xcel
07-30-2006, 07:09 PM
Gasoline at $3, the fuel savings on a car that gets 40 vs. 20 miles/gallon would be $1,125 at 15,000 miles/year. (http://www.miami.com/mld/miamiherald/business/personal_finance/15159097.htm?source=rss&channel=miamiherald_personal_finance)
Kathy Kristof - LA Times - July 30, 2006
http://www.cleanmpg.com/photos/data/501/FEH_Incentives.jpg
2006 FWD Ford Escape Hybrid - 36/31 MPG - Tax credit = $2,600
Forget dealer incentives for a moment. A motorist who is thinking about buying a hybrid vehicle this summer can factor a tax credit of as much as $3,400 into the purchase decision.
The bottom line: Costly hybrids are beginning to look like a steal.
''In the past, you would have sold the car before you'd break even on the gas savings,'' said Paul Taylor, chief economist at the National Automobile Dealers Association in McLean, Va.
But international events have pushed the price of crude oil - and gasoline - ever higher. The tax credits, Taylor said, help to ``really change the economics.''
Hybrid cars typically cost about $2,500 more than comparable, conventionally powered vehicles, Taylor noted.
But with the price of a gallon of gasoline reaching a national average of $3, the fuel savings on a car that gets 40 miles to the gallon versus 20 mpg would be about $1,125 a year for someone who drives 15,000 miles annually.
In addition, last year's federal Energy Policy Act provided tax credits for buyers of certain ''energy efficient'' vehicles. Though the credits are claimed at tax time, not when purchasing a car at the dealership, buyers are responding in droves.
''These cars come in the door and immediately go out,'' said Fritz Hitchcock, president of Puente Hills Toyota and director of the California Motor Car Dealers Association. ``The tax incentives are a huge part of it.''
Hybrid sales jumped 26 percent in the first six months of 2006 compared with a year earlier, with 116,994 hybrid cars and light trucks sold through June. That double-digit sales gain was especially impressive because 2005 was a record year. There's been a fourfold increase in hybrid sales since 2001, when hybrid vehicles became widely available, according to the national dealers association.
The brisk pace of hybrid sales could limit how long the tax breaks are available. The energy law that authorized the breaks includes a trigger that says that once a particular hybrid model has sold more than 60,000 units, the tax break on that model will start to diminish.
Three months after the sale of the 60,000th vehicle, buyers will be able to claim just half of the tax credit that's currently available on that car. Six months later, the credit amount will drop to one-quarter of today's level, and then it disappears completely.
Many hybrid models, such as the Honda Insight, don't sell enough to flirt with the limitation anytime soon, but the ever-popular Toyota Prius is already on the cusp.
So far this year, 48,156 Priuses have been sold, according to the national dealers association. At the current sales pace, Prius buyers could lose the full tax credit by this fall.
That's not something that all dealers understand. Hitchcock, for example, said he'd never heard of the credits' being phased out based on sales volume.
That isn't the only complication for buyers. For example, each type of hybrid qualifies for a different level of tax break.
Because the breaks are so substantial, it makes sense to understand them before shopping.
Here's how they work:
Each hybrid vehicle qualifies for two different tax credits. The first credit is based on how many more miles the hybrid gets per gallon than a similar standard-fuel vehicle.
It's not always easy to calculate. When a manufacturer produces a model with hybrid- and gasoline-engine variants, the assessment is fairly easy. When there's no identical model, government officials work with the manufacturer to make a judgment call.
Hybrids that are 25 percent more fuel-efficient than a standard car qualify for a $400 ''fuel economy'' credit. Those that are more than 50 percent more fuel-efficient qualify for an $800 credit, while those that are 250 percent more fuel-efficient get the maximum $2,400 credit. Cars that are less than 25 percent more fuel-efficient than standard gasoline-driven engines don't get this credit at all.
The second tax break is a ''conservation'' credit, which is intended to subsidize upfront a car's lifetime fuel efficiency. This credit ranges from $250 to $1,000 a car.
The two credits are added together to get the full tax break available on any given car.
These credits, which took effect Jan. 1, replaced a $2,000 tax deduction that was available for hybrid-car purchasers. The deduction was simpler, but the credits are far more valuable.
That's because deductions simply reduce the amount of income that's subject to tax, while credits reduce the tax owed on a dollar-for-dollar basis. For example, a $2,000 deduction saves a person in the 30 percent federal tax bracket $600 in taxes, but a $2,000 credit saves $2,000.
The Internal Revenue Service and the Environmental Protection Agency determine the credit amounts for the hybrid vehicles on the market.
So far, 27 different cars have been ''certified,'' but that number counts some vehicles more than once because of different versions and model years. As cars are presented for fuel tests, the agencies will continue to certify them, IRS spokesman Anthony Burke said.
Because the tax breaks rely on estimates of energy savings, one car model - such as the Honda Accord - can qualify for different breaks if the model has different versions.
For instance, the 2006 Honda Accord Hybrid AT provides a $1,300 credit. But if the car doesn't have ''updated control calibration'' equipment - the Accord's 2005 models lack it - the car qualifies for a tax break of only $650.
The front-wheel-drive Ford Escape gets a $2,600 tax credit, but the four-wheel-drive model of the same car qualifies for just $1,950 in tax credits.
The vehicles qualifying for the smallest tax credit are the GMC Sierra and the Chevrolet Silverado. Both two-wheel-drive hybrid pickup trucks qualify for the minimum $250 conservation credit. But, the four-wheel-drive models of the same trucks qualify for $650 in tax credits.
The most lucrative certification so far -- the Prius, which qualifies for a $3,150 credit. Toyota's Highlander and Camry hybrids, as well as the two-wheel drive Ford Escape, each qualify for a $2,600 credit.
Kathy Kristof - LA Times - July 30, 2006
http://www.cleanmpg.com/photos/data/501/FEH_Incentives.jpg
2006 FWD Ford Escape Hybrid - 36/31 MPG - Tax credit = $2,600
Forget dealer incentives for a moment. A motorist who is thinking about buying a hybrid vehicle this summer can factor a tax credit of as much as $3,400 into the purchase decision.
The bottom line: Costly hybrids are beginning to look like a steal.
''In the past, you would have sold the car before you'd break even on the gas savings,'' said Paul Taylor, chief economist at the National Automobile Dealers Association in McLean, Va.
But international events have pushed the price of crude oil - and gasoline - ever higher. The tax credits, Taylor said, help to ``really change the economics.''
Hybrid cars typically cost about $2,500 more than comparable, conventionally powered vehicles, Taylor noted.
But with the price of a gallon of gasoline reaching a national average of $3, the fuel savings on a car that gets 40 miles to the gallon versus 20 mpg would be about $1,125 a year for someone who drives 15,000 miles annually.
In addition, last year's federal Energy Policy Act provided tax credits for buyers of certain ''energy efficient'' vehicles. Though the credits are claimed at tax time, not when purchasing a car at the dealership, buyers are responding in droves.
''These cars come in the door and immediately go out,'' said Fritz Hitchcock, president of Puente Hills Toyota and director of the California Motor Car Dealers Association. ``The tax incentives are a huge part of it.''
Hybrid sales jumped 26 percent in the first six months of 2006 compared with a year earlier, with 116,994 hybrid cars and light trucks sold through June. That double-digit sales gain was especially impressive because 2005 was a record year. There's been a fourfold increase in hybrid sales since 2001, when hybrid vehicles became widely available, according to the national dealers association.
The brisk pace of hybrid sales could limit how long the tax breaks are available. The energy law that authorized the breaks includes a trigger that says that once a particular hybrid model has sold more than 60,000 units, the tax break on that model will start to diminish.
Three months after the sale of the 60,000th vehicle, buyers will be able to claim just half of the tax credit that's currently available on that car. Six months later, the credit amount will drop to one-quarter of today's level, and then it disappears completely.
Many hybrid models, such as the Honda Insight, don't sell enough to flirt with the limitation anytime soon, but the ever-popular Toyota Prius is already on the cusp.
So far this year, 48,156 Priuses have been sold, according to the national dealers association. At the current sales pace, Prius buyers could lose the full tax credit by this fall.
That's not something that all dealers understand. Hitchcock, for example, said he'd never heard of the credits' being phased out based on sales volume.
That isn't the only complication for buyers. For example, each type of hybrid qualifies for a different level of tax break.
Because the breaks are so substantial, it makes sense to understand them before shopping.
Here's how they work:
Each hybrid vehicle qualifies for two different tax credits. The first credit is based on how many more miles the hybrid gets per gallon than a similar standard-fuel vehicle.
It's not always easy to calculate. When a manufacturer produces a model with hybrid- and gasoline-engine variants, the assessment is fairly easy. When there's no identical model, government officials work with the manufacturer to make a judgment call.
Hybrids that are 25 percent more fuel-efficient than a standard car qualify for a $400 ''fuel economy'' credit. Those that are more than 50 percent more fuel-efficient qualify for an $800 credit, while those that are 250 percent more fuel-efficient get the maximum $2,400 credit. Cars that are less than 25 percent more fuel-efficient than standard gasoline-driven engines don't get this credit at all.
The second tax break is a ''conservation'' credit, which is intended to subsidize upfront a car's lifetime fuel efficiency. This credit ranges from $250 to $1,000 a car.
The two credits are added together to get the full tax break available on any given car.
These credits, which took effect Jan. 1, replaced a $2,000 tax deduction that was available for hybrid-car purchasers. The deduction was simpler, but the credits are far more valuable.
That's because deductions simply reduce the amount of income that's subject to tax, while credits reduce the tax owed on a dollar-for-dollar basis. For example, a $2,000 deduction saves a person in the 30 percent federal tax bracket $600 in taxes, but a $2,000 credit saves $2,000.
The Internal Revenue Service and the Environmental Protection Agency determine the credit amounts for the hybrid vehicles on the market.
So far, 27 different cars have been ''certified,'' but that number counts some vehicles more than once because of different versions and model years. As cars are presented for fuel tests, the agencies will continue to certify them, IRS spokesman Anthony Burke said.
Because the tax breaks rely on estimates of energy savings, one car model - such as the Honda Accord - can qualify for different breaks if the model has different versions.
For instance, the 2006 Honda Accord Hybrid AT provides a $1,300 credit. But if the car doesn't have ''updated control calibration'' equipment - the Accord's 2005 models lack it - the car qualifies for a tax break of only $650.
The front-wheel-drive Ford Escape gets a $2,600 tax credit, but the four-wheel-drive model of the same car qualifies for just $1,950 in tax credits.
The vehicles qualifying for the smallest tax credit are the GMC Sierra and the Chevrolet Silverado. Both two-wheel-drive hybrid pickup trucks qualify for the minimum $250 conservation credit. But, the four-wheel-drive models of the same trucks qualify for $650 in tax credits.
The most lucrative certification so far -- the Prius, which qualifies for a $3,150 credit. Toyota's Highlander and Camry hybrids, as well as the two-wheel drive Ford Escape, each qualify for a $2,600 credit.