Sunday, January 15, 2006

 

Why I'll probably buy a Prius

When I started thinking about buying a second car, I first looked at a Kia Rio or another equally basic form of motorized transportation. At that point I envisioned spending in the ballpark of $11k. Slowly it occurred to me that my tastes had become a bit more bourgeois; I really like power windows, locks, keyless entry, a tilting steering wheel, etc., which don't come standard on the most basic models. Alrighty then, I'll need to upgrade, which puts the price more in the 13-kilobuck range.

Now suppose I get really fancy and want a vehicle from a respected manufacturer in order to avoid rapid depreciation. That moves my thinking to something like a Toyota Corolla. That vehicle starts at $14,000, but to get to the model that has

then the price is within a few accessories (e.g. floor mats) of 20 kilobucks. An equally well decked out Prius will run about $24,130 (Yes, I've memorized that number; that's package HG, in case you're curious). Now remember that if you buy a Prius before July 2006, you'll probably be eligible for a federal income tax credit of about 3 kilobucks, so the Prius costs something like 21.3 kilobucks with reasonable accessories. So how many miles must one drive at the Prius' superior efficiency to make up that the $1,300 difference? Solving the equation

$1300 / gasPrice * (1 / (1/CorollaMPG - 1/PriusMPG)) = miles

where gasPrice = $2.50
where CorollaMPG = 31.0
where PriusMPG = 47.8

then miles=45,865

I think that's a reasonable time to ROI. Moreover, we like the Prius as a vehicle a bunch more.

OK, but suppose that I live in a snowy place where winter drags on. I still feel good about the Prius because it seems to handle really well on slick surfaces. When we test drove a Prius, I took it to the local high school's icy parking lot and attempted to put the vehicle into a spin or otherwise lose control. Without endangering the vehicle, I couldn't. I say I couldn't without hyperbole. After we returned the car, I took my current front wheel drive sedan back to the parking lot to get a quick comparison. It, and I, fared much worse; our car's traction was so poor my wife asked me to stop soon after starting to play, er, experiment. Honestly the Prius seemed more stable on slick stuff than Subarus I've ridden in.

So let me go back and revisit one assumption: suppose I was willing to stick with a Kia. At that rate, I'd want to at least look at the Rio 5, which, with the addition of a hatchback, appears more similar in space to the Prius. Decked out with almost every feature that I listed as important beside VSC, the Rio 5 is $16,000, a solid 5 kilobucks cheaper. To make up that difference you'd have to drive the Prius about 175,000 miles. Honestly, I'm expecting the Prius to last that long without need of significant repairs. However, I think the decision at this point has really come down to the quality of the vehicle and I think I'm going to spring for the nicer. Why? Well, for example, the Prius has

I think my final reason for picking the Prius over anything else is the fat check from the government. Naively assume that all vehicles evenly depreciate 2 kilobucks per year. If the federal government writes you a check for 3 kilobucks, they're covering the cost of 1.5 years' depreciation. If you trade in after 3 years, you're further ahead on that curve than you would be with any other vehicle. Now dropping a naive assumption: vehicles don't depreciate evenly; however, the Prius has held its value pretty well. I have a friend who bought an '02 Prius for, I'm guessing, around $22K. It's now privately salable for about $16K according to Blue Book. He lost $6K in 4 years, which beats my naive depreciation curve. I'll speculate that Priuses (my Latin teacher wife points out that the proper plural of the Latin word prius is priora) will continue to be well-demanded items because I'm pessimistic about the future price of gas, which seems to have a direct correlation to the demand for such vehicles.

Feel free to point out flaws in my logic or better transportation options that I missed. I've still got a few days before I'll make an irreversible decision.


Comments:
Thank you for noting the correct plural "Priora" even if you didn't use it.

And though I have been through this logic with you numerous times before, I appreciate seeing it all laid out in an organized fashion, math equations and all. Thanks for not going out and buying the first spiffy Hummer you fall in love with.
 
The financial considerations you consider are helpful. I've seen similar numbers elsewhere.

But I think you notice something else important, which is the that monetary value is not the only value to consider when buying a car. There is also the safety value, the aesthetic value, the convenience value, and (although you didn't explicitly mention it) the environmental value. It sounds like based on your weighing each of these, the Prius wins.
 
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