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#4728 of 5290 Re: Blunder by Consumer Reports in Hybrid Car Cost Comparison [markjenn]
Mar 07, 2006 (4:09 pm)
I'll be fascinated to see how CR handles this.
Correct me if I am wrong. Isn't the main gripe with the resale values that CR has attached to the Hybrids in 5 years? If that is the case one should look at what is being offered for 5 year old Prius Classics. They are not tearing up the used car market. You would be very lucky to get $6500 for a 2001 Prius with 75k miles on it. Not many are willing to take the BIG Battery risk, including dealers. I think that is what is reflected by the CR article. Another question I have: where on the Toyota website can you find that the hybrid warranty is transferable to the second owner. Another big IF in Hybrid resale values. Not all warranties transfer on cars. Lastly, one of the big hybrid draws, is having the latest and greatest. Each new model makes that last model much less enticing. In the big picture CR may be right. Only time will tell. As a disclaimer I don't trust CR much anyway.
#4729 of 5290 Re: Blunder by Consumer Reports in Hybrid Car Cost Comparison [gagrice]
Mar 07, 2006 (4:24 pm)
You're making some very valid points, but they don't explain the flawed methdology, nor are these issues big enough to justify the ridiculous numbers that result from this flawed analysis.
This is a simple math error, not a fudging of assumptions or factors. They added 2+2 and got 6.
#4730 of 5290 Re: Blunder by Consumer Reports in Hybrid Car Cost Comparison [markjenn]
Mar 07, 2006 (4:29 pm)
I only have seen what was set out here so I may have missed the errors you are referring to. I guess I could buy the issue and look closer at what they wrote. Would not surprise me as I consider it a near worthless magazine anyway.
#4731 of 5290 Re: Blunder by Consumer Reports in Hybrid Car Cost Comparison [markjenn]
Mar 07, 2006 (5:13 pm)
Since there are so many valid sources which can be checked by anyone in the business, its shocking that CR could make such a basic error. The best source is the summary online of the Mannheim Auctions. This is the real market value of a used vehicle because it's what it will bring in cash on the spot. Dealer and Retail and P-t-P sales are often colored by emotion and need.
Auction sales are just cold cash for a hunk of iron. Edmunds TMV's on used cars here are a pretty good approximation of the auction values on most cars.
2002 Prius with 50K mi has a TMV trade in of $11500 in avg condition. This is about 50+% of the original purchase price back in 2002 of ~$22500. In general Toyota's hold about 50-55% of value after 50K miles. The Prius is no different.
4 yr depreciation 50K mi
Corolla LE ( $16000 new ).. ~ $9000 depr ( $7000 tradein )
Prius ( $22500 new )........ ~ $11000 depr ( $11500 tradein )
Camry LE ( $20000 new ).. ~ $11000 depr ( $9000 tradein )
There is only one depreciation number and it's the difference between the original sales market price and the current auction values. Everything else is supposition.
ON the face, it appears to be lazy analysis by the writer and editor. Not enough digging and verification - just get something into print. Or it may be intentionally slanted.
#4732 of 5290 Agree CR is wrong but...
Mar 07, 2006 (5:46 pm)
It also depends on how you look at the analysis. You have assumed that we should look at it from an accountant's point of view or that we are selling all vehicles at the 5 year mark. Assuming that the vehicles will be kept beyond 5 years and you are only looking at the expenditures up to the 5 year mark, CR is still wrong but you would use just the purchase price and not the depreciation. The difference in that case would change to the following.
Ford Escape: $8350 >> $2050 >> $3550
Honda Accord: $10250 >> $4550 >> $5950
Honda Civic: $3700 >> ($300) >> $800
Lexus RX: $13100 >> $4300 >> $6800
Toyota HL: $13300 >> $6100 >> $7300
Toyota Prius/Corolla: $5250 >> ($450) >> $2050
I am saying that CR is wrong. You guys have looked at it the best normal accountant's way, but CR could be assuming the car will continue to be used and the difference in car market value will not be realized at the 5 year mark. Thus the greater cash outlay would be seen for hybrids if not sold at the 5 year mark for all the hybrid models.
#4733 of 5290 Re: Agree CR is wrong but... [bamacar]
Mar 07, 2006 (5:54 pm)
If you are not selling the car at the 5 year mark, then you need to re-calculate all the other figures too, e.g. what is the gas savings over X years?
You could only use the purchase price difference and not depreciation if the car has no value when it is sold. It would need to be very old for that to be the case.
Using CR's methodology, here are some estimates for years 6-10 for the Corolla vs. Prius:
At end of 5 years: (450)
Gas savings: (2300) (assumes same price as in yrs 1-5)
Extra insurance: 300
Extra maintenance: 300 (assumes no battery replacement)
Extra depreciation cost: ??
Net cost difference after year 10: (2150)
That is, the Prius saves $2150 over 10 years compared to the Corolla before any extra depreciation cost for years 6-10 and any battery replacement cost are factored in. CR notes that the batteries have a 150,000-180,000 mile life expectancy, so a battery replacement in the first 10 years is not a given. Also in the CAFE states, the battery is warranted for 10 years and 150k miles.
BTW, to be much more of an apples-to-apples comparison, CR should have compared the Matrix to the Prius.
#4734 of 5290 Re: Agree CR is wrong but... [backy]
Mar 07, 2006 (6:11 pm)
I am not saying how many years the vehicles will be kept. I was just saying that my numbers would be the total outlay of money at the 5 year point assuming the vehicles are not sold at that point (not the normal accounting method).
#4735 of 5290 Re: Agree CR is wrong but... [bamacar]
Mar 07, 2006 (6:24 pm)
Ok, got it.
BTW, maybe CR didn't compare the Matrix--a 5-door hatchback very similar in size to the Prius (another 5-door hatchback) because the comparison would not have been as much in favor of the ICE car. The MSRP of a Matrix XR equipped as much as possible like the Prius (automatic, alloys, ABS, cruise) is $19,220--$2600 more than a Corolla LE. Also, the mpg of the Matrix is 5 mpg less (24 vs. 29).
#4736 of 5290 Re: Agree CR is wrong but... [bamacar]
Mar 07, 2006 (6:31 pm)
True but you must balance it by the value of the asset you have at the end of 5 yrs.
#4737 of 5290 Re: Agree CR is wrong but... [kdhspyder]
Mar 07, 2006 (6:59 pm)
Once again for accounting purposes- yes, you are correct. For outlay of cash in the 5 year period, no. If it is not sold at the 5 year mark, you receive $0 dollars no matter what it is worth.