The Dedly Blog

Hybrids Aren't Hotcakes

The following is reprinted without the permission of Dow Jones or the author of the piece. I got it through my Scottrade account. I've left the author's contact info off so that she won't get spammed, or worse.

Still Time To Grab Tax Perk On Hybrid Cars

By Andrea Coombes

Thanks to the popularity of Toyota Motor Corp.'s (TM) Prius, time is running out to enjoy the full $3,150 tax credit available to those who purchase that hybrid.

That's because the tax credit starts to decline after a car maker sells 60,000 hybrid vehicles, and Toyota moved past that mark almost on the strength of its Prius alone, though sales of its hybrid Camry and Highlander, and two Lexus hybrids, also helped.

Toyota sold 59,270 Prius models from January through the July, bringing its total hybrid vehicles sold in that period to 105,816, according to Edmunds.com, an auto information site, based in Santa Monica, Calif.

"Last month was the second-highest month ever for Prius sales," said Alex Rosten, manager of pricing and market analysis at Edmunds.com. "I think you can assume that a lot of that has to do with gas prices, but also most people have been shopping for a hybrid for a while - it's not really an impulse buy - [and since] there's a waiting list, people want to try to get in now to get the tax credit."

Even if you are only now getting on a waiting list to purchase a Toyota hybrid, you might be able to buy in time to reap the full credit, Rosten said - if someone ahead of you on the list decides against purchasing. For Toyota models, the deadline for buyers to reap the full credit is Sept. 30. Still, expect to pay a premium for your car. In July, the new Camry hybrid was selling for an average of $1,522 above sticker price, while the Prius cost an average of $1,812 above sticker, rising to as high as $3,000 or $4,000 above sticker in some places, including Southern California, Rosten said.

Don't forget that every model comes with a different tax-credit amount, with the Prius' $3,150 the highest. The tax credit on the 2007 Camry Hybrid is $2,600.

For more recent information, also search the IRS page for "hybrid tax credit" and sort the results by "date."

Taxpayers who pay the alternative minimum tax should realize that they may not be able to enjoy the benefit of the hybrid tax credit.

Plus, "the credit will reduce regular income tax liability but not below zero," said Michael Eisenberg, a certified public accountant and personal financial specialist in Los Angeles, in an email message. That is, this isn't a refundable credit.

And, he said, "if you're eligible for multiple tax credits, the hybrid tax credit is taken last, after all other credits [such as] child-care credit, retirement-savings credit. Any tax liability left over after these reductions will be the maximum dollar limit of your hybrid tax credit. If the hybrid tax credit exceeds this maximum dollar limit, the excess is not refundable, and is lost forever."

Car buyers can enjoy the full credit on Toyota models purchased through the end of September. After that date, those who purchase a Toyota hybrid model in the next six months will receive half the credit, and purchases after that will be eligible for one-fourth of the credit. After that, the credit is no longer available.

But there's plenty of time to enjoy the tax credit available on other makers' hybrid models.

Honda's total hybrid sales this year through the end of July total 22,757 vehicles, according to Edmunds.com. "Honda's not even close" to the 60,000 mark, Rosten said.

About 580 of Honda Motor Co.'s (HMC) Insight sold through July (eligible for a $1,450 tax credit), while 18,428 of the Civic Hybrid ($2,100 credit) and 3,749 of the Accord Hybrid ($1,300 credit if the car has updated calibration) sold in that period.

Meanwhile, Ford Motor Co. (F) sold a total of 14,055 hybrid models in that period, 12,154 of its Escape Hybrid (the two-wheel drive is eligible for a $2,600 tax credit and the four-wheel drive for a $1,950 credit), and 1,901 of the Mercury Mariner Hybrid ($1,950 tax credit).

Edmunds.com doesn't have sales figures for General Motors Corp.'s (GM) GMC hybrid vehicles, though the IRS says GMC sold 1,388 hybrid vehicles in the quarter ending June 30. GMC models are eligible for a credit of between $250 and $650.

posted by DED at 12:35 PM

 Alan P. said...

The writing is on the wall for fuel prices, you are wise to think ahead. As for hybrids, they are too expensive, besides, it usually pays to wait and let them work out the bugs. Like waiting to see whether Beta or VHS would come out on top.

9/01/2006 10:43 AM

 DED said...

I have to disagree with you Mort. Hybrids are not too expensive. They are reasonably priced. "Too expensive" is what I call the electric cars I posted about today. It's also what I'd say about Ferraris and Porsches.

Hybrids, while more expensive than their ICE-only brethren, are affordable for the average car buyer. My wife is looking at the hybrid Camry. She says that she's seeing it for $25,000. That's reasonable! Average people can afford that. While I'm not sure if we'll see a ROI for gas mileage savings, the reduced amount of pollution that we'll be putting out, not to mention the decrease in foreign oil we have to buy, justifies the extra cost.

9/01/2006 12:12 PM

 DED said...

Oh and both Honda and Toyota have put out hybrids for a few years now so I'm confident in the technology.

9/01/2006 12:13 PM

 Alan P. said...

I thought they were more like $40k. I should have said too expensive for me. But then, I don't drive much. I plan to get a pv solar system first, then convert my truck to electric. Don't know when, but hey, it's a plan.

BTW, people around here think hybrids are funny. Wait until gas hits $20/gal. they won't think it's so funny then.

9/01/2006 6:29 PM

Mort said...

Actually, to be fair, I have been seeing a lot more newer, smaller cars around.

9/01/2006 8:15 PM

CarDave said...

I know this is an old post, but how do you feel about this now? The goverment has passed additional tax credit hybrid laws.

Also the price of hybrids in general is dropping while performance is slowely increasing.

4/07/2008 9:50 AM

 DED said...

Sorry for the delayed reply.

If you've looked at more recent posts (and I haven't checked to see that you have), then you'll see that we bought the Toyota Camry Hybrid. We're both quite pleased with it.

I hope that when the time comes to put the Subaru out to pasture, we'll be able to find an affordable SUV hybrid (we need an SUV for the winter and for rough jobs). It's entirely possible that the Obama administration will have some new tax credits in place (I believe that the old ones expired).

1/22/2009 2:08 PM