Gasoline, Hybrid and Electric Vehicles

As of September 2024, when the data was collected, the most economical fully electric vehicles (e.g., Nissan Leaf and Chevy Bolt) were compared to their gasoline most economic (e.g., Nissan Versa) as well as the most economic hybrid (e.g., Toyota Corolla) options to evaluate whether the higher upfront cost of electric vehicles or even the hybrid vehicle is justified. Fuel price at that time was observed to be $3.50 per gallon.

* Manufacturer's Suggested Retail Price (MSRP)** Fuel efficiency in miles per gallon. For electric vehicles, assume the fuel efficiency can be interpreted as the number of miles driven for the cost equivalent to one gallon of gasoline.*** While there are other costs not included in this analysis—such as additional registration fees, sales tax, and insurance for electric vehicles—there are also maintenance costs associated with gasoline vehicles (e.g., oil changes and increased brake wear and replacement). These additional costs tend to offset each other and are therefore considered negligible in the economic decision-making process. Additionally, we assume the same resale value for both vehicles at the end of their life, even though electric vehicles were depreciating more rapidly as of September 2024.

Questions

Develop MS Excel analysis graphs to compare these four vehicles and determine which one you should buy. Include detailed explanations to support your decision.

Answer

Figure 2-18 shows the solution generated using MS Excel, comparing all four vehicles.

Figure 2-18

Gasoline, Hybrid, and Electric Vehicles Solution

Decision

The most economical hybrid vehicle, the Toyota Corolla Hybrid, was observed to be the most expensive to drive among the four vehicles compared in this example. It starts at about the same cost as the two fully electric vehicles (after applying the tax credit), but it continues to incur higher fuel costs over time.
It is worth noting that the Toyota Corolla Hybrid was previously identified as the most economical option when comparing popular hybrid and gasoline models in the earlier example.
Among the two electric vehicles, the Nissan Leaf was observed to be less costly within a reasonable mileage range. While the Chevy Bolt offers slightly better energy efficiency, it would take a long time to recover its additional cost of $1,110 ($25,500 − $24,390). In fact, it would require driving over 400,000 miles—well beyond the typical lifespan of most vehicles—to break even.
The most economical gasoline vehicle, the Nissan Versa, remains the least expensive to drive—until the fully electric Nissan Leaf breaks even at around 120,000 miles, which is well beyond the factory warranty period.
Therefore, if simply getting from point A to point B is the priority, the Nissan Versa appears to be the best financial decision among all four vehicles.