Choosing between a gasoline or hybrid vehicle in 2024 was not easy, especially since the benefits of hybrids were well known, and some models—like the Toyota Sienna—were only available as hybrids. 

• • Assuming all other costs (like insurance and maintenance) are the same and don't affect the decision.

  • How many miles would it take to recover the additional cost of the hybrid if the fuel price is $3.50 per gallon?

Solution

Considering only the relevant costs—vehicle price and fuel—while assuming all other costs are equal and thus excluded from the analysis, the total cost of driving 𝑥 miles can be calculated as:

And the cost of fuel can be calculated as: 

At the breakeven point, the total cost should be equal for both vehicles. Therefore,

An alternative solution

• Additional cost of hybrid = 23,500−22,050=$1,450

• Gasoline Corolla: 3.50/35 = 0.10 dollars/mile

• Hybrid Corolla: 3.50/50 = 0.07 dollars/mile

• Savings per mile = 0.10−0.07=0.03 dollars/mile

• Breakeven mileage = $1,450/(0.03$/mile) = 48,333.3 miles

Solution Using MS Excel

Figure 2‑11 shows the solution using MS Excel. 

While setting the costs of both options equal gives a single breakeven point of 48,333 miles (as shown in the previous example), the MS Excel graph of cost versus miles driven provides additional insights. For example, there may be a range of mileage where the cost difference is negligible, which can support better decision-making. Analysis in Figure 2-11 shows total savings of over $5,000 over the vehicle’s predicted useful life of 200,000 miles. Moreover, the hybrid Corolla breaks even well before the end of its warranty period. Therefore, the hybrid Corolla is a better economic choice compared to the regular gasoline model. 

Nevertheless, this example should not be generalized to conclude that hybrids are always a better economic value than their gasoline counterparts. Consider another vehicle from the same manufacturer, Toyota: the Highlander, which is available in both gasoline and hybrid models. 

 Figure 2‑12 shows the complete cost analysis up to its assumed predicted useful life of 200,000 miles. 

At the same fuel cost of $3.50 per gallon, the additional cost of the hybrid breaks even at 141,818 miles—well beyond its 60,000-mile/5-year warranty period. Moreover, this breakeven point is close to the vehicle’s predicted useful life of 200,000 miles. Therefore, the fuel savings offered by the hybrid may not be fully realized within its useful lifespan.

Additional Analysis

Consider these four common segments in passenger vehicles: the economy sedan Toyota Corolla, the five-seater crossover Toyota RAV4, the 7–8-seater minivan Kia Carnival, and the 7–8-seater SUV Toyota Highlander. Table 2-3 shows the retail prices and fuel economy for each model. Since all of these vehicles are available in both gasoline and hybrid versions, it is worth discussing whether the additional cost of the hybrid can be recovered within the warranty period and the expected useful lifespan of each vehicle.

This comparison shows that while some vehicles can easily break even within their useful life, others may not recover the additional cost of hybrid components. 

Regardless of the conclusions drawn from the analysis, the MS Excel solutions offer valuable insights that simple, single-formula methods cannot provide.