The next time someone says the Volt is only a pricey “halo” vehicle drawing buyers to Chevrolet’s bread and butter Cruze, you might want to refute them with facts to the contrary.
What facts? How about the truth that depending on miles driven per year and price of fuel, a Cruze could cost from only a few hundred less to significantly more over a five-year period.
At least this is the case if Kiplinger’s number-crunching is correct, and it had better be at least close considering it has also gone on the record with the story in its own September edition and in speaking to a TV news station.
Jessica Anderson, an associate editor for autos at Kiplinger’s Personal Finance was quoted by a TV news station (and commented today to GM-Volt) about one scenario in which the Volt comes within a few hundred dollars of the Cruze. Similarly, the Nissan LEAF is nearly as close to the Nissan Versa even while factoring significantly higher selling prices for the electric cars.
“While both of them cost about $18,000 more than the gasoline models, the Volt comes within $500 of Cruze’s ownership costs over five years,” Anderson said to KomoNews, “and the Leaf is only $800 more than a Versa over five years because they do save so much.”
In its September article, Kiplinger said the five-year ownership costs were calculated based on info from Vincentric, an automotive data firm. It assumed 15,000 miles per year, and gasoline cost at $3.64 per gallon for regular, and $3.91 per gallon for premium – with a 3.5-percent annual increase for each fuel.
Kiplinger’s Jessica Anderson got back to us at 3:45 p.m. EST today and said because I was questioning the accuracy of the calculator, they did indeed uncover a “glitch” in the system.
“The tool works by taking the inputs from users on our site, sending them to Vincentric and then bouncing back with the appropriate calculations using their data (this is so our users can benefit from their monthly data updates),” Anderson said. “Unfortunately the fuel cost for Volt is not taking the gas usage into account as we thought and subsequently that number is off by quite a bit.”
After re-running the calculations, in the example given, Anderson says the disparity between a Cruze and Volt is actually $1575, not $500. Still a pretty fair closing of an $18,000 initial price gap, but this is where it stands.
“We will be running a correction in the magazine and online, but I still think that with such a close gap in ownership costs, the Volt is certainly a viable choice for the economically minded,” Anderson said. “My apologies for the confusion and my thanks for helping us to spot a problem. We will be working in the next few days to fix the error on the Volt calculations, but that issue has not affected any of the other models in our calculator. Just another way that Volt is forcing the industry to look at everything differently.”
After evaluating the Volt’s real costs, Vincentric named it the best value in America 2011 in its new “Eco” classification.
It is also assumed the buyer will take advantage of $7,500 in federal incentives for the Volt.
In this cited example, the differential is slightly in the Cruze’s favor, but depending upon circumstances, the Volt could hypothetically cost far less over five years.
“We figure five years is enough because it’s the typical length of ownership for most people,” Anderson said to KomoNews, “and if you haven’t seen your gas savings by five years, you’re probably going to be very frustrated.”
Actually, Kiplinger’s Green Car Calculator – updated in June – allows one to plug in some key variables and calculates these with a few given factors and assumptions.
One of the assumptions is a 6.46-percent interest rate on a five-year loan on both cars, with 15-percent down payment.
Fuel consumption costs are based on the Environmental Protection Agency’s estimated mileage figures for both highway and city driving. Kiplinger assumes 55 percent city driving and 45 percent highway.
Kiplinger’s Green Car Calculator. (Note, plugging in future gas increases like $5 or $6 per gallon will not work when comparing to the Volt. This calculator is not set up for that, but it is updated monthly for average fuel and electricity rates, so it will be close if you punch in your actual fuel price for a car compared to the Volt.
The calculator also factors in “opportunity cost,” which is the amount of interest that could have been earned in a certificate of deposit if those funds had not been spent owning and operating the vehicle.
When running the numbers for the Volt, it auto-calculates “fuel” price based upon average utility rates and gasoline prices. Changing the price of fuel for the Volt therefore makes no difference to its fuel cost line (see charts).
Since the calculator is not allowing individuals to plug in their actual electricity rate or fuel prices, it looks like there’s some room for variance from real world. What’s more, hypothetical comparisons of 15,000-20,000 miles per year may be difficult to next to impossible – unless one has access to away-from-home charging, and is using the Volt for more than one full charge cycle per day.
This said, the calculator may at least be a good starting point to refine actual costs, or gauge a ballpark estimate.
Based on 15,000 miles driven per year and $4 per gallon gasoline, Kiplinger says the Cruze costs about $1,000 more over five years. (Note, the Volt’s price accuracy may be optimistic because the calculator factors gas costs at “average” rates, not $4 per gallon.)
Today Anderson replied to us via email to further qualify how the Volt’s costs are calculated. She reiterated the calculations are being done by Vincentric, and acknowledged difficulty in pinning down the Volt’s costs to the last dollar, as these are based upon any number of usage models partially using gasoline, partially using electricity.
“With the LEAF and the Volt they had to do some pretty extensive back-end work to calculate what the annual fuel cost would be. You’re absolutely right that the Volt’s cost for fuel will vary with fuel prices, but we could not build that capability into our calculator,” she said. “Thus, Vincentric has calculated using current average gas prices and utility rates and a combination of EV and gas-assisted motoring, an annual fuel cost for Volt. (LEAF’s is obviously just based on the utility costs and charges needed.) Monthly, their data is updated on fuel prices, so that rate will change, but you’ll never see it change with your inputs on the calculator because it’s all being done on their back end.”
The calculator is probably more accurate when showing that life with the Cruze is all about fuel costs and distance traveled. The higher these go, the more it costs to own compared to the Volt.
Kiplinger’s writers were surprised to discover the Volt and LEAF proved heads-above-better than several hybrid vehicles compared. Hybrids present a mixed bag ranging from financially advantageous to quite costly.
“You can be getting a really great deal like the Mercedes-Benz S400 hybrid. It’s actually the cheapest S-class that you can buy. And you save about $7,000 over five years,” Anderson said, “Conversely, another popular model, the Lexus LS600 hybrid, it costs more than $36,000 more than its gasoline counterpart and you lose all of that. It does not save money over the gasoline engine.”
If Kiplinger’s calculations are even nearly on-target, it is good news for the Volt, and contradicts cost-conscious reviewers who have portrayed the Volt as not making financial sense.
That said, it is worth repeating it is a qualified decision made on a case-by-case basis, and there are plenty of scenarios where the Volt will come out more expensive than a Cruze.
But buying the Volt is potentially more than just a money-based decision, as it also stands to keep more funds in the U.S., reduce gasoline usage, emissions, and provides other benefits, which Anderson touched upon in commenting generally about purchasing green cars.
“If your goal is to be good to the environment, the premium and the savings is not going to be something that is ultimately a make-or-break situation for you,” Anderson said. “But if your goal is to save money, run the numbers, really do as much as you can to find out about the long-term costs because some of the green cars will save you a lot and some of them really won’t.”
This entry was posted on Monday, August 29th, 2011 at 5:55 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.