Green cars – what’s the price?

More people are buying green vehicles — such as gas/electric hybrids or cars powered by other sources — due to concerns about the environment and high gasoline prices. But do they save you money?

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“Typically a green car will cost more to buy than a traditional vehicle,” says Chartered Accountant Paul Rhodes, a partner with Soberman LLP in Toronto. “The manufacturer has significant research and development invested in the vehicle and therefore needs to earn a higher return, hence the higher price.” The higher up-front cost may be worthwhile if you can recoup it through savings on fuel, or are motivated to reduce your carbon footprint. When comparing fuel costs, keep in mind that hybrid vehicles use less gasoline for city driving, but use about the same amount of gasoline during highway driving. You can also help defray the higher purchase price by taking advantage of available tax incentives to encourage the purchase of green vehicles. “In Ontario, the incentive is a refund of up to $2,000 of Retail Sales Tax on hybrid electric vehicles bought before April 1, 2012,” says Chartered Accountant Mona Tessier of Welch LLP in Ottawa. Ontario also offers a Tax Credit for Fuel Conservation of up to $100 to those who buy, rent or lease new passenger cars that use less than 6.0 litres of gasoline or diesel fuel per 100 kilometres of highway driving. The credit is also available to people who buy, rent, lease, or import new passenger cars. It does not apply to sport utility vehicles. You must know what features are important to you before deciding between a green vehicle and a gas-fueled vehicle. “Safety, the environment, dependence on gas, operating costs, performance, looks and where the vehicle is made will likely factor into your decision, in varying degrees,” says Rhodes. Don’t forget to factor in additional costs, such as maintenance and insurance. “The repair costs for first-generation hybrid cars are reported to be comparable to gas cars, but manufacturers of hybrids typically offer warranties that cover an extended period as an added incentive to buyers and to overcome a perception that they cost more to maintain,” says Rhodes. “There is no evidence that insuring hybrids is any more or less expensive than insuring a gas-powered car, but they have only been in Canada since 2000, so this may change as insurance companies collect more information that identifies trends in claims.” You should also consider resale value. “Manufacturers are constantly bringing out new green vehicles, so it is likely that a current hybrid will be superseded by a version that uses less or no gas,” says Rhodes. “In that environment, today’s green cars would not likely retain their value.” Before making a decision, talk to a Chartered Accountant. “A CA can help you prepare the cost/benefit analysis,” says Tessier. “That will help you decide whether a green vehicle is right for you.”