It’s hard to say exactly when or how the most recent war in the Middle East will end. While huge in scope, time-wise, WWII was a TikTok video compared to the longer conflicts in Iraq and Afghanistan. Even the battles in Ukraine continue to rage with no sign of stopping. Unless you can get around on a bicycle and live in a house that is powered mostly by renewables, the cost of today’s conflicts will eventually impact your life. For car buyers, this is most easily understood as the cost of gasoline or electricity.
There’s data that shows that buyers are suddenly more interested in “electrified” models, which includes different types of hybrids and EVs. Does that math? For hybrid buyers, recouping the difference between the price premium and gas prices might take a little longer than you might guess. The other way to look at this is from a viewpoint of a country. How much money is a place like China saving by having all these EVs?
I’ve talked a lot in The Morning Dump about how a lot of good used EVs are going to come into the market soon. Is this a good deal for dealers that need nice used cars? Or is this just going to be a replay of the price wars of the past?
That’s a lot of questions, so let’s see if I can pull together some answers.
Nearly A Quarter Of Car Buyers Are Looking At ‘Electrified’ Vehicles
Would you like to see a chart? Here’s a chart:
This is from Edmunds, which measures how often people are looking at photos, reading reviews, or browsing inventory of various vehicles. As recently as early March, the number of people interested in any form of electrified vehicle (hybrid, PHEV, EV) was hovering around 20.7%. It’s understandably jumped up to 23.8% as gas prices and crude prices have increased the most since Hurricane Katrina.
“High gas prices combined with elevated interest rates are a tough one-two punch for car shoppers,” said Head of Insights and verified cool person Jessica Caldwell. “If oil prices remain volatile, it could keep inflation and auto loan rates higher for longer, putting continued pressure on monthly payments for consumers who are already feeling stretched. While it’s too early to gauge the full impact, a prolonged conflict involving Iran could also drive up supply chain and logistics costs, placing further pressure on vehicle prices.”
Are oil prices going to stay volatile? It sure seems like it. President Trump just waived The Jones Act, which is something I wasn’t sure I’d ever see in my lifetime. That’s a seemingly obscure but very important maritime law that means any good shipped between ports in the United States have to be shipped on a vessel built here and owned by an American company. Getting rid of it, even temporarily, is a big deal.
The recession fears are real, too, as inflation is still too high and only likely to get higher as the impacts of the war ripple through the supply chain. That could mean a delay in interest rate cuts, as Caldwell points out above. Moody’s just put the chance of a recession in the next 12 months at 49%. Obviously, 49% is sort of like saying “I don’t know,” but the lack of uncertainty is the safe bet.
Does all this mean people are making a safe bet by buying hybrids? That depends.
Hybrid Buyers Still Need To Own A Car For Years To Make Up The Difference
There is a point that gas prices could hit where almost anything that doesn’t need gas is likely to be a good deal. We’re not quite at that point yet and, of course, it varies a lot depending on which car you want to buy. A Toyota Corolla LE is $22,925, whereas a Corolla Hybrid LE is $24,775, for a difference of $1,850. Using the combined EPA estimates, the ICE-powered car gets a good 35 MPG and the hybrid gets an impressive 50 MPG.
A person who drives 12,000 miles a year and has to pay the current $3.84 average per gallon (AAA), will save roughly $395 a year, meaning it’ll take 4 years and 8 months to make up the difference. If you assume that hybrid cars will carry a higher resale value and not compromise reliability, that’s not a bad deal. If average gas prices drop to $3.00, that’ll take six years, which still seems reasonable. If gas rises to $5.00 a gallon, that’s less than four years to make up the difference.
That’s at the lower end, however, and S&P Global Mobility puts the advertised range in prices between $1,614 and $13,121 for full hybrids. Assuming a 15 MPG improved efficiency at the high end, that would take more than 30 years to make up the difference. The average is a little better at $4,300, but that’s still ten years.
As more automakers sell hybrids, this delta should shrink, but high demand in the interim is causing an observed drop in incentives:
In many instances, because hybrid demand has gone up, there are fewer incentives applicable to hybrid versions or dealers were asking over MSRP for the hybrid model making them even more expensive compared to the gas only version. The result is a hybrid vehicle that typically costs more than the gas only counterpart with potentially fewer applicable discounts. However, even when there are higher discounts, it doesn’t offset the higher initial price.
Again, this is going to depend a lot based on where you live, what you’re currently driving, and how long gas prices are going to last. For something like a Corolla, CR-V, or Maverick, the small difference will likely be to your benefit over the long term. If you’re buying a Lexus LS500h? The third owner will reap those savings.
EVs Probably Saved 2.3 Million Barrels Of Oil A Day Last Year
The hybrid calculation is the easier one to make because you’re just comparing the usage of one fuel source to another. The cost of electricity is not only regional, it’s also related to delivery mechanism. Fast charging is, typically, a lot more expensive than home charging. It gets even more complex. While gas prices are likely to go up due to the war, so will prices associated with creating electricity.
Environmental group Transport & Environment looked at the EU market, took into consideration the potential impacts, and found that the price of gas is likely to rise about five times more than the cost of shoving some electrons into a battery:
Petrol car drivers can expect to be hit far harder by price rises related to the Iran conflict than electric vehicle drivers, new analysis finds. With oil prices surpassing $100 a barrel, the additional cost of fueling a petrol car is expected to be five times the extra cost of charging an electric car, according to T&E. Electric vehicles will be top of the agenda for EU Environment Ministers meeting in Brussels today when they will discuss a proposal to weaken climate targets for carmakers in the EU Automotive Package.
T&E analysed the likely impact on petrol prices and found that fuelling the average petrol car would cost €14.20 per 100km, a rise of €3.80 due to the conflict. The average cost of charging an EV would be €6.50 per 100km – an increase of €0.70 because of higher electricity prices due to more expensive gas. [1] For company cars, which drive high mileage, the impact will be even greater: an extra €89 per month for every petrol car in a company’s fleet. EV company cars would cost just €16 extra per month to charge.
As a producer of natural gas, and not an importer, American consumers might see that the price increase for gasoline might be ever greater than for electricity. But what about at the macro level? How much are countries saving by the EV switch? New research from BloombergNEF shows that last year the savings were meaningful:
Growing global adoption of electric vehicles helped avoid the consumption of 2.3 million barrels of oil per day last year, according to a modeled scenario from BloombergNEF.
Those fossil fuel savings are expected to increase every year for the rest of the decade as more drivers turn to battery-powered vehicles, said Claudio Lubis, BNEF’s oil analyst. The research group projects that by 2030, avoided daily consumption could more than double to 5.25 million barrels under the economic transition scenario, where governments deploy technologies that are economical rather than implement policies primarily driven by climate goals.
Put another way, globally, enough fuel was saved to account for about 15% of daily consumption in the United States. That’s not nothing. Another report cited by Bloomberg showed that, at current levels of consumption, China would save about $28 billion annually in lower oil imports, and that was when the price was $80 a barrel. As of this morning, Brent Crude prices jumped to nearly $110.
Are Cheap Used EVs A Trap For Dealers?
Numbers are fun. Let’s do some more numbers, shall we? In 2025, about 2% of cars coming off lease were EVs and 93% were ICE-powered. This year, Edmunds projects 8% will be EVs, or about four times as many. As I’ve discussed before, this is a quirk of the way the Inflation Reduction Act was enforced, meaning that way more EVs were leased than purchased. We’re not even at the peak, which should come in 2028 (roughly 2.5 years after the revocation of the IRA).
If you’re in the used market and are in a position to buy an electric car, this is potentially a great deal. The War in Iran, counterintuitively, is probably bad for buyers if the potential supply glut is suddenly met with more demand, but that’s far in the future.
Could this be good for dealers? Potentially, but there’s a risk. When EV mania took over during the early part of this decade, dealers took on a lot of used EV inventory. This was suddenly a curse for some dealers as Tesla lowered its prices and other brands followed. The relationship between new and used cars usually means that when new car prices drop, the comparable used car prices have to go down as well. Dealers might have spent $30k for a used Tesla Model Y at auction, only to see values crash.
As Automotive News points out, the operative question is how automakers are going to price these off-lease vehicles:
Bowman Chevrolet expects used-EV lease returns to balloon starting in May, though they already are trickling into the market, Jackson said. The dealership bought two off-lease EVs in December from GM to see how customers reacted to pricing. The first of those two cars sold the first week of February at a profit and the dealership has since sold the second vehicle, he said.
The dealership is waiting to see how GM prices off-lease EVs once “the floodgates open,” Jackson said.
“Are we going to see normal demand in spring or fall?” Jackson said. “That puts us in a position where all we can do is buy some to try and and see who calls.”
I will be keeping my eye on it this year.
What I’m Listening To While Writing TMD
For no reason at all, here’s “I Ran” by Flock of Seagulls. I wonder how hard it is to play the drums while spinning in a circle? Probably easier than wearing a garbage bag in a hot studio.
The Big Question
What’s the biggest jump (or dip) you’ve made in fuel economy from one car to another? The Forester got about 24 MPG combined and the CR-V Hybrid I have now makes about 35 MPG in my driving experience, so that’s +11 MPG.
Top photo: Ford
The daily gets about 25mpg and the old Benzes get 10-12 on a good day, so 13-15 dip. I’m not proud of it.
Back in 2013, we had a 2006 Acura MDX that got about 17 MPG on a good day. We leased an all-electric FIAT 500e for $99/month, used it for most of our driving, and largely parked the MDX. The orange little car was really fun to drive and the gas savings paid for the lease. The hardest part was returning it after the lease; the two closest FIAT dealers had closed.
Amazingly, I don’t think I’ve had a car yet (out of 15 or so) that has gotten better than 30mpg regularly. Sad.
Most impactful change was probably swapping my 79 Westy automatic for an 80 Datsun 210 5 speed. The Westy went back to my family and the Datsun came from my then-girlfriend’s family and had been sitting in a field for years, so it was free. 13mpg -> 25mpg saved me a lot of money as a broke teenager working at Dairy Queen and Starbucks.
I have stopped looking at oldish additional toy convertibles and have switched to used EV’s. Saw an Ionic 5 in CA marketplace for 13K yesterday. Soon….
18mpg from a 04 STi (still have it) to 65+mpg in a 13 Chevy Volt (I also still have this), meaning a 3.6x increase in fuel economy. C:
Most have probably seen this by now, but there’s a fairly well-done AI video based on the Flock of Seagulls “I Ran” music video above, but featuring Donald Trump, JD Vance, Marco Rubio…
https://www.youtube.com/watch?v=D_h7hcK6pFs&list=RDD_h7hcK6pFs&start_radio=1&pp=ygUjZG9uYWxkIHRydW1wIGZsb2NrIG9mIHNlYWd1bGxzIGlyYW6gBwE%3D
TBQ: Jumping from my very ‘Murican Jeep XJ 4×4 to a rented Skoda Octavia TDi.
Bought a new Lexus 450h+ back in December. Plug in hybrid. You’re right, we’ll never live long enough to recoup the additional cost up front. However, for us personally, living in a town of 25K, the plug in hybrid was an excellent choice. EV in town, ICE on the road. Our nearest “big city” is 60 miles away. Our total average mileage is lower 60’s mpg. With the current oil “crisis”, we’re pretty happy.
I feel sorry for auto manufacturers. The government just keeps changing the rules…
Sooo my first car was a 2005 Subaru Outback 3.0 BP, that was drinking about 14l/100km + 1l of oil (it was… not in a good shape and died of rust).
Afterwards came a short affair with a Mazda CX-7 turbo petrol. While the consumption of fuel stayed the same, the oil consumption went down from 1l/100km to almost zero! That’s a 99% decrease.
Now I drive a BMW i3s, at 15.7kwh/100km, which equals to about 1.8l/100km in petrol terms. That’s almost a 90% increase in efficiency.
Bowman Chevrolet? I bought a 2001 Cavalier Z24 from them in the early 2010s.
Biggest MPG jump was going from low-to-mid-20s in my lifted 2005 Saab 9-2X to high-40s-to-low-50s in a 2007 Prius.
I still have both, but one is still a daily and the other has rotted to the point of being off-road only.
Aside from the resale value, I think you’re also ignoring the value of a hybird/electrified model being the better car in more ways than just efficiency.
The hybrids in many lineups are typically better equipped, have more power, and are more refined than their pure gas counterparts. There’s huge value in being in a nicer car while those gas savings catch up to the price.
Plus it seems to be the only way to get a reliable transmission in a fwd vehicle these days. Otherwise you’re stuck with a cvt.
A couple of years ago we sold my wife’s FJ Cruiser which averaged about 19 mpg (we also have a newish 4Runner and didn’t need two 4WD trucks) and bought a new RAV4 hybrid. To date and 18K miles, it has averaged 38.7 mpg overall. Yes, that’s significant and it does make road trips a bit less painful…
I bought a 2015 Camry two years back that’ll average 36 mpg, it’s my commuter and I average 75 miles a day, or 24,500 miles a year. I wince at refueling, but I can’t imagine my coworkers, most of whom drive trucks, who’re getting less than half of my economy and driving similar miles.
I just bought a 2017 Volt (with new battery this last year), for $13.9k. Comparable Mazdas were $16k+, so my hybrid has already paid for itself.
I hate that my prior Mazda got totalled, but the Volt, getting about 80-100 MPGe for my daily commute is a great deal at a great time.
PS, interestingly, pure gasoline on the highway, my Mazda 3 got 33-34mpg, and the Volt only gets 31-32. So hybrid isn’t always the answer. However for my daily commute, which I can do 70% electric, 90 MPGe is a good deal.
“on the highway, my Mazda 3 got 33-34mpg, and the Volt only gets 31-32.”
I wonder if that is a reflection on your driving speed.
Oh, the actual mpg values are absolutely a reflection of my driving speed, and I make no apologies for that. Wind resistance scales as the square of velocity.
Could I drive slowly and get 38, 40, or more mpg from the Volt? Maybe, but I’ll never know.
However, when comparing them at the same speed in the same way, the difference between them, is only due to the cars. That is where the Mazda did better. The Volt is underpowered and/or geared differently, so it works harder at that speed, with worse resulting fuel economy on long highway drives.
But to reiterate, for my daily commute driving, the Volt is getting me >80mpge, so I’m quite happy with it.
“the actual mpg values are absolutely a reflection of my driving speed, and I make no apologies for that.”
I’m sure the courts will appreciate your insubordination.
Oh, I’m surprised you didn’t know this, but courts don’t regulate my mpg.
As a function of speed they certainly do. If however you prefer to lower your MPG by dropping to 15 psi in all your tires, or drive with your handbrake on, well that’s OK.
That’s the first thing you’ve said I can agree with. It is okay, because it’s my business, not yours.
You’re not my mother, you’re not the police. You’re not my HOA President, and as far as I know, your name isn’t even Karen. So stop acting like one and mind your own fucking business.
Whatever.
No I am not you mother thank Christ. I’m just someone who shares the roads with you. Speeders impacts my safety and my legal use of the roads so yes your speeding IS my fucking business.
Grow up and slow down.
If I’m not mistaken, the Edmunds data cited here is simply what car shoppers are looking at when they go to Edmunds for car shopping information. (Someone correct me if I am wrong.)
Nowhere does that data state that people are throwing good money after bad by buying a new electrified vehicle when they were not otherwise ready to acquire. So why is the article making that assumption?
The data is about what people are shopping for. Two weeks ago, more shoppers were looking at ICE vehicles than they are now (which is probably wise). You can’t make any further inferences from that statistic. If you want to know if people are being inefficient with their spending, then you would need to conduct a separate study for that.
Agreed. It measures interest/consideration, which is only step one of many in the purchase process.
I understand it takes a long time to pay for better mileage but what about day to day living? By your own numbers, would you rather get 24 mpg or 35 mpg? The gasoline costs the same per gallon but you’re filling up less often. Little battles.
Biggest jump is my most recent one, went from a 1988 Chevy K2500 that got 8-12 mpg to my 2014 Chevy Cruze 1.8 Auto that averages around 22-25 mpg with mostly in town driving and mid to upper 30’s if we take it on long highway drives.
with car prices, insurence prices, and vehicle size Soaring into the stratosphere something has to give and fuel economy seems to be the one lever automakers can pull to help ease buyers into saddling up for these extrodinary car payments. “well your going to be paying $700 a month in payments and your insurence premiums will go up $180 a month but you will SAVE $100 on gas!”
one thing that makes ‘most’ hybrids a smart purchase is resale they tend to not have as steep a depreciation floor and low mileage ones tend to go for over 10 grand so even if its 9 years old you can “at least” get 10 grand on your trade vs a gas car it might be half that.
What’s the biggest jump (or dip) you’ve made in fuel economy from one car to another?
Pretty much had to be going from the Mitsubishi Montero Sport to the Mini Cooper S. Low 20s on a good day to a consistent 32-33.
Our biggest fuel economy jump was from a 2010 KIA Sorento (inline 4 with AWD) at about 16.9 real world mpg to a 2021 RAV4 hybrid (also AWD) which averages around 36 give or take a tenth or two depending upon the weather conditions.
In both cases, the vehicles did better out West where we fueled with pure dino juice instead of the (heavily subsidized) 10% ethanol blend we get here in the corn belt.
The KIA was rated for 21/27 city/hwy mpg, and the RAV4 for 41/38 (40 combined), but we never got/get anywhere close to those numbers, likely due to the ethanol and the 80 mph speed limits.
Not sure what my biggest jump is because I tend to keep things in my fleet. But I have a diesel truck that probably gets 18mpg on a good day. And some gas trucks in the same 15 to 18mpg. Not sure what the mpge is on my newest leaf is but well over 100 if that’s even accurate. I guess 20 something years ago I went from driving a Tahoe that maybe got 15mpg to a jetta tdi getting 45ish to 52mpg that seemed like a big jump.
We haven’t finalized yet but are actively hunting for a used Accord hybrid to replace my wives Element, so just by the epa numbers we are looking at 22mpg combined to 48.
Not that it’s my business, but out of curiosity how many wives do you have?
Not enough to teach me grammar ;-p
I would NOT buy another used EV. We bought a used EV back in 2019, drove it until 2024. The battery pack died right before the EV battery warranty expired. Kia put in a new $16,000 battery but it took 4 months to get it. We then traded it in. The same dealer that had just put in a $16K battery offered us $5000 for the car. We ended up trading it elsewhere. All the dealerships said EVs were best to lease, not to buy. Even with 34 solar panels and home charging, our use went up when we charged and the delivery cost for electricity in Maine is as expensive or more than the actual juice.
People don’t run the numbers on payback for the premium of Hybrid over the regular version of a car. They just care about fewer painful fill ups.
I miss my Mk4 TDI manual wagon that got 49mpg. But diesel is much more expensive then gas right now. Our Civic Si gets 34mpg and is fun to drive too.
Why would you trade it in right after getting a new battery? Seems like with a brand new battery you would have just added a bunch of life to the car and you only got 5k for the car so why not keep it at that point? Also was this a Kia Soul EV? If so I know those had air cooled batteries which likely helped contribute to its demise. Modern EVs use liquid cooling for the batteries and are expected to last much longer.
Because the car was developing some electrical “hiccups” and we were all done with it and wanted something more fun than a rolling dishwasher. Hence the Civic Si.
IIRC, I went from a 1984 VW Golf to a 2001 Honda Insight (Gen 1) so from around 30ish mpg average to about 60 mpg (both were commuting cars), so a twofold betterment.
As is typical, the best time to take advantage of a price difference or trend or what have you (gas prices, car prices, real estate prices, availability of a hot commodity, etc.) is to do it before most everyone else. Or you may end up just paying the early adopter premium. Very occasionally lucky myself, mostly just managing to muddle through.
Switching from a hand-me-down 1978 Lincoln Continental MK V to a 1985 Saab 9000 Turbo manual meant going from an optimistically rated 8/12mpg city/highway figure to, at worst, 17/26mpg observed. It got even better as I gradually upgraded through a series of 9000s, culminating with a couple of Aero models. Those were great cars. They got ridiculously good mileage regardless of how hard I drove them, which was quite hard. I lived in a very rural area then and my daily commute was about 50 miles of mostly country roads broken up along the lines of 40 acre parcels, meaning there were a lot of stop signs.