Chevy Volt Payback Period Really 26 Years?

Editor’s Note: EarthTechling is proud to repost this article courtesy of Midwest Energy News. Author credit goes to Ken Paulman.

An article in a recent New York Times looks at different types of hybrid and fuel-efficient cars, arguing that many buyers opting for the more efficient models may take years to see any actual savings.

The article comes with a handy chart, using data from TrueCar. The chart compares the price differences between comparable conventional and hybrid cars, and using a figure of $3.85 per gallon and 15,000 miles driver per year, estimates the number of years it would take to recover the cost difference in gas savings (assuming the price of gas never goes up or down).

For most of the cars TrueCar looks at, the break-even point is ten years or less, well within the typical lifespan of most new cars. But there are two outliers – the Ford Fiesta vs. the Fiesta SFE and the Chevy Volt vs. the Chevy Cruze, both with payback periods in excess of – are you ready? – 26 years.

At this point, if you’re Rush Limbaugh, you’ll be rushing off to the microphone to declare the Volt a waste of money. The rest of you may be wondering if that number is really accurate.

The missing mpg figure

The figures for the Fiesta are pretty clear (and trivial, the cost difference is only a few hundred dollars), but for the Volt, we’re left with a mysterious dash where there ought to be a data point – the assumed mpg.

Working backwards using a spreadsheet, I found that the missing number is 46.7 – that would be the mpg equivalent you would have to achieve with a Volt in order to reach a payback period of 26 years. That seems a tad pessimistic, considering the EPA rates the car at 93 mpg equivalent in electric mode and 37 mpg running on gasoline.

The problem with pinning down a mileage figure for the Volt is that it depends entirely on how much you drive in electric mode. A person driving fewer than 35 miles per day (the Volt’s approximate range on battery power) would theoretically never have to buy gas at all. Some Volt owners have reported average mileage in excess of 1,000 mpg, and figures reported by a handful of Volt owners on run from a low of 77 mpg to as high as 168 mpg.

But wait! You can’t just make estimates based on the cost of gasoline burned – electricity costs money, too.

The EPA says the Volt can go 100 miles on 36 kWh, and for simplicity’s sake, lets assume a cost of 10 cents per kWh. So at 37 mpg (in gasoline mode) with gas at $3.85, the Volt costs about 10 cents per mile to drive on gasoline, versus 3.6 cents per mile on electricity.

Still with me?

Your mileage will vary

To get to that 26-year payback figure, we’d have to assume the Volt was driven 11,000 miles in gasoline mode, but only 4,000 miles in electric mode. Assuming the car exhausts its battery on each trip in order for gasoline mode to kick in, that would mean the car was only driven 114 times each year for an average of 131 miles of driving each day. That’s not very typical driving behavior, unless you’re a part-time pizza delivery driver.

2012 chevy volt

image via GM

So let’s assume the car is charged and driven every single day. Over a year, that works out to 41 miles per day, 35 in electric mode, 6 in gasoline mode. Again using the spreadsheet, that puts our payback at 11.8 years.

Or, we can assume the car is only driven on weekdays. That means 57.7 miles per day (35 in electric mode and 22.7 in gasoline mode). That would put the payback period closer to 15 years.

And, just for kicks, if you drove the car in electric mode 100% of the time, the payback would be around 10 years – more in line with the other cars in the Times’ comparison.

Now, that’s still a long time, but it’s also based on some other unlikely assumptions – such as, the price of gasoline remaining below $4 for the next decade (anyone willing to wager on that?).

recent analysis by Edmunds pegged the Volt vs. Cruze payback period at 15 years with gas at $3 per gallon, and 9 years with gas at $5 per gallon, though those numbers seem to have been reached simply by comparing EPA mileage figures.

The bottom line is that the Volt is a different beast, whether it’s a smart financial decision will vary dramatically depending on an individual’s driving habits. In fairness, the Times does make this distinction deep in the text of the story, but no such nuance can be found in the accompanying graphic.

The 26-year payback period that the Times is reporting is based on a pretty unlikely scenario, and should be taken with a grain of salt.

Midwest Energy News, launched in 2010, is a nonprofit news site dedicated to keeping stakeholders, policymakers, and citizens informed of the important changes taking place as the Midwest shifts from fossil fuels to a clean energy system.

    • Devin Serpa

      Ha I looked at the link you have for “in excess of 1000 mpg” and yes if you ignore the electricity costs, sure a Volt can get 1000 mpg, even 3000+ mpg like that engineer. But since we are ignoring electricity costs, my LEAF gets infinity mpg. Pay back period very short….

    • dexter bland

       It would be interesting to see a total cost of ownership comparison that includes some other factors (e.g. parts and servicing, and insurance). Hybrids are rumored to have low maintenance costs, has this ever been quantified?

      Then there is the opportunity cost of refueling. If you spent a half hour per week, driving to and from a gas station and refuelling, and charge your time at say $25/hour, then that amounts to $650/pa, or $6500 over the course of a vehicle’s lifetime. Once again that’s going to be a highly personalized equation, but to some of us the smaller amount of attention these cars need has a direct financial benefit.

      Even so, would like to see the next generation Volt with a smaller battery, for a lower price sticker and broader market appeal. Perhaps the full size battery could be an optional extra for those who need it, I expect many owners drive much smaller distances on a daily basis.

    • Ruth Cooper

      I am a huge advocate of hybrid, better yet electic, vehicles, as a mechanism toward self-sufficiency 🙂

      I propose focusing on self-sufficiency and sustainability vs. playing the unpredictable $’s game. The only thing we know is that non-renewable resources are finite.

      I would like to suggest to the readership than any payback periods involving fuel costs and extending beyond ~ 5 years, are hypothetical at best. Those that propose to present 20+ year payback periods must be on special medication.  There is no way that we could possibly predict what traditional fuel (i.e. oil/coal-based) availability, let alone cost, might be several decades from now.  We can’t even currently predict this day-to-day.

      I know that people want feasibility studies, payback period estimates, ROI estimates, etc.  But the reality is that traditional fuel costs and/or availabiltiy cannot be projected that far into the future.

      P.S.  I have witnessed gas prices at the pump here in the Hamilton area go from $0.95/l to $140/l over the last 2 years; unfortunately, my pay cheque hasn’t been similarly increased.  For those in the transport business, including those of us who buy food & clothing at local outlets, that spells higher prices for services = higher prices for consumer goods.
      P.P.S Buy local before it ceases to be an option!