Hybrid Cars Come of Age

With Al Gore III barrelling down a California highway in his Toyota Prius at 105 mph, hybrid gas-electric cars may be at the tipping point of becoming a mainstream item in America.

Hybrids, which operate with gasoline engines coupled with a bank of high-tech batteries and an electric motor, are in hot demand seven years after Toyota's Prius hit the market. More manufacturers are building hybrids, but the supply isn't enough to meet demand and prices are at or above manufacturer's suggested retail price (MSRP).

U.S. hybrid sales advanced 23 percent last year to 253,000 vehicles, and they rose another 55 percent in the first six months of 2007, with analysts expecting a doubling of units sold for the full year. With total hybrid production to date at less than 1 million cars, and Toyota accounting for three-quarters of that, analysts expect that America's appetite for the technology would hardly seem to be satisfied.

A recent check of hybrid inventory in the New York-New Jersey area by ABC News found dealer after dealer with no or few cars available. Many have waiting lists to obtain the most popular models.

Hybrid shoppers can mostly forget about negotiating price. Hard bargaining may win you a few hundred dollars in floormats, but most dealers aren't willing to part with their precious allotment of hybrids for less than MSRP. And more than a few dealers add charges for useless items like pinstriping and rustproofing to the already high sticker price.

Why a Hybrid?

The initial hybrid buyers in the United States tended to be environmentally conscious "tree-huggers," according to CNW Marketing Research in Bandon, Ore. The desire to help the environment has only increased, with 57 percent of Prius drivers saying in an early 2007 survey the car "makes a statement about me," compared with 34 percent who gave that response in a 2004 CNW survey.

Now, as gas prices top $3 a gallon across the country, a new kind of buyer is emerging -- one who likes the idea of a car that pollutes less but that also saves money. This wasn't always the case when hybrids cost $3,000 or more than their conventional (and often more powerful) counterparts. Today more people are considering fuel-saving benefits as the price disparity between hybrids and conventional cars has dropped to as little as $1,500.

Taking into account the extra expense and figuring you'd cut your annual fuel bill by a third, the payback period for a hybrid might be about five years, Consumer Reports said in 2006. But gas prices have risen since then, and the hybrid cost differential has slimmed, so the payback now may be even shorter.

Taking a Tax Credit

The rising demand for hybrids may have been fueled by federal tax credits that are now disappearing. Congress designed a program that allows tax credits of as much as $3,400 for hybrid buyers, but only on up to the first 60,000 vehicles for each manufacturer, with a phase-out period.

Toyota hybrid buyers can currently only get one-fourth of the full credit, with that going to zero for purchases after Oct. 1, 2007. For other carmakers, the credits and phase-outs vary, and it's even possible for the amount of the credit to change between when you buy the car and go to claim your credit at tax time. Dealers will mostly tell you to call an accountant rather than supply wrong or outdated information.

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