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Tax credits / incentives for hybrids?



  • Hi blane,

    No, I haven't tested an Insight yet. Frankly, the only thing I really like about it is it's fuel economy. I'm not impressed by it's design (hate that lack of rear wheel well), but I am willing to make some compromises. This will be the first new vehicle I've ever purchased that I will select for intellectual, and not emotional reasons. I've already decided to go back to a manual transmission (recently rebuilt my Dodge automatic trans for the 2nd time), regardless of what I buy, and I'm willing to accept that the 'get up and go' factor may be lacking in some situations. I can get by with limited seating, but would prefer to be able to carry more than one passenger. Between the honda and the toyota, I do prefer the Prius, and since both are overpriced to about the same degree, it's difficult to make a decision based on the sticker.

    I did research the Civic. I'm equall unimpressed with the design of that car, however, there may be significant differences in comfort and driveabililty, between the that and an Insight.

    I've read some customer reviews that expressed disappointment in the Prius mpg, which seems to fall somewhere far below what's advertised, so I have reservations about that car too.

    I guess that's why I came to this forum. I'd like to find out what owners of the respective cars think about what they're driving, and hopefully get the benefit of the research that others have done. I thank you for your comments. That's one more thing to consider, before making a purchase.
  • gagricegagrice Pahrump, NevadaPosts: 31,432
    I've already decided to go back to a manual transmission

    That will limit you considerably buying a hybrid. Your only real choice is the Civic hybrid with manual shift. The Insight manual transmission car is very difficult to find. And it appears that the 2006 Civic hybrid will only be offered with an auto transmission. All the other hybrids are Auto, including the Prius. Good luck with your purchase.
  • Hi gagrice,

    Thanks for your comment. Let me elaborate on what I posted earlier. I looked at several non-hybrid cars, including the Scion Xa, which boasts 38 mpg. All of the non-hybrid cars appear to gain a few mpg with manual transmission. My point is that I'm willing to drive a manual transmission, but not determined to do so. I'd be more than happy to find a reliable vehicle that gets great mpg with automatic transmission. The fact that manual transmissions are less likely to break down and easier to repair is just an additional benefit.

    My dilemma, at the moment, is that since I tend to keep my new vehicles for 7 to 10 years, I have some reservations about new technologies and the possibility of huge repair bills down the line, or simple obsolescence as new, and improved technologies appear on the market. I'm torn between purchasing a lower priced(significantly) conventional vehicle with good fuel economy or a far pricier hybrid vehicle that gets great mileage, that may be outdated, 3 or 5 years down the line, and may be a mechanical nightmare if something goes wrong.

    As you can tell, I don't purchase new cars as often as some do, so I'm less likely to make a snap decision, based on the fact that if things don't work out, I'm bailing out in 3 to 5 years.

    Aside from the fact that the hybrids are more eco-friendly, the data seems to show that mile for mile, the hybrids are still more expensive to drive, despite the price of fuel, so I'm torn between buying a conventional car, for far less, and waiting a few years to see what happens, and jumping on the hybrid bandwagon and taking my chances.
  • PS. My favorite (hybrid), in terms of styling, convenience, comfort and price is the Prius. I hesitate because I've read that the mpg is significantly less than advertised, which kind of defeats the purpose.
  • falcononefalconone Posts: 1,726
    Check out and you will see a compilation of real world mileage on all the hybrid vehicles. You can easily get mid to high 40's with a Prius. Most of the people I know are getting between 48-52 on average.
  • Kirstie_HKirstie_H Posts: 11,077
    Hey folks,
    Let's get back on topic here. We've got the following discussions that are more appropriate for this conversation:
    Hybrids: Toyota Prius vs. Honda Civic Hybrid v. Honda Insight v. ?
    Any downside to buying a hybrid?

    Roving Host
    Host, Future Vehicles & Smart Shopper discussions


    Need help navigating? [email protected] - or send a private message by clicking on my name.

    Share your vehicle reviews

  • mfusaro,

    I drive the accord hybrid. It is not a sci-fi car. It looks and drives like a conventional car but gives you a higher mileage. These cars can be found below invoice if you do your homework so you wont be paying much premium over a gas only car. It is a nice, powerful car with lots of high end features. In the worst case scenario, even if the hybrid portion fails, you are still left with a regular 240hp V6 to drive you around.
  • even need a tax credit or tax incentive ?

    Just wondering? Some people above are talking about not getting the advertised mileage. I though even with the advertised mileage the payout was still 5-7 years. Maybe closer to 5 years now with higher gas prices.

  • What payout? The HCH (06) will yield a $2200 tax credit, the Prius will get you $3150. If you get a mid level Prius you can effectively change the price to below 20k if you count in the credit. I sure hope gas prices go down.... I now have to spend $33 to fill up my tank and it lasts me 3 weeks.
  • "What payout?" TCO of ICE versus equvialent Hybrid at plus $2,000-$3,000. Remember the difference between a credit and a deduction, on a credit assuming you itemize it only reduces your tax liability yielding at most 38%

    My point is that if hybirds were truly economical , then there would be no need for
    any tax incentive: credit or deduction. By they are not, so therefore the incentive to entice people to buy hybrids.

    No for voodoo economics. Let's say youpurchase gas every 3 weeks at $33. For simplicity that is $44 per month. Let's say you trade fro a Prius and now only pay half of $22 per month. That is a gas savings of $22 per month. You trade in you current car, assuming it is paid for, and get a great trade-in and you buy the Prius at a great price with a net monhtly payment of say $222. Total economics is that you are paying $222(car payment)-($22 gas savings)= $200 more. But wait you get a tax creadit of $3000 and save 38% = $1,140 on next years taxes. Did you come out ahead no.

    But the example people really like to use is they have the Gas guzzler SUV now and spend $300 per month on gas and a SUV payment of $500. Now they trade in their SUV ( hopefully the finacing is not upside down) and buy a Prius with a net payment of $250 and a monhtly gas bill of only $100. Previous monhtly outlay was $800 per month and new outlay is only $350 per month for a savings of $450 per month. "My hybrid saves me $450 per month" Wow if that is true why the tax incnetive one asks. Becuase that is voodoo economics, becuase you are comparing apples to oranges. Assuming a ICE only Prius existed; compare it to a hybrid Prius If the real goal is bottom line and TCO then you pick an inexpensive economy car (the Prius is an expensive car with good gas mileage) with gas mileage not quite as good as a Prius. Let's say you car payment is now only $175 and your gas cost is $125 for a total monthly cost of $300. Then the Prius would end up costing you $50 a month instead of saving you any money; hence the tax incentive.

    Keep you current car! Better economics!


    27 mpg in a 6-speed performance vehicle MidCow
  • There is a NY Times article dated 9/5/05 discussing Toyota's hybrid sales. It alarmingly references the 2006 tax credits not being available for Toyota purchases; only domestic producers.

    link: 26105246-uyVkdWrgafkQLpxHy9MQpg

    Exact language:
    "At the same time, the energy bill signed by President Bush on Aug. 8 effectively gave a break to American manufacturers by extending what could be a tax credit of as much as $3,400 per car to purchasers of the first 60,000 hybrids sold by a company. The credit phases out after that. Toyota sold more than 60,000 hybrids in the first six months of this year, so the tax law seems intended to help General Motors and Ford."

    Is the 60,000 limit retroactive to the first hybrid sold by a manufacturer, ever? Or does the 60,000 limit begin with the first sale in 2006?
  • otis1otis1 Posts: 142
    I don't have the exact link, but it's been discussed here. The credit is good for the first 60,000 (+ 2 quarters) cars sold AFTER DEC 31, 2005.
  • gagricegagrice Pahrump, NevadaPosts: 31,432
    If that article in the Times is factual it will be a blow to Toyota and Honda. They have both sold more than 60,000 hybrids to date. I have not seen any tax credit information from the IRS that states what vehicles are included. Only links where people have calculated from what they are seeing in the Energy Bill. Anyone have a link from the government that refutes the NYT article?
  • otis1otis1 Posts: 142
    On the bottom of p 1417 to the top of p 1418 shows the language regarding the limitations. It says nothing about american manufactures- just 60,000 hybrids sold after Dec 31, 2005. You can find the link to the bill if you search this forum. In fact that language is in the first 3 lines of p1418.
  • gagricegagrice Pahrump, NevadaPosts: 31,432
    I should know better than believe the New York Times on anything they put out. I'll pull it out and read it for myself. Thanks.
  • Thanks. I didn't really trust the source either, but thought it was worth further investigation.
  • toycashtoycash Posts: 139
    I think what they were talking about is the fact that this new law helps the domestics more than it helps Toyota and/or Honda. It seems that it was designed to make up for the fact that the domestics are way behind on this technology. Toyota will sell 60,000 hybrids in less than 6 months, and then they will be done.
  • Remember the difference between a credit and a deduction, on a credit assuming you itemize it only reduces your tax liability yielding at most 38%

    You've got that backward. A credit is a dollar-for-dollar reduction in tax liability. (Ex: a $3,000 credit yields a $3,000 REduction in tax liability.)

    Also, the highest marginal tax rate is 35%, not 38%.

    I guess "YMMV" means Your Math May Vary. :)
  • The dealer was not exactly misleading you, he was quoting facts right off the official IRS web site. It states that cars that qualify as clean burning fuel vehicles can be eligible for a tax deduction of up to $2000, and the Prius qualifies. It also states that the deduction will be reduced to $500 in 2006 and will disappear in 2007. That's the law of the land right now.

    This thread discusses the new tax credit available after December 31 of this year for certain vehicles, including hybrids, contained in the recently passed energy bill. As you can tell by this thread, the new legal verbage is ambiguous, confusing and subject to interpretation. We can "what if" about it until we run out of gas but the only interpretation that matters is the one finally made by the IRS and nobody knows when that will happen. And, if its interpretation is fair, logical and easy to understand I'll be in shock and awe...
  • Mi_sat,

    Thanks for both corrections you are right on both accounts. Max tax rate = 35% and I was trying to clarify deduction versus credit and wrote it too quick; the point was the savings is not as great as people think.


  • kdhspyderkdhspyder Posts: 7,160
    The reporter wrote...
    "Toyota sold more than 60,000 hybrids in the first six months of this year, so the tax law seems intended to help General Motors and Ford." ...Huh???

    This is very poor and shallow writing by the NYT reporter. It leaves the impression that the incentives are mainly directed to the domestic industry and away from Toyota and Honda. However just reading the summary of the legislation it's clear that the limit for the credit is 60000 vehicles thereafter declining in subsequent quarters.

    60000 is 60000 it doesnt matter when the incentives are taken. There is no advantage intended to one manufacturer over another. It's just that Toyota and Honda buyers will be able to take their incentives NOW in today's dollars rather than waiting several years for GM/DC and the others to get up to speed.

    It's true that Toyota would love to have the limit be 200K or even 1 Million units but thats not feasible.

    That being said.. there is a HUGE difference in the actual incentive due to a new buyer beginning next year depending on whether the vehicle is a full hybrid with significant gas savings like the Prius or whether it is a 'mild' hybrid like the Accord or eventually the Avalanche where the gas savings are minimal. In this case the Toyota buyer makes out much much better.


  • kdhspyderkdhspyder Posts: 7,160
    I've been selling the Prius since its genesis here in the US in 2001. The 'incentive' has been clear since the beginning that the $2000 allowance is a reduction in income similiar to an IRA deduction. In fact it is reported in the same place on pg 1 of form 1040. It reduces your Adjusted Gross Income ( AGI ) by $2000 in the year taken. Thus what would be a $102000 AGI is only $100000. This normally results in a $500-600 Tax saving for most people.

    The new Energy bill is MUCH better for the potential hybrid buyer in 2006. The incentive is a direct tax reduction by as much as $3000 depending on the calculated gas saving in the vehicle class. Full hybrids will probably be subject to much larger incentives than mild hybrids; for example $2800 vs $800. This tax reduction is direct money in the pocket of the buyer. Thus a potential Prius buyer would get 4-5 times as much in his/her pocket next year as opposed to this year.

    This tax saving brings a $24000 mid-range Prius down into the same price level as a 4c Camry or Accord with Auto trans. A top-of-the-line Prius would be several thousand less expensive than a top of the line 4c AT Camry or Accord.


  • I just ordered an 06 Escape Hybrid to take delivery after Jan 1, 2006 to take advantage of the new incentives.

    Based on estimates I've seen, the AWD Escape will qualify for a 1950 federal tax credit. On top of that, Colorado offers a 2797 state tax credit bringing my tax credits to 4747.

    When I factor that in with the ford xplan pricing, I get a car payment of about 450.00/mth. Currently I'm driving a 2002 WRX with a monthly payment of 307/mth and getting about 21mpg. So, doing the math that means that if I spread the effects of the credits over the life of the loan (6yrs) equals 66/mth in rebates, 80/mth in gas savings, and 30/mth in insurance savings. So effectively I come out with a net savings of about 20/mth over thos 6yrs.

    That being said, it all depends on what your goal is and what your replacing. As has been said, if you're trading in a moderate to low fuel mileage car and have a car payment, it makes financial sense. If you don't have a car payment, or have a high fuel economy car, it might not make financial sense, but might make sense from a ecological consciousness stand point.

    All I can say is I can't wait, the next 14wks are going to be hard to bear.

  • stevedebistevedebi LAPosts: 4,098
    "When I factor that in with the ford xplan pricing"

    Out here in CA, the Hybrid is not in the plan pricing. Or is this the employee discount rather than the family plan?
  • mirthmirth Posts: 1,212
    ...are not be sold with employee pricing. Even if the employee pricing applied to them, it's the decision of the individual dealers whether they want to honor that, and why would they?
  • gagricegagrice Pahrump, NevadaPosts: 31,432
    This is very poor and shallow writing by the NYT reporter

    Has anyone found a link from the government that says the tax credit amount each hybrid will be entitled to? They have the figures on the old incentive. I have only seen speculation at this point. Maybe the NYT writer got some inside information. Is it spelled out in the Energy bill that past sales are not included? I would not count my money till I see it in the tax code.
  • I would not trust anything I read in the NY Times. One thing is certain and that is that in order to get the credit, the purchase will have to be made in 2006. I've read that the HCH will entitle you to a $2,200 credit and the Prius ~3,150. I have a feeling the Prius will be closer to $2700, just based on other sites which quote that amount too. Does anyone know if any diesel cars are entitled for a credit? Once clean diesel is here, I think the government should give us an incentive to buy them. That may encourage other manufacturers to bring them to market.
  • gagricegagrice Pahrump, NevadaPosts: 31,432
    The diesels are entitled to a tax credit also. BUT, they have to pass the EPA emissions. That will not happen until the mandated ULSD is available. The earliest I would expect that to happen is late next year. I have seen two or three figures on the Prius tax credit. It would be nice if the IRS would get that out. We may not have it until they put out the 2006 tax code info late next year. It will be like a Christmas bonus the first of 2007.
  • Your logic is true, only if your Escape and WRX loans are coterminious which I imagine they are not! How many payments did you have left before your WRX was paid off ? Let's say you had 2 years left on your WRX. Using simple math The first two years your cost difference would be ($450-307)= $143 while the last four years of your six year loan the cost would be ($450-0)=$450 So lets say, again using simple math, you net cost not accounted for would be $307*4years*12 months per year = $14,736 Now take your $20/month savings over 6 years= $20*6*12= $1,440 for a net loss of $1,440-$14,736 = $13,296 total or an effective loss of $184.67 per month. Now if you still had six years of payments left on your WRX and you replaced it with the Hybrid six yerar of payments , then the loans would be coterminious and yes you would save $20 per month effectively. But I think you are really probably losing $184 per month. Maybe less because the residual value of the Escape migth have a net asset value positive over the WRX.

    Cost On,

  • stevedebistevedebi LAPosts: 4,098
    "Your logic is true, only if your Escape and WRX loans are coterminious which I imagine they are not!"

    Yep, people often forget in the "cost analysis" that you have to figure in the amount of the loan you have already paid on your current vehicle, plus the loss on the trade, etc.

    Buying hybrids (or any car) only make sense if you are really in the market for a new car anyway. It seldom works out to the $$ advantage is you are still paying on your current car.
This discussion has been closed.