Myth Busters: Toyota Prius as a Money Saver

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People often wonder just how much money they can save by purchasing a Toyota Prius.  With the Prius’ famed EPA fuel consumption estimates of 51 miles per gallon city and 48 highway, everyone believes it is not a question of whether, but how much, the Prius will save you.

Sadly, the notion of the Prius being a sound frugal living choice is another myth generated by shortsightedness and tremendous marketing.  The myth is easily exposed by following one of the basic rules of practical frugal living of thinking it through.  When we do that, we can easily see that any sensible, traditional gas powered compact or economy class car will match or beat the total cost of the Prius.

The problem lies in the Prius’ starting price tag, which is a good thirty to forty percent higher than comparably sized non-hybrid models.  The Prius, you see, relies on two engines, one of which is powered by a hugely expensive battery, for power.  When you put two engines in a vehicle, the price rockets upward pretty quickly.

Let’s see how that increased purchase price negates the eventual gas savings even before you drive the first mile.  Start by looking at some “base prices,” (i.e., those MSRPs that are always a few thousand dollars short of the actual price needed for a car with basic options.)  The Prius Two weighs in at a starting price of $24,200 for the basic 1.8L four cylinder engine.  The Chevrolet Cruze LS automatic starts at $18,225 with the same size engine (and still gets you 35 miles per gallon on the highway, by the way.)

Just to give Prius the benefit of every doubt, let’s liberally assume that you will do all of your driving in the city, where the Prius’ fuel efficiency advantage is the greatest.  By comparing only city fuel efficiencies, you will average a full 26 more miles per gallon of gas with your Prius.  Let’s also assume gas prices of $4.00 per gallon.  That $6,180 in additional sales price and sales tax that the Prius will cost you equals 1,545 gallons of gasoline.  That’s how much you are in the hole the day you put the first mile on the odometer.  That means that you’ll need to drive your Prius for about 65,000 miles, entirely within the city, before you break even on the cost.  Yes, I realize that if gas prices soar above $4.00 per gallon, the breakeven point would come sooner.  But I think we also all realize that most of a car’s miles are driven on the highway, where the Prius’s fuel efficiency advantage shrinks to 16 miles per gallon.

Now let’s compare Prius to another Toyota, one with a well-earned, decades-old reputation for reliability, the Corolla.  The Corolla’s starting MSRP is $16,230, making for a roughly $8,240 difference in sales prices and additional sales tax.  Meanwhile, the Corolla boasts fuel efficiency numbers of 27 city and 34 highway.  With this comparison, you have a wider price difference gap and a smaller fuel efficiency advantage to work with.  The end result is that, even if you do all of your driving in the city, after 100,000 miles of driving, you will still be about $1,700 in the red with the Prius.  If you check the numbers on other sensible cars, such as the Hyundai Accent and Elantra or the Kia Forte, you will quickly notice that there are plenty of other opportunities to beat the Prius in savings.  Then there is the Nissan Sentra, which starts at $15,990 and brings you fuel efficiency numbers of 30/39.

So why would you do that?  Why pay over eight thousand dollars more for an uglier car?  And don’t get me wrong, I’m all for green living.  I recycle and reuse religiously, and I’m conservative with my consumption habits.  But, I’m sorry, I don’t believe in putting myself in the red for the sake of being environmentally friendly.

Some will respond that the Prius is cheaper when purchased used, and that’s absolutely correct.  So is the Corolla, the Sentra, and every car made, by the way.  The price gap between the Prius and a non-hybrid model might narrow a bit the older they are, but so will the opportunity to recoup the difference through gas savings.  In other words, if you buy your car with 80,000 miles on it, it becomes much harder to go another 100,000 without incurring substantial mechanical expenses.  The expenses that arise after 100,000 miles, by the way, are likely to be much higher with the Prius, as those expensive batteries and computer systems begin to fail.

I’m not sure why people are so quick to overlook the financially losing proposition of the Prius.  Some folks, I suppose, are just so ecstatic at the thought of 51 miles a gallon that they don’t even think of comparing prices.  Others will say that it is worth paying more in order to “save the planet.”  To me, it’s not.  And until hybrid technology reaches the point where comparably sized cars are comparably priced, the practical choice is a traditional model with better looks, better rear view visibility, and a forty percent cheaper price.

Update 07/25/2014: You might want to review my more recent post on Emotions, Pride and the Myth of Prius Savings, which discusses comments received on the above and how emotions and pride often prevent people from thinking through the financial wisdom of purchases like this.

 

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31 Responses to Myth Busters: Toyota Prius as a Money Saver

  1. Very good points here. It’s also worth noting that the Prius doesn’t actually “save the planet”, since it takes such a ridiculous amount of energy to make it’s engines that it more than evens out any gas you might save.

    I heard an interesting point on Priuses listening to the Freakonomics podcast – they pointed out that it might be conspicuous consumption that continues to drive their sales; if someone wants to be known as green, a Prius is a quick and easy (though not frugal) way to do it.

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  3. Maria Gralak says:

    Maybe a few of your site’s readers will want to take advantage of this offer. I am not sure how long it will run. I just ordered a new baby sling that normally costs $39.99 and I got it for only $11.90. The only thing you are being charged for is the “shipping and handling.” Anyhoo, the website seems like it specializes in “designer”-type slings so I think this is a decent bargain. There’s also “size insurance” which costs something like $5 but it can be removed from the order. Visit this store site: http://bit.ly/16LH7Eh and then hit “Shop Now” and then select the sling you want. Make sure you select your size and any other options! When you are taken to the page where you put in your information, enter ENBABY into the discount code box and the cost will be reduced to zero plus S&H. Enjoy!

  4. Wade K. says:

    With the exception of a few owners who damaged the battery by tinkering, there’s no known case of the battery failing, or so I’ve been told numerous times. Where the Prius V(the biggest Prius) will shine for me is I plan to live out of one to travel fulltime. What’s so special about a Prius in that regard? The a/c runs off the big battery, so when the battery gets low enough the gas engine will turn on to top off the battery. So one can sleep in the Prius in comfort with a few minor mods. And that is pretty frugal!

  5. EvilShin says:

    WOW, after years of doom and gloom predictions of Prius being a white elephant, comes this article that flies in the face of facts.

    It is interesting that the author states, ” The expenses that arise after 100,000 miles, by the way, are likely to be much higher with the Prius, as those expensive batteries and computer systems begin to fail.” Without any source material for such a speculative claim.

    In Vancouver, British Columbia, a fleet of Prius taxis from 2004 are hitting their 1,000,000 km mark (that’s 625,000 miles) on the original batteries, with only minor repairs and routine maintenance. This track record have prompted more taxi companies to switch their fleets over to the Prius and Camry hybrids.

    The way the Prius is designed, it does not have a starter motor or alternator, replaced by the much larger brushless hybrid motor. Since it is brushless, there are no brushes to fail (number 1 point of failures in alternators and starter motors), and the motor is sealed, so it does not suffer from corrosion. The regenerative braking (just a fancy word for engine braking using the electric motor) reduces brake wear, and prolong brake life.

    My Prius is 200,000 miles and still going strong. The front and rear brakes have been replaced just once. Some windshield wipers, and headlights, and a set of spark plugs along with the usual maintenance (ie oil change every 5000 miles) are the only maintenance it has needed so far.

    This compared to my previous vehicle: a chevy lumina minivan, which by 200,000 miles needed two transmissions repairs, 4 wiper motors replaced, two starter motors, four alternators, air conditioner repaired once, one engine over haul, four tail gate locks replaced (finally gave up on it and the tail no longer locks), two door lock repairs, one sliding door latch replaced, two coolant system repairs (one pump, and one leak), 5 fan belts replaced, four car batteries, two driver seats replaced, and 4 brake replacements (3 front: calipers, discs and pads, 1 rear, shoe and drums). Total cost of all repairs $13,000+ not including the $800 that would have been required should I have repaired the broken axle that did it in. Cost of lumina (purchased used 2 years old with 30,000 miles on it): $9,000.

    Total cost of Prius maintenance to date: <$1500. Cost of purchasing the Prius (used 2 years old with 60,000 miles on it): $15,000.

    Any ways from my experience with my Prius, it is the lack of repair cost that has made this vehicle more than worth the extra cost. (Which was not that much since a used Toyota Matrix would be about $11,000 at the same age and mileage.)

    BTW, battery is perfectly fine. The little (car battery sized) auxiliary battery might need to be replaced in 2 to 3 years time.

  6. Maneesh says:

    The Prius does not save you money in the long run:
    1. Psychologically, you will spend more money elsewhere knowing you are saving on gas, and that is not saving money.
    2. Prius is really painful journey for your back, especially your hips, so the longer you have driven your Prius, the more likely it is you will be going to physiotherapist and churning up all that saved money to correct your body alignment.
    3. The cost of maintenance for hybrid models vs standard gas models is much higher, and it is true that after 100,000 miles, the computer systems may start to become rusty, and they will charge you to your last dime to get it up to normal operating conditions.
    Unless you are in the Taxi business, this car is not for the normal person for daily commute to work or just for leisure.

    • Wade K. says:

      Toyota has sold millions of them to private owners, they’ve been rated highly by Consumer Reports, Consumers Digest, and others. It’s not a sports car, but it is a very practical daily commuter. And many have found that with practice they can get the mpg way up, known as hyper-miling or something close to that. And there are cushions that work well with your back while driving.

      • Maneesh says:

        Yes, but in the process of hypermiling, you are isolating yourself from the simple pleasures of driving. In the long run, it is not much money saved, unless the gas prices were to shoot to $8 per gallon. The top ranked family car in USA for more than over a decade is still the Camry, even though the Prius has been around for a long time.

      • Wade K. says:

        I’m a courier, and for about 4 years delivered a very rural route in East Texas. You’d be surprised how many ranchers had a Prius sitting next to their big pickups. When you drive 30+ miles to a supermarket, every bit helps. The Prius has proven to be super reliable, which means the cost savings between fuel and maintenance and not having to replace the car every 5 years(or less) really saves in the long run. From what I’ve read the only car that edges the Prius in overall costs of ownership is the Honda Fit, which costs considerably less to buy. But just barely and the Fit is smaller. And that is without hypermiling. If you want to drive a car for pleasure there are many better choices than the Prius. But this blog is about practical frugal living, and the writer makes assertions that don’t bear up under scrutiny.

    • EvilShin says:

      Maneesh, do you own a Prius? If not where do you get the idea that the Prius is bad for your back? I own one and I’ve driven it for most of the 200,000 miles. (It was purchased used at 62,000 miles.) My back is fine. I’ve only had the vehicle for 6.5 years. It is now at 225,000 miles. So here’s the deal, I drive the car 25,000 miles per year, about 10,000 miles more than the average driver. I can tell you my back is fine…

      Further more, I can tell you the expensive complicated electronics has not failed, in 225,000 miles. But what you claim is true, it would have failed twice. There has been a minor electrical issue with a fuse box, but that is something that is in all vehicles. It was fixed for $100. The wheel bearings had to be replaced, but that’s much better than par even compared to other Toyotas, let alone domestic cars.

      And your number one point, is just plain stupid. So maybe you should buy the most expensive to operate car so you will save money elsewhere? As for taxi businesses buying the car, that’s the proof in the pudding, no business where they drive cars to the ground (often 80,000 miles per year!), has more relied on the Prius in recent years than the taxi business. Next time you hail a cab, it will likely be a Prius or a hybrid Camry. Why, because they last forever with very low maintenance costs. They are NOT being subsidized by governments, they gas savings would not compensate for maintenance costs if what you say has an ounce of truth.

      This is all climate change denier BS…

      I have yet to see a Prius owner testify that the car is a piece of crap, just climate change denier fan boys. And don’t give me this Prius owners are too proud to admit their mistake crap. I owned a Lumina for 8 years and it is a piece of crap. So I call it as I see it.

      • Maneesh says:

        A lot of people are complaining and I am not sure what year you bought your car, but mine is the 3rd generation, and I found the driving position to be awkward. The car is excellent as it gives great mpg, but the ergonomics are poor. I can tell because my wife owns a Camry and I drive it sometimes. The difference in driving is quite obvious between the two. As for the Prius, well let me give you the big picture. They are rolling out hybrids like crazy now for only one purpose….extend the life of the oil fields and to maximize oil profits. If people continue to ride in their gas guzzling vehicles, the life span of the oil fields will be significantly shortened and not much money can be made. So increase the life span, and increase the gas prices over time and VOILA….maximized oil profits. It was never really about saving the planet.

  7. Philip says:

    I own a cab company. I make a living using and maintaining cars. I have a dual technical degree in Automotive and Diesel Technology. I have been turning a wrench for 16 plus years. I have studied oil and filtration. I have taxi cabs with upwards of 400,000 miles. I do 10,000 mile oil changes in extreme taxi service with approximately 700 engine hours between oil and filter changes. There is a term called (planned obselence) the engineering of things to fail or have a certain life and it all started with the light bulb in the early 20th century. It is not uncommon for diesel semi-truck to go 1,000,000 miles between overhauls. But cars only seem to make it to 150,000 miles? This is by design, because car manufacturers have to sell new cars and dealerships have to keep there mechanics busy. In 1965 the SR71 black bird plane was launched and could fly over 2000 miles per hour and almost leave are Atmoshphere and you actually believe car manufacturers can’t build a longer lasting car? I would bye every second generation Prius in the United States if I had the money. They are being used in over dozen countries as taxi cabs and they don’t fail EVER… And if the high voltage battery ever does fail eventually you pick one up at a salvage yard $200 bucks, the salvage yards can’t even sell parts on those cars because they don’t fail. That’s just my 2 cents! PhilforGOD

  8. Laura says:

    Your article was so ignorant I barely got through the entire thing.
    1) instead of comparing to the cruze and corolla (both COMPACT cars) try staying in the mid sized class to get an apples to apples comparison.

    2) talk about why ‘drive an ugly car’ many people VALUE things like reducing emissions more than styling. They just must not be on your stylish level, thank god.

  9. The Fox says:

    i love the prius

  10. Scott says:

    This is an absurd article. Comparing the Prius to a Sentra or Corolla??? Not quiet as big as the Camry, but closer to that then the Corolla. I’ve had my Prius since 2006 and it recently passed 200,000 miles and is going strong. Changed the brakes once and the tires twice so far (first time because of nails on the highway). Other then that, just oil changes and once light that went out. Prior to this, I never had a car pass 100,000 miles. This is by far the best car I’ve ever driven. Also, I’m 6 feet tall and 225 pounds. I (and my wife and two kids) take all our driving vacations in the Prius and fit everything with no problem. Comparing it to compact cars is just silly.

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  12. Stan Peterson says:

    Most states don’t charge sales tax on hybrids ( saving 10% in Seattle). Also, lower annual registration fees. Finally, a quick look at the high reliability rating of consumer reports does make it pencil out especially at resale which remains high. More space in a Prius 3 than a corolla too.

  13. BJ says:

    The gist of your op/ed piece here is that you don’t think using less oil is worth any investment or expense at all. I would think its better to spend more to protect our environment, you don’t have to go “into the red” to do so. Its fine to have differing viewpoints. A hybrid can have more benefits price wise if you purchase slightly used. There are used low mileage hybrid vehicles on sale for thousands less than the retail price. Just like gas only cars, once hybrid cars get sold in mass numbers, the aftermarket brings the price down for everyone when used purchasing comes into account. You can really, really save if you purchase a moderately used hybrid in great condition vs traditional gas cars.

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  15. johnP says:

    Is the author of this article or the other dissenters here even on the same planet… I’ve seen the carfax of 30 priuses in the last two weeks and not a single one needed anything other than the brakes…once.. at 200k average… My 2001 prius at a net cost of $9000 after selling it saved me $11,000 in gas over the smallest four door audi we owned then. How many cars pay you to drive? And that would be much more over that once very nice Nissan SUV we had which fell apart at 170k. These hybrids cars resell so fast and high. What planet I ask again? There is a whole cottage industry to help handy folk fix the batteries themselves for $45 in parts total… or by a pro shop for $450 and that’s so much cheaper than the honda civic transmision at $1300 (usually at half the milage the battery on the prius will need a rebalancing of cells. LOL. I watched my engineering student friends at my school make an electric car in 1992 and I can say with tesla, the end is near for the ICE. For sure. Finally. The chevy volt and new plug in hybrids have an interesting dynamic when coupled with even a few solar panels at the work garage or at home. This is the future. Get with it brother.

  16. johnP says:

    And twice I have convinced the most frugal wife in the world to pay $10k more for a prius because when you actually crunch the numbers, the prius is cheaper to own than almost any comparable or even less equipped and cheaply made economy car. All via actual numbers on a spreadsheet by this engineer. All that before we really knew if the batteries would last 100k.. and they seem to average 250k or maybe 500k with one or two $400 rebalancing and reconditoining of the battery pack. And before we realized toyota was going to make almost every component of this car run for 500k or so.

    Now add to that: being able to drive in the HOV lanes alone for a decade? put a price on the extra gas and maintenance saved there. Then add the power of the electric “turbo” off the line… I beat mustangs daily from a red light. Then being able to leave the garage without making any smell for my kid to inhale? Then add this intangible. Something I never even imagined before owning a prius: when we are stuck in 40 mph traffic and seeing that we are getting over 100mpg for up to 20 minutes like that? and watching others pound the dashboard? The reduced smells of cars in our cities? Less asbestos dust from brakes all around? In the newer priuses I average 65mpg with almost no change in driving and it’s not even a plug in. Hello. We just bought a once $700,000 house for half that… in some part becuase we saved about $18k in gas over the average image enhancement fool out there. When that equity goes into gold again for a tripling.. we will both retire. Good luck in your corrolla… wait… every car is getting a hybrid option? even ferraris and now every military boat too? hmmm… stupid tree huggers huh?

  17. I think the writer picked a poor choice of car (Chevy Cruze) to compare the Prius to. The only reason i think that, is because the Cruze is in the top ten in fatalities when crashing. I forget the percentages and stats, but you can look it up. I think if we are comparing cars and prices; it should be noted the more expensive Prius has better safety. And Toyota makes better cars than GM. That is a fact.

  18. Pattie says:

    As I was saying on the other comment before it posted and I was not ready for it. I also drive long distances with my Prius and have never had back or hip or any kind of pain. So it must have just been the person. Prius is a great car.

  19. DE says:

    Just bought my first Prius (II), a 2012 with 16,000 miles for $18,000. I’ve been averaging 65 to 75 MPG driving in Boston. I averaged 60 MPG driving from Boston to Providence,RI. Unfortunately, the “Practical” frugal author who wrote the article can’t see the forest through the trees. And if he/she continues to gas her/his car up, we won’t have any trees left. Some people are so frugal they completely lack common sense.

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  21. 65,000 as a break even point? That doesn’t sound bad to me. From what I understand, it is not at all uncommon for a Prius to accumulate 200,000+ miles over its operational life span. Using your own math, this car would completely pay for itself in gas savings even compared to a car considered quite efficient by non-hybrid standards. Am I missing something?

  22. Aaron says:

    You guys crack me up. Do some basic math and assumptions

    Rough Cost for a Prius V with good option package. 32,000

    Rough Cost for Camary SE with a good option package. 25,000

    Gas 3.50 a gallon.

    If Robert Purchased a Prius V for 32,000

    His payment would be 575 a month 60 months @ 3%

    What would his yearly operating cost to drive 15,000 miles a year at 3.50 per gallon of gas and 45MPG?

    1166 spent on gas, 6900 in payments. Total spent 8066 dollars.

    If Jill Purchased a Camary SE 4 cylinder for 25,000.

    Her payment be 449 a Month 60 months @ 3%.

    What would her yearly operating cost to drive 15,000 miles a year at 3.50 per gallon of gas and 30MPG?

    1750 spent on gas, 5388 in payments. Total cost 7138 dollars.

    Who has made the better decision over the course of the 5 year loan?

    Robert has spent 40330 to drive his prius 75,000 miles
    Jill has spent 35690 to drive her camry 75,000 miles.

    Obviously Jill has made the better decision saving nearly 5,000 dollars over the course of 5 years in her Camry.

    • EvilShin says:

      Dude, my Prius is now 235,000 miles old. I have spent a grand total of $2000 on maintenance on the vehicle. This includes summer and winter tires, brakes, spark plugs, oil changes, air filters, etc, It also includes a total of $400 on repairs.

      During this time, I did not have to change the batteries, though the little lead acid battery is getting to the end of its life, but still usable after 7 years. There were no replacement of the starter motor or the alternator, as these are taken care of by the one of the two hybrid motors which are brushless. (If you don’t know what that means, let’s just say brushes are the point of failure in almost all automotive dynamos.) The only failure of that sort was a blower motor. Nothing special about it, typical brushed motor for blowing air into the passenger compartment…

      Anyone with a Camry at 235,000 miles that can give me some anecdotal maintenance costs on the Camry?

      Also, the assumption of your calculation is that fuel prices won’t rise in the 10 years or so that you will own your car. Who here believes that fuel prices won’t rise in the next 10 years?

      Let me remind you that in 2004, gasoline was just getting above the $2 mark. Today it is nearing $4

      Now go back and redo the calculation taking into account fuel price increase for your five year lease…

      Of course you can do what a lot of smart people are doing: buying a used Prius. Since they are so trouble free, a high mileage Prius is a bargain. It will save you fuel costs, maintenance costs, AND purchasing costs.

  23. CJ says:

    Evilshin, my Mother drove a Camry and sometime around 110,000 miles, the engine blew. We had a used engine dropped in (IIRC total cost installed was about $2500) then a few months later the transmission blew, lol. Had that rebuilt for $1700. At some point, the air conditioning stopped working and she gave the car to my Aunt. At least in our experience, the Camry was far from low maintenance. I just googled it too and a lot of other reports came up with blown engines and transmissions. I opened a tab next to it, and searched for prius blown engine and transmission and barely anything came up, lol.

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