Hybrid cars: Getting green for going green - MoneySense

Hybrid cars: Getting green for going green

New rebates are lowering the cost of hybrid vehicles.

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So there you sit in your favorite café, sipping a Fair Trade latte, pondering your carbon footprint and admiring your gleaming new Toyota Prius parked out front.

There’s never been a more rewarding time to save the environment—while also luxuriating in that wonderful new car smell. Under the new ecoAUTO program, the federal government will hand you a rebate of up to $2,000 if you buy a new hybrid car or other fuel-saving vehicle.

The free money is hard to pass up. Purchasing a Toyota Prius, a Honda Civic Hybrid or a front-wheel drive Ford Escape Hybrid puts the maximum $2,000 rebate in your pocket. Other hybrid vehicles earn you a sweet $1,000 to $1,500 in federal cash.

But the program isn’t just for hybrids. Buying a fuel-efficient but non-hybrid vehicle, such as some models of the Toyota Yaris and Mini Cooper, merits a $1,000 reward. Even some SUVs without drinking problems, like the Jeep Compass and Jeep Patriot, qualify for $1,000 in green cash. And “flex fuel vehicles,” which run on a special ethanol blend, enjoy a $1,000 rebate.

The biggest savings come in provinces such as Ontario, Quebec, Manitoba, British Columbia and Prince Edward Island, which run their own rebate programs that top up the federal dough with even more cash. Most provincial schemes offer up to $2,000 a vehicle. P.E.I.’s program is the most generous, providing residents of that province with refunds of up to $3,000 off hybrid vehicles. Combined with the federal incentive, that cuts the price of a Honda Civic Hybrid from $26,250 to $21,250—which means the hybrid actually costs a P.E.I. resident a couple of thousand less than the nonhybrid Civic EX-L model.

So should you let the rebates determine what you will be driving next? If you’re an ardent environmentalist, you should definitely take advantage of the program. Even non-environmentalists should factor in the free cash. If one of the cars on the rebate list is already high on your wish list, then the rebate may be the deciding factor that pushes it to the very top. If you’re dithering between several similarly priced vehicles, there’s nothing like a $1,000 cheque to make the decision for you.

On a strictly dollars-and-cents basis, however, it’s not clear that the vehicles on the rebate list always win the financial car race, even with the government cash. Among other issues, you have to read the fine print to make sure that your car purchase is eligible. To date, only new 2006, 2007 and 2008 model year vehicles purchased or leased (for at least 12 months) after March 20, 2007 can qualify for the ecoAUTO rebate. Used cars are not eligible, but dealership demonstrator vehicles are.

Most of the provincial rebate programs are less generous than they look. All but the plan in Manitoba limit the amount of the rebate you get to the amount of provincial sales tax you pay. That means consumers who trade in a high-value vehicle in order to buy a hybrid get only a portion of the rebate.

To see how this works, let’s say you trade in a $20,000 vehicle on a $30,000 hybrid. You pay tax only on the difference in price, which is $10,000. In Ontario, where provincial sales tax ticks in at 8%, that means your tax bill is $800—and therefore you only qualify for $800 of rebate. Similarly, people who lease hybrids only qualify for a rebate on the amount of PST remitted through their monthly payments. Even then, leasing customers must wait until the end of their term before applying for the rebate.

Even if you’re up for the maximum rebate, you may find that a hybrid isn’t necessarily a money saver. It all depends on where you do most of your driving. If you rack up most of your kilometres on the highway, where a gas engine operates most efficiently, then a gas-electric hybrid engine won’t save you much money. It’s only during intense stop-and-go city driving that hybrids really cut fuel consumption.

According to Canada’s EnerGuide ratings, a Toyota Prius will use about $738 of gas a year to power its gas-electric engine, assuming you drive it an average number of kilometres. By comparison, a non-hybrid Toyota Corolla has an annual average fuel cost of $1,224—nearly $500 a year more. Problem is, the apparent savings from going hybrid disappear when you consider the higher price of the Prius. Even if you live in P.E.I. and max out on the combined rebates, you would still have to drive the Prius for 15 years before your fuel savings would offset the higher sticker price.

Of course, that equation becomes more reasonable if you buy a cheaper hybrid and get rid of a large, fuel-sucking, six-cylinder vehicle. For instance, if you decided to scrap the family minivan in favor of a compact hybrid you could save about $1,200 a year on fuel costs. Over five years that’s a substantial savings of $6,000.

But you have to be realistic. If you’re driving a large vehicle, you probably have a good reason for needing so much space. No compact car with a large battery compartment taking up trunk space is likely to be a suitable substitute, says Mohamed Bouchama of the consumer group Car Help Canada. “If someone is looking at a Toyota Corolla, they may now want to look more closely at an alternative like the Toyota Yaris because of the $1,000 rebate, but if you need a minivan, you still need a minivan.”

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