Can Hybrid and Electric Vehicles Really Help You Save Money?

Electric vehicles have been growing rapidly in popularity in Singapore. Just earlier this year, for insance, the Land Transport Authority reported a 70% growth in the number of of petrol-electric hybrid cars in Singapore from 2015 and 2016. While hybrid cars have garnered more popularity due to their low fuel consumption and high rebates, many buyers may not have actually estimated the total savings one can get from buying an EV instead of a petrol-fueled car. According to our calculation, however, the cost advantage of hybrid cars are not yet significant enough to be realised immediately. In fact, it takes at least 7 years of car ownership for the hybrid car purchase to be more economic than its traditional alternative.

Hybrid Cars vs Traditional Cars: Total Savings About S$5,500 over 10 Years

According to ValuePenguin’s calculation, a car owner saves about S$5,499 to S$9,264 over 10 years by purchasing a petrol-electric hybrid car instead of a traditional car. Not only that, most of the cost reduction results from the last 2-3 years of the ownership, as it takes over 7-8 years to accumulate enough cost savings to offset the difference in the purchase price of the vehicles.

To estimate this, we gathered data on two of the most popular car models in Singapore: Toyota Corolla Altis 1.6 and Toyota Prius 1.8. The former costs about S$106,988 to purchase, while the latter costs about S$130,988 even with the CEVS rebate, resulting a difference of S$24,000. Furthermore, we estimate that the higher price tag leads to a bigger car loan, adding around S$2,000 of extra cost in interest. Given that the maintenance cost of these vehicles are more or less similar, the major cost differences resulted from petrol cost and road tax you pay on the vehicle every year.

Savings from Petrol Cost

First, Prius 1.8 consumes about 3.7 litre per 100 km, while Altis 1.6 comes 16.3 litre per 100km, more than 4x higher. Given that an average person drives about 17,500km per year in Singapore, this results in an annual petrol savings of 2,205 litre. At S$2 per litre and saving about 20% on petrol purchases with petrol credit cards, one can save about S$3,528 per year on petrol by driving a hybrid car instead of a traditional sedan. This would result in total saving of S$9,264 over the span of 10 years, and would take about 7.4 years to offset the S$26,000 in higher price tag and interest cost.

Savings from Road Tax

Secondly, because a Prius 1.8 has a higher engine capacity than an Altis 1.6, it requires a higher road tax payment every 6 month. This is about S$376.53 per year that offsets the petrol savings that we mentioned above. This offsets the petrol savings by a little bit, resulting in a lower net annual saving of S$3,151.47. To offset the S$26,000 in cost difference between the two car models, then, it requires about 8.3 years for an average driver. If he drives his car for 10 years, he can save about S$5,499 over the life of his COE. Of course, if he purchases a hybrid car with an equal engine capacity as the traditional car like an Altis 1.6, he will be able to realise an even greater amount of savings we mentioned above.

A Surprising Discovery: No Difference in Car Insurance Cost

While we expected car insurance to be more expensive for the more expensive, we surprisingly found that the cost of car insurance for these vehicles were not all that different. For instance, FWD, one of the cheapest car insurance providers in Singapore, charged S$674.77 per year for Prius 1.8 and S$682.15 for Altis 1.6. These estimates were based on a 45 year old, male driver with more than 5 years of driving experience and a NCD discount of 50%.

Are EVs Really Worth It?

Saving S$5,500 to S$9,000 over 10 years can be extra S$550 to S$900 you can spend on something else every year. For different people, this could mean an extra vacation overseas, or several big purchases they’ve been wanting to make.

However, one should also consider the downside of purchasing an EV, namely the bigger upfront payment (due to a higher purchase price) and the limited number of choice. Not only does it cost you more upfront to purchase a hybrid car, it can take more than 8 years before you see its true economic benefit. Therefore, it may not be the right choice for you if you don’t plan on keeping your car for that long. This is especially the case for car-aficionados who have deep emotional attachments to specific models of cars they want to own, as there aren’t that many EV models available in the Singaporean market just yet.

The article Can Hybrid and Electric Vehicles Really Help You Save Money? originally appeared on ValuePenguin.

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Source: ValuePen