Why Hybrid buyers should get tax credits

Currently, the US government offers a tax credit on many hybrid models. As a general rule, the more fuel efficient the model is, the bigger the tax break. So you see tax credits as low as $650 for vehicles like the full-size GM pickup mild hybrids, all the way up to $2100 for a Honda Civic Hybrid.

Toyota once had the highest tax credits available on the Prius and Camry Hybrid, but due to limitations on the tax credit, Toyota’s incentives are dropping. The tax credits are based on volume of hybrids sold, and once a manufacturer passes 60,000 units, the tax credit begins to phase out.

Why do I care?

As consumers, we usually look for the best value. When comparing a hybrid model vs a non-hybrid model, the price difference is usually several thousand dollars. A $2000+ tax credit can ease that difference significantly, and make the difference in which vehicle we purchase. Take away that tax credit, and the math starts to get fuzzy… it will take longer to make up the price difference in gas savings, and many people will choose the gas only model. If there is a strong tax credit available on the hybrid vehicle, you may decide to purchase it. In doing so, you’ll save money on gas, and pollute less. I’m no green freak, but if we can spew less crap in the air without too much trouble, then great.

Use less foreign oil

Just turn on the television or surf to your favorite news site. You can’t help but hear that we as Americans use too much oil, and depend too much on foreign oil. Compounding the problem is the constant strife in the Middle East, one of our main sources of oil today. If the government helps people buy more hybrids, then people will buy less gas. Less gas means less oil, which means less money flowing to the most violent region in the world. It also frees up dollars for American consumers to spend in other areas, which will help spur the American economy. With the housing issues and energy prices the way they are, this will become more and more important in the coming years.

Auto Manufacturer’s can’t do it all

It’s often said that selling hybrids is unprofitable for automakers. Whether that’s true or not, I doubt that we’ll ever truly know. I don’t have access to their books, so we’ll have to take their word for it. If Honda loses money on every single Honda Civic Hybrid they sell, where is their motivation to produce more? If they build and sell more, that simply means they’ll lose more money. If they’re simply going after marketshare, they don’t have any room to offer pricing incentives, since the cars are already sold at a loss. In a nutshell, they have no room to maneuver.

Permanent tax credits can help

If the US government puts permanent, or more likely, long-term, tax credits in place for hybrid vehicles, that gives automakers some much needed assistance. With strong enough tax credits, automakers could raise hybrid prices slightly, enough so that they are profitable to sell. This will spur an increase in R&D dollars for even more fuel-efficient vehicles that the public will love. More variety will give us, the consumers, more choices when we’re going hybrid shopping. We won’t have to limit ourselves to goofy-looking tree-hugger mobiles. ( Though that’s not necessarily the case today, either. )

I don’t know if we’ll ever see long-term or permanent hybrid tax credits. But if the US government is serious about reducing our dependency on foreign oil, and I think they should be, then they should play ball. US citizens want to do the right thing ( it’s hidden deep-down at times ) , but they do need a little push. A tax credit won’t convince the guy who’s buying a Yukon XL to go the hybrid Camry route. But it may convince the guy who’s looking at the Altima and Camry. A hybrid of either model with a big fat, juicy tax credit may get him to come over to the other side. The US government needs to rewrite the hybrid tax credit program, quickly, and decisively.

Published on January 9, 2007 in Gas Mileage,Hybrids,Incentives,Ponderings

Previous post:

Next post: