Tuesday, June 19, 2007

State of hybrid tax credits

The tax credits available for hybrid vehicle purchases is declining. One article gave the amount of the credits for each vehicle. There was quite a big range (1,300-2,600), so I was curious how the tax credit was being applied to vehicles. What determined how much credit you should get?

In spirit of the whole idea of this tax credit, one would think that you gain a tax credit based on how much gas you are saving. The more gas mileage a hybrid gets than its nonhybrid counterpart, the greater the tax credit. Was my theory true? Here is a list of several of the vehicles they reported with the mileages of the hybrid and their regular ICE counterparts. I averaged the highway/city miles and figured out the difference, and then divided to see how many dollars the government was giving you per mpg you are saving. Here are the results.

Ford Escape Hybrid 2WD ($2,600)
   NonHybrid: 23/26 [24.5]
   Hybrid: 36/31 [33.5]
   Difference: 9 or $288/mpg

Ford Escape Hybrid 4WD ($1,950)
   NonHybrid: 21/24 [22.5]
   Hybrid: 32/29 [30.5]
   Difference: 8 or $243/mpg

Honda Accord Hybrid AT ( $1,300)
   NonHybrid: 24/34 [29]
   Hybrid: 28/35 [31.5]
   Difference: 2.5 or $520/mpg

Mercury Mariner 4WD Hybrid ($1,950)
   Nonhybrid: 21/24 [22.5]
   Hybrid: 32/29 [30.5]
   Difference: 8 or $243/mpg

Toyota Camry Hybrid ($1,300)
   Nonhybrid: 24/33 [28.5]
   Hybrid: 48/38 [43]
   Difference: 8 or $162/mpg

Toyota Highlander Hybrid 2WD and 4WD ($1,300)
   Nonhybrid: 22/28 [24]
   Hybrid: 32/27 [29.5]
   Difference: 5.5 or $236/mpg

The Accord stood out the most. What a pathetic vehicle, but its quite clear now why Honda discontinued it. The Accord hybrid should never have qualified for any tax credit.

Then it gets interesting. Guess which vehicles give you the most credit for the least gas used? The SUVs of course. The best vehicle, which gets a fantastic average of 43 mpg gets by far the worst tax credit. The Mariner and Escapes, all SUVs, gain about the same amount in fuel economy as the Camry, and of all 4 the Camry by far gets the better gas mileage, yet it gets the lowest tax credit.

So, I'm confused. What exactly is the tax credit supposed to be rewarding?

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