If you’ve been wanting a hybrid car (a gasoline-electric vehicle) but have been reticent to shell out the extra bucks, 2006 just might be your year.
Beginning January 2006, in accordance with the new Energy Policy Act, the federal government began awarding unprecedented tax credits to consumers who buy hybrid cars.
Tax Benefits Offset Additional Cost of Hybrid Cars
Hybrid cars are more expensive than conventional vehicles because of their costly batteries, and because there are two separate engines under each vehicle’s hood. But the new tax credits go a long way toward closing that cost differential.
Individuals who purchase any of the new gas-electric hybrid cars available in the U.S. between 2006 and 2007 are eligible for up to $3,400 in federal tax credits. The credits apply only to the first 60,000 hybrid cars sold by each automaker, however, limiting the savings to those who act early.
According to an analysis by the non-profit Union of Concerned Scientists, which runs the website HybridCenter.org, Toyota’s popular Prius model would typically qualify its buyer for a tax credit topping $3,100, while Honda’s Civic Hybrid would garner about $2,100.
Buyers of the new hybrid SUVs from Ford, Toyota and Lexus could expect more than $2,000 in tax credits. The amounts of the credits for hybrid cars are based on fuel economy improvements over conventional models of the same class of car or truck, so the hybrid cars offering the biggest boost in fuel efficiency will generate the largest tax credits for their owners.
Solo Drivers in Hybrid Cars Can Use HOV Lanes
And, yes, another component of the Energy Policy Act is the Federal Hybrid HOV Waiver, which allows states to open their high-occupancy vehicle (HOV) lanes to hybrid cars that get at least 50 percent better fuel efficiency in the city and 25 percent better in combined city-highway miles over conventional models, regardless of how many passengers. So far 12 states are participating and many others are sure to follow.
Additional Incentives for Buying Hybrid Cars
Beyond these new federal incentives, 36 states offer some kind of rebate, incentive or benefit to encourage consumers and businesses to go hybrid.
New York Governor George Pataki recently unveiled a comprehensive energy reduction plan that includes a $2,000 hybrid state tax credit, discounted highway tolls for hybrid drivers, and HOV-lane access for hybrids. If the state legislature approves Pataki’s plan, New York taxpayers who buy hybrids could save more than $5,400.
Even some businesses are voluntarily getting in on the act. Search engine giant Google is offering $5,000 to each employee toward the purchase of a new hybrid. And Travelers Insurance has pledged to start giving a 10 percent discount to its auto insurance customers who drive hybrids.
Hybrid Cars Gaining Popularity
Demand for hybrid cars is surging.
Combined sales of the first hybrids in 1999 topped out at just a few hundred vehicles. In 2005, American car dealers sold more than 205,000 hybrid cars and SUVs.
With all these new incentives in place, and a public more concerned than ever about the price of gas at the pump, automakers are planning to unveil many more hybrid car models over the next few years.
Whether automakers can keep up with the demand for hybrid cars is going to be anybody’s guess.
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