Buy A Hybrid Now Or Wait For Government Incentive To Kick In?

Buy A Hybrid Now Or Wait For Government Incentive To Kick In?

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The Chevrolet Volt will likely garner an IRS tax credit of $7500 for buyers when the car comes to the market in late 2010. Most hybrid models receive some sort of federal government credit, an allowance buyers should take into consideration when selecting a new car.

The Chevrolet Volt will likely garner an IRS tax credit of $7500 for buyers when the car comes to the market in late 2010. Most hybrid models receive some sort of federal government credit, an allowance buyers should take into consideration when selecting a new car.

Federal Intervention To Help You Buy The “Right” Car

Never underestimate the federal government’s desire to steer consumers to purchase much more fuel efficient cars and get away from buying gas guzzling trucks and SUVs.

For the past several years, buyers of hybrid vehicles — those cars designed to run on either gas or electric power — has helped some consumers make the switch. As it stands right now most hybrids carry a price premium of $2500 to more than $10000 over the cost of a comparable gas-only powered car, making them only worth it for people who drive a lot. But, with an IRS tax credit of $250 to $3000 on select models, that differential is reduced, making hybrids a logical choice for more and more drivers.

Some Vehicles Qualify, While Others Do Not

Not every car qualifies for the tax credit as the IRS has created a formula which determines how much credit a car will get, if any. Some Toyota Prius owners have found themselves to be ineligible to receive a tax credit because the IRS phases credits out when a particular model sells more than 60,000 units in a year. The Prius is a popular car, but the US government doesn’t want to give industry leader Toyota too much help in this area.

Under consideration right now is a new legislative package which will offer even greater incentives to a new type of hybrid vehicle expected to become available by 2010. Plug-in hybrids, cars which can get the bulk of their energy from the electrical grid, are currently in the pre-production stage, most notably the Chevrolet Volt, a car with a range of 40 miles on electric power only. These cars will also be equipped with small gasoline engines to help extend their range, but the bulk of the people who will be buying plug-in hybrids will be commuters, particularly those whose commute falls within that 40 mile round trip range.

A Handsome IRS Tax Credit Coming

The federal package zipped through the Senate earlier this week, approved by a 93-2 margin. The house will be taking up the legislation shortly and is expected to pass the bill. President Bush is expected to sign the measure into law, paving the way for what will be a generous IRS tax credit.

Under the proposed legislation, plug-in hybrid owners will receive a significantly larger credit thanks to their vehicle’s ability to store more electricity than conventional hybrid vehicles. That credit will range from $2500-$7500, which will come in handy as the chief vehicle it was designed for, the Chevrolet Volt, will retail for about $40,000, some $15,000 more than a Toyota Prius. The price differential is due in part to GM using a lithium-ion battery to power the Volt while the Prius uses older technology, a nickel-cadmium battery.

Buy Now Or Wait?

For consumers wanting to save money on their next car purchase, the temptation to wait ’til 2010 looms large, especially if other incentives packages to buy a plug-in hybrid are announced. Some large corporations have talked about offering incentives to employees to purchase cars like the Chevrolet Volt including providing free recharging stations which could recharge employees cars while they work. This would be an attractive option for the person who lives beyond the Volt’s electric range, effectively allowing them to tap into the power grid while at work and again once they return home at night. Some states, including California, are studying additional incentives which will help ease the financial burden owners.

But, waiting until 2010 may not be right for every buyer, particularly for the motorist who needs a new car before that time. Fortunately, Honda will shake the market up again when its new Insight hybrid is released, a car with a proposed base sticker price of $18,500, not including IRS tax credit.

Regardless of what decision you make when buying your next car, hybrid vehicles are looming larger than ever before. Standard hybrids offer fuel economy numbers from 20 to 60 mpg, while plug-in hybrids push that figure up to the 150 to 250 mpg range. Clearly, reducing your pain at the pump is an excellent reason to consider hybrid powered vehicles and beginning in 2010, that picture suddenly brightens considerably.

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Categories: Autos Express

Comments

  1. George
    George 9 October, 2008, 13:11

    What tax credit (if any) might the new 2010 Honda Insight have. Please let me know by email:
    (email removed to protect visitor’s privacy).

    Thanks!!!

  2. Matthew C. Keegan
    Matthew C. Keegan Author 9 October, 2008, 17:08

    George, I have no idea — that amount will be determined by the IRS when the car becomes available next year. Check irs.gov for that information.

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