Buying a NEW Plug-in Hybrid – Genius or Financial Suicide?

[HamMan]

Hello fellow Mustachians! I have been going over some numbers for weeks and I’m hoping for a reality check before I do something potentially stupid – buy a brand new car. This is a long post but I’d love to hear any feedback you can offer.

Our family currently owns an ‘07 Hyundai Tucson SUV with 280,000 km on it. It needs a couple thousand spent on repairs and new tires which I would pay, except the terrible gas economy is a thorn in my mustachian side, so we have started looking for a replacement vehicle. Sharing one car and doing what we can to reduce driving, we still drive about 35000 km/year.

My numbers on the current 2007 Hyundai Tucson are as follows (Canadian dollars):
Annual depreciation: $750 = [$2000 purchase price - $500 approx. current value] / 2 years
Annual gas usage: $4548.25 = 35000km (~22000 miles) @ 11.3L/100km (20.8 mpg) @ $1.15/L ($4.30/gal)
Annual Insurance: $1182
Annual maintenance/repairs: $500
Annual licencing fees & misc: $100
Total annual cost: $7080.25 ($0.202/km or $0.125/mile)

Even though the SUV gets crappy mileage, it has been cheap to own because we bought it for so little. I have had trouble finding any car with a lower cost of ownership, without going to a compact car. We have spent a lot of time discussing moving to a smaller car, tried fitting our basic daily necessities into a borrowed Prius C, and it simply won't work for my family at this stage of life.

Enter my dilemma. I just discovered that the Ontario government is offering a $14,000 rebate on new purchases of plug-in hybrids. I see two serious contenders: the Chevy Volt or the new Honda Clarity. Both have an MSRP of around $40K, but after the rebate they’re less than most new conventional hybrids. Our typical driving is under 50km/day so the 80km electric range is perfect, with the gas engine available when we need it.

Here are my numbers for a 2018 Honda Clarity Plug-In (base model):
Annual depreciation: $2910.12 = [$33101.23 (purchase price incl. tax, fees, rebate) - $4000 (approx. value if selling after 10 years)] / 10 years
Annual gas/electricity: $845.25 = 35000km (~22000 miles) @ 2.1Le/100km (112 mpg) @ $1.15/L ($4.30/gal) – this is a weird way to calculate it but seems realistic
Annual Insurance: $1443 (estimated, waiting on quote)
Annual maintenance/repairs: $1000 (estimated, based on double my previous car to be safe)
Annual licencing fees & misc: $100
Total annual cost: $6300.37 ($0.180/km or $0.125/mile)

There are a lot of assumptions here, the biggest being higher maintenance/repairs, and assuming I only keep it 10 years, but I think I’ve been conservative. I think the biggest factor that is missing is the opportunity cost of taking $33K out of my investments, however I will need to spend money no matter what if I want a newer car, so I'm not sure how much this matters and don't know how to calculate it. I originally was looking at the Toyota Prius which would save us up to $250 or cost an extra $500 per year depending on age, but because they hold value so well I was still looking at spending around $25K on one.

The Clarity or Volt seems like the best solution to me. It is just hard for me to fathom the idea of paying $33K for a new car as being financially responsible. I would pay cash out of my investments, or might consider financing if they can offer a rate below 2.5%.

Do you see a glaring flaw in my math or logic? Something I missed? Help me Mustachians, you’re my only hope!

[SC93]

Don't let that full charge of 80km fool you. In the Tesla it would say something like 420 miles but in reality it was more like 350 miles at the very most and that was taking a chance. Just remember, Volt or Tesla..... they are just an over-sized golf cart.

[inline five]

You live in the land of cold weather where range will be halved.

Did you account for electric costs to charge overnight?

[nereo]

Hello HamMan
You've put some decent effort into your calculations, here are my thoughts:
1) I have no idea why you budgeted $1k maintenance on a NEW plug-in vehicle but only $500 on a used gas-powered.  But all accounts there is far less maintenence involved with electric models.
2) the Honda Clarity has no track record, and brand new models typically have worse reliability as kinks are worked out of the design.
3) What is your charging ability, both at home and elsewhere? Do you have a garage for fast-charging (and are you going to put in a fast charging station in your home, with added cost? Does your work offer subsidized charging stations? what is your electricity rates
4) in colder months your mileage will indeed go down, as running the heater uses the battery (or demands more from the small engine).  Just be aware of that.

you are correct that the biggest hole in your analysis is the lost 'opportunity cost' of taking money from your investments. If we use a conservative 4% return that's -$1,320 in the first year. If you can get financing under 3% for some or all of the purchase that would mitigate the opportunity cost.

final thoughts? I'm a big fan of PHEVs; my parents have a Volt with a home fast-charger and they absolutely love it. Whether you come out ahead or not depends a lot on your ability to charge the vehicle cheaply and how much your opportunity cost will be - at present though looks pretty close either way (as in - it's probably going to be pretty close to a wash).

[Bird In Hand]

I was going to suggest that something like a used Camry could be a viable option.  Not sure if it meets your size requirements though.  Because it is cheap to insure and has proven reliability, those aspects of the cost are likely to be low.  If you aggressively price-shopped you could probably get something that beats the Honda Clarity, but not by a wide margin.

Also, note to self: $14,000/10 = $1,400, not $140.  :D

[HamMan]

Why does it have to be new? have you looked at what older cars are reselling for?

Good question. Yes I have spent a lot of time looking at older cars. The only reason I'm considering buying new is because I would get the $14000 rebate back, which doesn't apply to used cars. Here are a couple examples:

2012 Toyota Matrix:
Annual depreciation: $1715.73 = [$9999 purchase price + $1299.35 tax - $1000 approx. value in 6 years] / 6 years
Annual gas usage: $3340.75 = 35000km (~22000 miles) @ 8.3L/100km (28.3 mpg) @ $1.15/L ($4.30/gal)
Annual Insurance: $1390
Annual maintenance/repairs: $500
Annual licencing fees & misc: $100
Total annual cost: $7046.48 ($0.201/km)

This is assuming the car lasts 12 years. I'd still save $746 annually buying a brand new Honda Clarity.

2016 Toyota Prius v:
Annual depreciation: $2029.39 = [$21499 purchase price + $2794.87 tax - $4000 approx. value in 10 years] / 10 years
Annual gas usage: $2254 = 35000km (~22000 miles) @ 5.6L/100km (42 mpg) @ $1.15/L ($4.30/gal)
Annual Insurance: $1443
Annual maintenance/repairs: $500
Annual licencing fees & misc: $100
Total annual cost: $6326.39 ($0.181/km)

Very close to the Clarity, but that's assuming the Prius v lasts 12 years vs the Clarity lasting 10 years. All things equal, the Clarity is still ahead, and it will be under warranty for longer which I like.

I've done this calculation on every car I can think of for various ages, I'd be happy to share more if you're curious. The only other ones that are notable are much smaller cars like the Honda Fit, which is too small for my family, and even then the Clarity is still cheaper long-term. Perhaps if I bought a very old car again and only kept it for 1-2 years I might save a bit, but probably still not enough to justify the time involved.

Don't let that full charge of 80km fool you. In the Tesla it would say something like 420 miles but in reality it was more like 350 miles at the very most and that was taking a chance. Just remember, Volt or Tesla..... they are just an over-sized golf cart.

Thanks for your feedback. Actual street tests on both the Volt and Clarity have confirmed their range as advertised. The cars I'm talking about are plug-in hybrids; they have a gas engine to run when the battery is low (unlike Tesla). I do realize cold weather will reduce range; that is part of why I've ruled out full-electric cars like the Tesla / Bolt / Leaf. My average driving is 40-50km so it should still be fine.

You live in the land of cold weather where range will be halved.
Did you account for electric costs to charge overnight?

The EPA gives a weird way of rating these cars, called Le/100km (I guess that means electric/gas liters). I think its supposed to be a quick way to compare them to regular gas cars. I did some rough calculations based on KW/hrs and came up with around $600 annually for charging, plus a couple hundred dollars to cover gas on longer trips. It worked out close to the EPA method of rating which is 2.1Le/100km, working out to $845.25/year.

[TheAnonOne]

I bought a used Chevy Volt (prem, leather seats ect ect) for 13k and I could have had gotten one for 11k with cloth. (car had ONLY 40,000 miles)

I get around 45-50 miles in the summer and 30-35 in the winter, and I NEVER have range anxiety because it has an on-board gas generator. (the car is always driven by the electric motors, so it is different from actual hybrids)

The VOLT is maybe the most overlooked goldmine right now as far as cars go. I never use gasoline outside of edge case driving, and even when I do its 40+MPG. I drive the full 40 miles per day, so my savings are pretty massive.

[HamMan]

Hello HamMan
1) I have no idea why you budgeted $1k maintenance on a NEW plug-in vehicle but only $500 on a used gas-powered.  But all accounts there is far less maintenence involved with electric models.
2) the Honda Clarity has no track record, and brand new models typically have worse reliability as kinks are worked out of the design.

These go together as part of my calculations being conservative. I'm factoring for large repair bills later in the life of the car. Hopefully it won't be necessary but I think it is important to consider. I've also assumed I won't want to keep it past 10 years, but I generally keep cars until they die.

3) What is your charging ability, both at home and elsewhere? Do you have a garage for fast-charging (and are you going to put in a fast charging station in your home, with added cost? Does your work offer subsidized charging stations? what is your electricity rates
4) in colder months your mileage will indeed go down, as running the heater uses the battery (or demands more from the small engine).  Just be aware of that.

I don't presently have the ability to charge at work. I can easily plug in the stage 1 charger in my driveway, and can pretty easily add a stage 2 charger later if I decide it's necessary. Off peak rate is 6.5 cents/kWh, on peak is 13.2.

you are correct that the biggest hole in your analysis is the lost 'opportunity cost' of taking money from your investments. If we use a conservative 4% return that's -$1,320 in the first year. If you can get financing under 3% for some or all of the purchase that would mitigate the opportunity cost.

final thoughts? I'm a big fan of PHEVs; my parents have a Volt with a home fast-charger and they absolutely love it. Whether you come out ahead or not depends a lot on your ability to charge the vehicle cheaply and how much your opportunity cost will be - at present though looks pretty close either way (as in - it's probably going to be pretty close to a wash).

Thanks for your feedback.

[HamMan]

I bought a used Chevy Volt (prem, leather seats ect ect) for 13k and I could have had gotten one for 11k with cloth. (car had ONLY 40,000 miles)

I get around 45-50 miles in the summer and 30-35 in the winter, and I NEVER have range anxiety because it has an on-board gas generator. (the car is always driven by the electric motors, so it is different from actual hybrids)

The VOLT is maybe the most overlooked goldmine right now as far as cars go. I never use gasoline outside of edge case driving, and even when I do its 40+MPG. I drive the full 40 miles per day, so my savings are pretty massive.

You got a good deal! That sounds awesome.
The cheapest one I've seen around here is a 2012 with 157K km's on it for $14800. Here we go:
Annual depreciation: $3181.00 = [$14800 purchase price + $1924 tax - $1000 approx. value in 4 years] / 4 years
Annual gas/electricity: $885.50 = 35000km (~22000 miles) @ 2.2Le/100km (~112 mpg) @ $1.15/L ($4.30/gal)
Annual Insurance: $1443
Annual maintenance/repairs: $1000
Annual licencing fees & misc: $100
Total annual cost: $6609.50 ($0.189/km)

Pretty good I'll admit, but the new car is still ahead. Is this crazy or what? I've always though only suckers buy new cars,  what are we doing wrong?

[inline five]

Also why is your insurance so high on older cars? Just get liability only, that would save a bundle.

Your depreciation on the Volt seems beyond extreme.

Can you buy in the US?

[nereo]

Pretty good I'll admit, but the new car is still ahead. Is this crazy or what? I've always though only suckers buy new cars,  what are we doing wrong?

Yeah, the government subsidy drastically changes the equation and puts buying new ahead of used (which is kinda how they intended it - they wanted to turbocharge the market for Plug-in cars.)

So I understand that you are averaging in a decade+ of repair bills to arrive at the $1k/year figure for the Volt, but I still don't understand why that is HALF what you intend to spend on a your 2007 Tuscon.  To me that's exactly backwards. Expensive repair bills come towards the second half of a car's life, as large ticket items need replacement.  That said, on a PHEV most parts involving the combustion engine need repair/replacement far, far less often becasue they are used far less. For example, a VOlt with 100,000 miles on it may have had its engine running for just 20,000 of those miles; in maintenance terms the engine is brand new, and it completely lacks a drivetrain (instead just recharging the batteries).

[TheAnonOne]

Pretty good I'll admit, but the new car is still ahead. Is this crazy or what? I've always though only suckers buy new cars,  what are we doing wrong?

Yeah, the government subsidy drastically changes the equation and puts buying new ahead of used (which is kinda how they intended it - they wanted to turbocharge the market for Plug-in cars.)

So I understand that you are averaging in a decade+ of repair bills to arrive at the $1k/year figure for the Volt, but I still don't understand why that is HALF what you intend to spend on a your 2007 Tuscon.  To me that's exactly backwards. Expensive repair bills come towards the second half of a car's life, as large ticket items need replacement.  That said, on a PHEV most parts involving the combustion engine need repair/replacement far, far less often becasue they are used far less. For example, a VOlt with 100,000 miles on it may have had its engine running for just 20,000 of those miles; in maintenance terms the engine is brand new, and it completely lacks a drivetrain (instead just recharging the batteries).

Agree'd in my VOLT, during the spring/summer/fall the gas engine basically never turns on at all. In the winter it does turn on daily because, it does use the engine for cabin heat under (i think) 20*F. The wasted power from the engine also goes into the battery, so you (sort of) counter-intuitively get more "battery range" in the winter because it is somewhat prematurely charging.

Volts also have the other benefits like brake pads never getting used, and while we do need to change oil, it's more like once every 18 to 24 months.

Most VOLT owners are extremely satisfied as well. The handling and drive are both tight and smooth. I've seen comments online saying things to the tune of "I couldn't compare a volt to a prius, simply because the volt is a better build and feels like a different level"

So it might not be the 100% best for the OPs situation, but the rest of us should strongly consider it. (the OP should probably consider a new VOLT, as the range is 53-60 miles and the GEN2 is amazing)

[HamMan]

Also why is your insurance so high on older cars? Just get liability only, that would save a bundle.

Your depreciation on the Volt seems beyond extreme.

Can you buy in the US?

I'm learning how high the cost of living is in my province / country. I did a quick survey of my lunchroom at work and I'm paying the lowest for insurance by far. Ontario is known for high insurance rates. I do have full coverage right now but only because its only about $100 more per year over just liability. Questionable choice I know but it's worth it to me for the peace of mind.

Regarding importing a car, our government charges 13% sales tax on all new or used car sales, and will still charge it if you try to register an imported car. This plus the exchange rates make the prices pretty even unfortunately. Using TheAnonOne's car as an example, $13K USD = $16261 CND + 13% = $18374. There will be other import and inspection fees too. Unfortunately it's no longer such a steal compared to what's already available locally.

Pretty good I'll admit, but the new car is still ahead. Is this crazy or what? I've always though only suckers buy new cars,  what are we doing wrong?

Yeah, the government subsidy drastically changes the equation and puts buying new ahead of used (which is kinda how they intended it - they wanted to turbocharge the market for Plug-in cars.)

So I understand that you are averaging in a decade+ of repair bills to arrive at the $1k/year figure for the Volt, but I still don't understand why that is HALF what you intend to spend on a your 2007 Tuscon.  To me that's exactly backwards. Expensive repair bills come towards the second half of a car's life, as large ticket items need replacement.  That said, on a PHEV most parts involving the combustion engine need repair/replacement far, far less often becasue they are used far less. For example, a VOlt with 100,000 miles on it may have had its engine running for just 20,000 of those miles; in maintenance terms the engine is brand new, and it completely lacks a drivetrain (instead just recharging the batteries).

I completely agree with you. I guess I've been using the higher cost just because, to me, these plug-in electrics are still new technology and haven't proven themselves yet. The Prius went on sale in 2001 and has had multiple generations to prove it saves money. The Volt and Clarity can't say that yet. If I change both to $500/year the annual savings are that much higher. I guess I wanted to see that even if repair bills are extreme, it is still going to save money long-term.

(the OP should probably consider a new VOLT, as the range is 53-60 miles and the GEN2 is amazing)

I honestly didn't expect to hear this. Figured I must be making a mistake and would be laughed out of here. Thanks for reassuring me. We have a test drive on the Clarity booked for Saturday morning; hoping to see the Volt in the afternoon.

[JayhawkRacer]

I've been test driving some used plug-in cars, including a 2011 Volt and a 2013 C-Max Energi. You might want to check out some of the older models. You won't find a Clarity plug-in, obviously, but at the least the Volt. If you're already cross-shopping that model, try an old one and see if the $11k-ish price tag doesn't tempt you away from a new one.

[nereo]

as mentioned earlier, I really like the Volt too.  Amazingly solid car. 
Whether it is financially better for you depends exactly how your numbers play out, but I suspect you will come out slightly ahead buying a new car compared to keeping your '07 Tuscon.  But part of the question you ahve to ask yourself is whether you would rather drive a newer PHEV or a gas-burning older SUV.

Regarding technology - the Volt - as car, has been around for 8 years and is on its 2nd generation - that's actually pretty established in the car world.  But as a technology - electric motors go back over 100 years. That technology is arguably better established than typical gas combustion engines. What held plug-ins back for so long was largely battery capacity and range-anxiety.  The batteries in the Volt are fundamentally identical to those used in the Prius and have no moving parts.
Going off on a tangent here... incidentally large ships also get their propulsion entirely through electric motors. They use diesel engines to generate the electricity but the turning of the shaft (propeller) is all electric, much as the turning of the wheels is in a Volt.
Just food for thought...

[CoderNate]

We have been driving a Ford CMax for some time. One caveat of a plug-in hybrid is that gas does age, so if you use it most of the time as an electric car and only want the ICE for very occasional longer trips, you will have to manually manage your gas usage to ensure it doesn’t get old for long periods between long trips.

[nereo]

We have been driving a Ford CMax for some time. One caveat of a plug-in hybrid is that gas does age, so if you use it most of the time as an electric car and only want the ICE for very occasional longer trips, you will have to manually manage your gas usage to ensure it doesn’t get old for long periods between long trips.

interesting point and one I haven't needed to worry about as of yet. How long would you say you have to use up a tank's worth of gas before it starts to be a problem?  4 months?  6?  I'm genuinely curious...

[lightning hippo]

Driving 50km every single day only adds up to 18250km/year, but you say you actually drive 35000km/yr so you must have many trips that  exceed the 80km EV range. 
Once you're out of the EV range, your fuel consumption goes up to 5.7L/100km so you need to account for that in your cost calculation by figuring out how much of the 35000km can be driven in the EV mode based on your driving habits.

Honda Clarity annual gas/electricity cost = electricity cost @ 2.1Le/100km + gas cost @ 5.7L/100km

[Wintergreen78]

We have a volt as our pool car at work. I think it is a really nice car if you are driving a lot. I’ll repeat what a lot of people have said: I would be shocked if your maintenance costs are as high as you are estimating. But, that just means you are being really conservative in your estimates.

One consideration, if you need cargo space, the volt is not great for hauling bulky things. The way the trunk/back seats are configured, you can’t fold down seats to fit bigger objects. The new models may be a little better than ours though.

For people in states/provinces with subsidies, new electric and plug-in hybrids are incredible values.

[minnie1928]

We have been driving a Ford CMax for some time. One caveat of a plug-in hybrid is that gas does age, so if you use it most of the time as an electric car and only want the ICE for very occasional longer trips, you will have to manually manage your gas usage to ensure it doesn’t get old for long periods between long trips.

interesting point and one I haven't needed to worry about as of yet. How long would you say you have to use up a tank's worth of gas before it starts to be a problem?  4 months?  6?  I'm genuinely curious...

My Volt forces me to burn some gas after about 6 months...if I don't burn gas during that period.

I would highly recommend a used Volt.  Let someone else take the tax credit and the massive 1st year depreciation, then go buy one.  I bought mine when it was only a year old - 13k miles on it (former rental car) and came out ahead of buying new.  Something else to consider is the safety rating of the Volt vs other cars.  I originally looked at a Leaf, but when I saw the safety ratings between the Leaf and the Volt...my choice was made.

[WhiteTrashCash]

Why would you pay full price for a new plug-in hybrid when you can get a used one (like a Ford C-Max Energi) for like $10,000? It doesn't make any financial sense to get a new one, especially since used ones are so common. Save that money and invest it in VTSAX.

Hybrid maintenance is so cheap, by the way, especially if you drive in a Mustachian way. I have a regular old hybrid and I only have to change the oil once a year.

[nereo]

Why would you pay full price for a new plug-in hybrid when you can get a used one (like a Ford C-Max Energi) for like $10,000? It doesn't make any financial sense to get a new one, especially since used ones are so common. Save that money and invest it in VTSAX.

Hybrid maintenance is so cheap, by the way, especially if you drive in a Mustachian way. I have a regular old hybrid and I only have to change the oil once a year.

In the OP's defense, it's not the same here in Canada as it is in the US.  For starters, the federal rebate is much higher ($14k vs $7500) and the used market is much, much smaller. Where you might be able to find a dozen used Volts or C-Max in your market we're lucky to have even one pop up that meets our criteria. The cost of cars is also much greater here as well (as is fuel FWIW). Importing isn't practical as stated above becuase of import duties and fees.

This sustained low cost of gasoline has fueled sales of SUVs and light trucks while leaving fuel efficient models (including plug ins) oversupplied; thios has created a bizarre depression int he market where the sharp depreciation fall-off typical of new vehicles simply isn't there.  MMM touched on it in his blog post after buying a Leaf - lots of other articles out there as well.

I'm not disagreeing with you though - if you can find a used model that is selling for enough to cover that's the way to go... but in this 'brave new world' of large federal rebates, oversupply of small cars and a tiny market (in canada) for used plug-ins that's where we are...

[HamMan]

Thank you to everyone who is joining the conversation, I greatly appreciate it.

In the OP's defense, it's not the same here in Canada as it is in the US.  For starters, the federal rebate is much higher ($14k vs $7500) and the used market is much, much smaller. Where you might be able to find a dozen used Volts or C-Max in your market we're lucky to have even one pop up that meets our criteria. The cost of cars is also much greater here as well (as is fuel FWIW). Importing isn't practical as stated above becuase of import duties and fees.

This sustained low cost of gasoline has fueled sales of SUVs and light trucks while leaving fuel efficient models (including plug ins) oversupplied; thios has created a bizarre depression int he market where the sharp depreciation fall-off typical of new vehicles simply isn't there.

Well put. Bizarre is a good way to describe it. Just for reference I decided to make a quick list of the cheapest similar available cars within 500km of me:
2012 Chevy Volt - $14,800
2014 Ford C-Max - $15,655
2013 Toyota Prius Plug-In - $22,290
2011 Toyota Prius - $13,793
2014 Toyota Corolla - $12,888
2014 Toyota Camry - $14,888

These prices do not include 13% sales tax.
When I stick these cars into my spreadsheet they are still beat by the new Volt or Clarity. If I start assuming they will last more than 10 years things begin to shift around but it starts to get dicey. My last couple cars have limped past the 10 year mark but I'm not ready to depend on that.

[HamMan]

Okay mustaches, I have put my money where my mouth is!

We test drove the Honda Clarity on Saturday, and put a deposit down for one. It is a super nice car, not really in the same league as the Volt in terms of standard features, trunk size, and interior quality. We did end up choosing the more expensive Touring model; I have no excuses here, we just liked it more and it's still significantly less than a similarly equipped Chevy Volt. The dealer offered a discount to extend the comprehensive warranty from 3yr/60,000km to 7yr/160,000km, for around $2000. Normally I say no to all extended warranties but that is a lot longer than standard and seemed reasonable. Since this is a brand new model with possible unforeseen issues I went for it. Because of that I've confidently lowered my estimated repair budget.

Here are my final numbers (Canadian dollars):

2018 Honda Clarity PHEV Touring
Annual depreciation: $3435.56 = [$48141.45 purchase price including extended warranty + $6253.19 tax - $14000 rebate - $6000 approx. value in 10 years (based on old Honda Accord Hybrid)] / 10 years
Annual gas/electricity: $845.50 = 35000km (~22000 miles) @ 2.1Le/100km (~112 mpg) @ $1.15/L ($4.30/gal)
Annual Insurance: $1455 (official quote)
Annual maintenance/repairs: $300
Annual licensing fees & misc: $100
Total annual cost: $6135.71 ($0.175/km)

Total savings over existing Hyundai Tucson = $944.54/year
Monthly savings in bank account (ignoring depreciation) = $302.00/month

It is nerve-wracking but I trust my math, and after playing with the numbers more I'm convinced this will save me a lot of money long-term, even if my driving habits change. I suspect many people on this forum and in my social circles will think I've gone nuts. It's already been difficult trying to explain to friends and family that we bought a brand new car to save money.

We did have a moment at the dealer where they tried to sell me on bogus features like "nitrogen filled tires," "electronic rust protection," and others which are total scams. Please friends, do your research before buying into any of these bullshit "features." If I accepted everything he suggested it would have added about $5000 to the bill, more than doubling the dealer's profit on the sale. It isn't surprising that they try but it is pretty slimy. I pointed out that my 11 year old Hyundai has virtually no rust, that I hope the Honda will be at least as good, and he didn't have much else to say after that.

If there is continued interest I will post a follow-up thread once we take delivery (at most 2 months from now) and I'll keep it updated with my experiences with the new car. Thanks again for the discussion and advice.

[nemesis]

I'm not sure why this is nerve-wracking.  Are you very young or something?

Buying a new car, is neither financial suicide or financial genius.  It's choosing to buy an exact car of your choice, at slightly higher cost than a used vehicle that might have some hidden issues or not be exactly what you want.

Life is short, enjoy it.  It should only be anxiety inducing if you're living paycheck to paycheck and can't afford to save any money.

[HamMan]

I thought I'd post a follow up. We took delivery of our 2018 Honda Clarity Touring about 2 weeks after placing our deposit. The dealer had tried to make it an open contract with no firm delivery date - I insisted they add the condition that delivery would take no more than 8 weeks. By being firm here we bypassed other people that had already placed deposits, so we were some of the first people in Canada to get the Clarity. That's cool I guess.

It turns out we timed it well. About one month after our purchase the rebate was lowered from $14K to $13K. Then as of last month our provincial government changed parties and the rebate was ended entirely. Its theoretically possible I could sell the car at a profit now.

Regarding the car, it is fantastic. Very comfortable, lots of space. We did a camping trip a couple weeks ago and fit all our stuff easily. Range has been pretty good, we're regularly getting 70km on electric as advertised, but a lot less in the winter (as much as half). I love hardly ever putting gas in it. Huge drop in monthly car expenses versus our old vehicle.

However, and this is a big one, there was a glaring error in my calculations. I'm honestly shocked nobody pointed it out to me when we were talking numbers back in January. That of course is the opportunity cost of pulling $40K out of savings. I had glossed over this thinking either way I was buying a new car so what difference does it make if I spend $25K on a used Prius vs $40K on the Clarity. Well its a lot, over $16K in lost investment income in 10 years actually, which annihilates the savings that the Clarity offers. I was hoping that by posting my numbers here someone would catch something so stupidly obvious but nobody did. Alas I'm not blaming the board but hope others will learn from my fuck up.

In the end we still have a great car and it is helping us to manage our monthly expenses. Part of the incentive deal is I have to own the car for at least 1 year, so once that passes I'll reevaluate and see what these cars are going for used. Like I said there's a slight chance I could sell it at a profit (or at least get my money back) since the $14K rebate is no longer available. We will see, but realistically we'll probably stick with it long term as planned.

[nereo]

I thought I'd post a follow up. We took delivery of our 2018 Honda Clarity Touring about 2 weeks after placing our deposit. The dealer had tried to make it an open contract with no firm delivery date - I insisted they add the condition that delivery would take no more than 8 weeks. By being firm here we bypassed other people that had already placed deposits, so we were some of the first people in Canada to get the Clarity. That's cool I guess.

It turns out we timed it well. About one month after our purchase the rebate was lowered from $14K to $13K. Then as of last month our provincial government changed parties and the rebate was ended entirely. Its theoretically possible I could sell the car at a profit now.

Regarding the car, it is fantastic. Very comfortable, lots of space. We did a camping trip a couple weeks ago and fit all our stuff easily. Range has been pretty good, we're regularly getting 70km on electric as advertised, but a lot less in the winter (as much as half). I love hardly ever putting gas in it. Huge drop in monthly car expenses versus our old vehicle.

However, and this is a big one, there was a glaring error in my calculations. I'm honestly shocked nobody pointed it out to me when we were talking numbers back in January. That of course is the opportunity cost of pulling $40K out of savings. I had glossed over this thinking either way I was buying a new car so what difference does it make if I spend $25K on a used Prius vs $40K on the Clarity. Well its a lot, over $16K in lost investment income in 10 years actually, which annihilates the savings that the Clarity offers. I was hoping that by posting my numbers here someone would catch something so stupidly obvious but nobody did. Alas I'm not blaming the board but hope others will learn from my fuck up.

In the end we still have a great car and it is helping us to manage our monthly expenses. Part of the incentive deal is I have to own the car for at least 1 year, so once that passes I'll reevaluate and see what these cars are going for used. Like I said there's a slight chance I could sell it at a profit (or at least get my money back) since the $14K rebate is no longer available. We will see, but realistically we'll probably stick with it long term as planned.

Thanks for the update.  Glad you like the vehicle, and hope that it continues to serve you well.
Regarding opportunity cost - it was pointed out.  Check out reply #4 (mine) upthread.  Shrug.

[Bird In Hand]

However, and this is a big one, there was a glaring error in my calculations. I'm honestly shocked nobody pointed it out to me when we were talking numbers back in January. That of course is the opportunity cost of pulling $40K out of savings. I had glossed over this thinking either way I was buying a new car so what difference does it make if I spend $25K on a used Prius vs $40K on the Clarity. Well its a lot, over $16K in lost investment income in 10 years actually, which annihilates the savings that the Clarity offers. I was hoping that by posting my numbers here someone would catch something so stupidly obvious but nobody did. Alas I'm not blaming the board but hope others will learn from my fuck up.

I think since you mentioned it explicitly in your OP...

I think the biggest factor that is missing is the opportunity cost of taking $33K out of my investments, however I will need to spend money no matter what if I want a newer car, so I'm not sure how much this matters and don't know how to calculate it.

...then most of us assumed you understood that there was an opportunity cost commensurate with what you were pulling out of savings.  The idea of opportunity cost is kind of baked into the suggestions some of us made to consider a cheap used car.  But the question seemed to be framed like, "Since I'm going to be buying a newer/more expensive car anyway...".  To me you came across as someone who had his heart set on buying this Honda Clarity and was looking for confirmation (which several EV-loving members happily obliged).

Also, nereo did agree that opportunity cost was the biggest thing you neglected to fully consider, and you acknowledged it:

you are correct that the biggest hole in your analysis is the lost 'opportunity cost' of taking money from your investments. If we use a conservative 4% return that's -$1,320 in the first year. If you can get financing under 3% for some or all of the purchase that would mitigate the opportunity cost.
...

Thanks for your feedback.

Every purchase has an opportunity cost.  If you love the car that much, keep it, accept that the car was worth opportunity cost, and move on.  If not, sell it in a year (at a profit???) and buy a cheaper vehicle.

[HamMan]

I mean yes of course there's always opportunity cost. I never said I wanted a new car, just something newer than 11 years old. Using the factors in my calculations (depreciation, gas, insurance, maintenance) the Clarity looked like the cheapest option long term out of any car available. I failed to include opportunity cost as for some reason I was over complicating the math in how to compare the options, to use your quote.

I think the biggest factor that is missing is the opportunity cost of taking $33K out of my investments, however I will need to spend money no matter what if I want a newer car, so I'm not sure how much this matters and don't know how to calculate it.

It is simple - I should have just looking at the purchase price compounded over 10 years and added that to the total cost of ownership. That's what I would have expected someone to point out. Anyway I'm honestly not complaining or blaming anyone, I just felt it was important to explain this in case someone else copied my math.

[nereo]

@HamMan - I think you've done a good job of objectively looking at the costs of various types of vehicles.  I wish more people would do that, as opposed to the more typical "hey, I can afford this with a monthly payment!"
Hope you'll report back after a few monhts of owning the Clairity - would be interesting to know what grips and praises you have for the car then.

[CCCA]

I would second the idea of buying a used PHEV instead of a new one.  The technology is changing so rapidly in each generation of electric vehicle that you don't want to pay full price for a car that will seem more outdated than a normal gas car was in the past. 

[FIRE47]

Just pulled the trigger on a Volt - came to the same conclusions as you did.

Used car didn't make sense in Canada during the span OP was discussing - a used 2 year old 20,000 mile Volt is worth 28-30k up here for example and that is private sale even, try 33-35k from a dealer and the rebates were 14k but on new only. The market is smaller up here and if you want an obscure car like a PHEV or EV good luck, be prepared to pay top dollar, look for months and not get what you want. With the rebate you were basically getting the new car for the price of the 2 year old used.

As the subsidy is now eliminated OP is probably in the same spot I am - driving a car off the lot that is worth thousands more than you paid for it even after the 13% tax hit and new car depreciation.

[Fishindude]

Funny side story.  Before I retired, we built a manufacturing plant that did components for Chevy Volt.  The plans had us install a whole bunch of charging stations in the front row of parking lot to accommodate all of the employees they figured would be driving the Volts.   Months after construction, you could drive by and almost all of those spots would be empty.   The folks building parts for those cars wouldn't buy them or drive them.   Finally some big shot purchased several to give to upper management for company cars, so they would have a few in those parking spots when GM or customers came to visit the plant.

[nereo]

Funny side story.  Before I retired, we built a manufacturing plant that did components for Chevy Volt.  The plans had us install a whole bunch of charging stations in the front row of parking lot to accommodate all of the employees they figured would be driving the Volts.   Months after construction, you could drive by and almost all of those spots would be empty.   The folks building parts for those cars wouldn't buy them or drive them.   Finally some big shot purchased several to give to upper management for company cars, so they would have a few in those parking spots when GM or customers came to visit the plant.

What was it about the Volt which kept employees from purchasing them?

[Fishindude]

What was it about the Volt which kept employees from purchasing them?

Guessing the biggest drawback was the small size of the vehicle, secondly the fact that they were new and unproven.

[nereo]

What was it about the Volt which kept employees from purchasing them?

Guessing the biggest drawback was the small size of the vehicle, secondly the fact that they were new and unproven.

Thanks for the insight. I tend to avoid any new technology until it's been 'in the wild' for at least a few years.
Did most of the workers drive pickups and SUVs?

[swampwiz]

I think the new robot-driven cars are going to make all of today's cars obsolete; the cost to mod a non-robot-driven car to be robot driven will be a lot more than the cost of simply building it into the original product.  This is one of the reasons that I drive around a beater with 165K miles and a wholesale value of $350, LOL.  (The other reason is no comprehensive insurance!)

[DreamFIRE]

I think the new robot-driven cars are going to make all of today's cars obsolete;

No, some people will prefer to be able to drive.  Progress is slow, so it doesn't worry me.  35 years ago people thought electric cars were going to replace all gasoline engine cars within 10 years, but it didn't happen, not even close, even after 35 years.  Things take a lot longer to progress than you think they will.

[Bird In Hand]

This is one of the reasons that I drive around a beater with 165K miles and a wholesale value of $350, LOL.  (The other reason is no comprehensive insurance!)

I'm not an insurance expert, but I'm pretty sure comprehensive insurance on a $350 car is negligible.  If you submitted an insurance claim worth more than $350, they'd probably just call it totalled and cut you a $350 check.  Heck, if you're mustachian about it, your deductible probably exceeds $350  :D

[inline five]

This is one of the reasons that I drive around a beater with 165K miles and a wholesale value of $350, LOL.  (The other reason is no comprehensive insurance!)

I'm not an insurance expert, but I'm pretty sure comprehensive insurance on a $350 car is negligible.  If you submitted an insurance claim worth more than $350, they'd probably just call it totalled and cut you a $350 check.  Heck, if you're mustachian about it, your deductible probably exceeds $350  :D

Bare bones comp & collision coverage is around $20/month for me...haven't had it on my car for years. I did hit a deer a few months ago, bought a headlight off CL for $40 and a side light for $20 on eBay. Used pliers to bend the sheet metal back on the hood.

It sucked but cheaper than paying comp and collision.

[BobMueller]

All finances aside, i think it's financial suicide because the car is so COMPLICATED. there's literally two types of engines there. there's so much more that can break down.

electric < gas < hybrid in terms of how complicated they are. just get an ICE or a pure battery car.

[nancy33]

I drive a 2008 Honda Odyssey touring with 120 k miles on it. For some reason my insurance premium is going up a bit not down.  I did keep the comprehensive because that cost is minimal. It's the other costs here in CA on the premium. We have solar and I am SO tempted by the volt. I test drove one and love it. But since I only drive 20 to 30 miles a day it makes no sense financially to get a Volt as far as I can tell. A Volt will be my next car though when my van kicks the bucket. DMV taxes alone to buy a 15 k used volt are around $1500 I believe here in CA. That's a lot of gas in my mini van!

[nereo]

All finances aside, i think it's financial suicide because the car is so COMPLICATED. there's literally two types of engines there. there's so much more that can break down.

electric < gas < hybrid in terms of how complicated they are. just get an ICE or a pure battery car.

Financial suicide?  Your point of a plug-in Hybrid is well taken, but aren't you being just a bit hyperbolic here? The OP clearly can afford to pay cash for the vehicle out of investments. I don't see how this could possibly ruin him/her financially, even if a $7k ICE beater or a new all-electric might have lower ownership costs over the next decade (which I don't personally believe will be the case).

[HamMan]

All finances aside, i think it's financial suicide because the car is so COMPLICATED. there's literally two types of engines there. there's so much more that can break down.

electric < gas < hybrid in terms of how complicated they are. just get an ICE or a pure battery car.

Financial suicide?  Your point of a plug-in Hybrid is well taken, but aren't you being just a bit hyperbolic here? The OP clearly can afford to pay cash for the vehicle out of investments. I don't see how this could possibly ruin him/her financially, even if a $7k ICE beater or a new all-electric might have lower ownership costs over the next decade (which I don't personally believe will be the case).

I do agree that hybrids (plug in or otherwise) are more complicated at the surface. The fascinating part though is that because there are more parts, everything can work less hard and therefore last longer and require less maintenance. The engine and the electric motors share the work so both can be smaller and last longer without affecting performance. The motors provide regenerative breaking which recharges the batteries and prolongs the actual car brakes (I love watching my range climb as I come off the highway or down hills). I doubt I'll need a brake job for the first several years of ownership.

I honestly believe there is a conspiracy to make people think these cars are money pits to keep people buying gas guzzling ICE cars/trucks. The long-term cost of ownership on Toyota Priuses (Prii?) has been demonstrated to be one of the lowest out of any vehicle ever made. That was what caught my attention towards hybrids. I ended up with the Honda Clarity because it was around the same price for even better technology after rebates. Hopefully I experience similar quality and ownership costs with my Honda.

I just overheard some coworkers talking about going to buy gas today before it goes up for the long weekend. Gas has been hovering around $1.30/L here lately ($4.90 CAD/gallon). It is very freeing to not care about that any more!

[nereo]

All finances aside, i think it's financial suicide because the car is so COMPLICATED. there's literally two types of engines there. there's so much more that can break down.

electric < gas < hybrid in terms of how complicated they are. just get an ICE or a pure battery car.

Financial suicide?  Your point of a plug-in Hybrid is well taken, but aren't you being just a bit hyperbolic here? The OP clearly can afford to pay cash for the vehicle out of investments. I don't see how this could possibly ruin him/her financially, even if a $7k ICE beater or a new all-electric might have lower ownership costs over the next decade (which I don't personally believe will be the case).

I do agree that hybrids (plug in or otherwise) are more complicated at the surface. The fascinating part though is that because there are more parts, everything can work less hard and therefore last longer and require less maintenance. The engine and the electric motors share the work so both can be smaller and last longer without affecting performance. The motors provide regenerative breaking which recharges the batteries and prolongs the actual car brakes (I love watching my range climb as I come off the highway or down hills). I doubt I'll need a brake job for the first several years of ownership.

I honestly believe there is a conspiracy to make people think these cars are money pits to keep people buying gas guzzling ICE cars/trucks. The long-term cost of ownership on Toyota Priuses (Prii?) has been demonstrated to be one of the lowest out of any vehicle ever made. That was what caught my attention towards hybrids. I ended up with the Honda Clarity because it was around the same price for even better technology after rebates. Hopefully I experience similar quality and ownership costs with my Honda.

I just overheard some coworkers talking about going to buy gas today before it goes up for the long weekend. Gas has been hovering around $1.30/L here lately ($4.90 CAD/gallon). It is very freeing to not care about that any more!

The reliability on older plug-in hybrids has been fairly positive.  For example, the 2013 Volt (now 5 years old) has better than average reliability and customer satisfaction. While these hybrids have both an ICE and an electric drive, they lack some of the components which tend to have the costliest repairs, like a transmission and drivetrain.

[BobMueller]

All finances aside, i think it's financial suicide because the car is so COMPLICATED. there's literally two types of engines there. there's so much more that can break down.

electric < gas < hybrid in terms of how complicated they are. just get an ICE or a pure battery car.

Financial suicide?  Your point of a plug-in Hybrid is well taken, but aren't you being just a bit hyperbolic here? The OP clearly can afford to pay cash for the vehicle out of investments. I don't see how this could possibly ruin him/her financially, even if a $7k ICE beater or a new all-electric might have lower ownership costs over the next decade (which I don't personally believe will be the case).

I do agree that hybrids (plug in or otherwise) are more complicated at the surface. The fascinating part though is that because there are more parts, everything can work less hard and therefore last longer and require less maintenance. The engine and the electric motors share the work so both can be smaller and last longer without affecting performance. The motors provide regenerative breaking which recharges the batteries and prolongs the actual car brakes (I love watching my range climb as I come off the highway or down hills). I doubt I'll need a brake job for the first several years of ownership.

I honestly believe there is a conspiracy to make people think these cars are money pits to keep people buying gas guzzling ICE cars/trucks. The long-term cost of ownership on Toyota Priuses (Prii?) has been demonstrated to be one of the lowest out of any vehicle ever made. That was what caught my attention towards hybrids. I ended up with the Honda Clarity because it was around the same price for even better technology after rebates. Hopefully I experience similar quality and ownership costs with my Honda.

I just overheard some coworkers talking about going to buy gas today before it goes up for the long weekend. Gas has been hovering around $1.30/L here lately ($4.90 CAD/gallon). It is very freeing to not care about that any more!

I did not consider that. I guess a pure battery is so much simpler than a hybrid that I had a bias. Seriously, it's an order of magnitude. I guess that really is how bad internal combustion engine cars are. But there is a temporal issue here, that pure battery will be cost-competitive (at point of sale) with any other car soon. Then, ICE is history (no, not that ICE--internal combustion engine) for the same reasons it's been so hard to wean society off gasoline in spite of global warming. Economics.

You don't need to convince me of the conspiracies around these issues. They're pretty blatant. In fact, I think we'll be bailing out the automakers in a few more years like we did a decade ago because they're playing the same game as the 2000s--ford doesn't make cars anymore because "consumers prefer SUVs", in collusion with fossil fuel companies to raise consumption, prices, and make a boatload. The last gasp of the fossil fuel industry. Some day, it will all come crashing down--oil prices, Ford stock, etc., when your roof is more efficient than the massive geopolitical-security-transport apparatus we have had around oil for almost the last century.

I always considered my next car to be a pure battery, but i'll also look into plugins--you have a really important point.