The Toyota Prius promises 48 miles per gallon using a hybrid of gas and electric engine. The advance technology allows it to achieve a much higher fuel efficiency. With the price of gas approaching $4.00 a gallon with no end in sight, sales to Prius’ have been rising. The reason for buying a Prius should be the desire to stick it to the Middle East and reduce gasoline consumption. However, it’s not a legitimate reason for saving money.

With some basic back of the envelop calculations (figuratively), the Prius is clearly not economically efficient. To make this determination, I took the base price of the Prius at $21,100 and the base price of the comparable vehicle, the Toyota Corolla at $15,250. The Prius is really just a fancy Corola. The difference: $5,850. That’s the “premium” you pay for sporting the “green” vehicle. Okay, gas is really expensive you say. It’ll pay for itself. Assuming that the average driver drives 12,000 miles a year and keeps the vehicle for five years, I found the following:

• At $4 a gallon, you have to drive 114,763 miles to break even. Assuming you drive 12,000 miles a year, it’ll take 9.6 years of driving just to break even.
• Assuming you keep the vehicle for five years, you have to drive 22,953 miles a year paying average gas of $4 a gallon. That’s a lot of driving, or about 63 miles a day, every day.
• If you think gas will keep rising, it’ll have to go to $7.60 before you break even assuming you drive 12,000 miles a year for five years.

Given the results, to support the mass acceptance of the Prius, we’d have to see gas prices at $7.60 a gallon. From a policy standpoint, the government should subsidize the hybrid “premium” of $5,000 or tax gas an additional $3.60 to raise it to $7.60. Until either event occurs, or a mix of both, we’re not going to get mass adoption of hybrids.

Again, this analysis assumes that as demand rises, the economies of scale from mass producing hybrids won’t drive the price down.

Bottom Line:

Don’t buy the Prius to save money, buy it to feel good about yourself in that you’re reducing your gasoline consumption. Or, just recycle or ride a bike.

See my analysis spreadsheet (Google Docs).