Plug-in hybrid car costs

The costs of owning a plug-in hybrid car are different than those associated with a conventional vehicle. Upfront capital cost (purchase price) tends to be higher than for non-hybrid petrol and diesel cars, whereas running costs (fuel, maintenance, car tax) tend to be lower.

Cost of buying a plug-in hybrid car

The purchase price for most plug-in hybrid cars are at least 50% higher than for their non-hybrid petrol and diesel equivalents. Typically, for new car, the additional purchase price is around £8000 on a £15,000 model, and £10000 on a £20,000 model.

The additional capital cost is a reflection of the price of the plug-in hybrid drive-train which adds complexity and requires a high quality, significantly larger battery. The additional price reflects the size of the battery – the larger the electric range, the larger the battery capacity and the highet the vehicle cost.

However, from January 2011, the Plug-in Car Grant subsidises the purchase of qualifying plug-in hybrid cars – the grant is worth 25% of the cost of the vehicle up to a maximum of £5,000. The models that qualify for the Grant currently include three plug-in hybrid cars.

To be eligible under the grant scheme vehicles must satisfy the following:
*Only new cars are eligible; including pre-registration conversions (cars converted to battery or hybrid versions before first registration).
*Tailpipe vehicles emissions must be 75 gCO2/km or less.
*Plug-in hybrid EVs (PHEVs) must have an electric range of at least 10 miles.
*Vehicles must be able to reach a speed of at least 60 mph.

Both private car buyers and fleets are eligible to receive the new grant, which is administered by the Office for Low Emission Vehicles (OLEV) – no applications forms are required as the dealership completes all the necessary paperwork on the buyer's behalf and the grant is automatically deducted from the vehicle price at the point of purchase.

As more hybrids become available, and as the cost of hybrid drive-trains is reduced, the price premiums of hybrid will reduce over time. That said, recent research suggests they will remail more expensive for at least another 20 years.

Hybrid car running costs

Most running costs are less for plug-in hybrids than conventional vehicles. The higher capital costs are mainly offset by lower fuel costs due to the high fuel economy of the vehicles (in hybrid mode) and the ability of the cars to run on low cost electricty.

As is the case with carbon emissions, in hybrid mode, plug-in hybrids typically use 15%-20% less fuel per mile – fuel costs are reduced by a similar amount. Hybrids therefore make most economic sense for high mileage drivers as the reduced fuel costs will help to recoup the higher purchase price.

Other changes in ownership costs include car tax (Vehicle Excise Duty) – as all plug-in hybrids have official CO2 emissions at under 100 g/km, car tax is effectively zero-rated – both for the 'standard' and 'first year' rates. Company car tax is also very low, most plug-in hybrids being charged at the 5% or 8% BIK rate depending on fuel type.

For drivers in and around London, another major running cost to consider is the Congestion Charge – all plug-in hybrids are eligible for the Greener Vehicle Discount (although owners of hybrids need to register with Transport for London and pay an annual £10 fee). With a £10 payable daily charge, this could provide a potential annual saving of around £2000.

Given that new cars with tailpipe C02 emissions of less than 110 g/km are eligible for an Enhanced Capital Allowance, business owned plug-in hybrids therefore can lead to significant savings in corporataion tax within the year of purchase.

Next: Where to charge your plug-in hybrid car >>

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