replacing the battery packs of older hybrids could make hybrids twice as fuel efficient as before with new battery technology, such as lithium batteries. Not only would this reverse depreciation costs, but it would double fuel savings costs.

In 10 years, it could turn out that replacing the hybrid battery pack on an old hybrid actually results in a better hybrid than when new. Imagine the effect this would have on resale value.

Additionally, "Hybrid supporter and Prius owner James Bell, publisher of the automotive guide IntelliChoice, recently sold his two-year-old Prius for just $4,000 less than he originally paid for it -- a remarkably low rate of depreciation." (more)

So, hybrid depreciation is a complete wild card.

Furthermore, "We really like hybrids in terms of their overall performance" and environmental benefits, says Doug Love, a spokesman for Consumers Union.

In conclusion, the CR study does demonstrates that hybrid vehicles do pose some risk when it comes to long term value; however, the CR study largely assumes the worst case scenario. If hybrid batteries are very reliable and/or new battery technology could cost-effectively make old hybrids twice as fuel efficient, then hybrids could end up as long term bargains.