How long to get investment back on the Volt?

[emd]

i drive 20k miles a year and am thinking the same way as the originator of this post. my old econo tiny tidler that i bought new in 2004 had 160k miles on it. it needed $3g worth of work on a $2g car so it was time to cut my losses. post volt my fuel consumtion went from 20 gallons/week to 5 gallons/week. only service was a tire rotation so far. electric bill went up $20. just paid $10g against the loan principal ahead of time this week.

[jeffhre]

Sounds like you just did!

Thanks for the tip.

[MrEnergyCzar]

You get it back from day one because if you bought a comparable entry BMW or Audi it would cost more to fuel those...

MrEnergyCzar

[Ron C]

In having this discussion with many of the anally-retentive engineers that I work with (I speak their language, after all), I don't let them get away without framing the question fully. If they won't, I frame it for them. The question that I pose is to provide a solution to the following equation:

T = VP$/(deltaV/month)

T = Time in months until the Volt Premium is recovered.
VP$ = Volt Premium in currency units. For me, that's USD.
deltaV/month = the incremental difference on a monthly basis of the cost of operating a Volt vs. the cost of operating the victim vehicle.

That problem itself is defined two terms that have to be defined.

Term 1: Volt Premium

Both of the terms require answering an ancillary question: what vehicle are we comparing against, what I'm calling the victim vehicle. Given a victim vehicle, the Volt Premium is computed differently if the Volt is purchased vs leased.

For the purchase case, the Volt Premium is that net amount paid over that you would have paid for another vehicle, let's call that the "victim vehicle." It could be the full purchase price of the Volt if you're replacing an existing vehicle; it could be negative if the victim vehicle cost more. Negative premiums mean you've already won, so let's ignore this case. Don't forget to include any government incentives in this net amount; for me, this was a 11414.50 discount.

For the lease case, it is the sum total of all moneys paid for the lease, including any money down and all of the monthly payments (or single lump-sum payment if you do it that way) and any money that you anticipate will be due at the end for excess mileage, less any ownership/leasing cost of the victim vehicle over the duration of the Volt lease.

The lease case is kinda messy, but at least we now have a value for the numerator that makes sense. That is the amount that has to be amortized to declare "break even."

One other argument that I actively don't allow has to do with the future value of a Volt. The vehicle is only 2 model years into existence - we have nothing by which to base this future value discussion other than perhaps lease residuals, and I think the lease residuals are set so that the leasing company won't lose money given that they can only guess what the future value will be. There is no real data on which to base this discussion or decision, so it's just a bunch of what-ifs and maybes that just muddy the discussion.

This has to be a net value because any government incentives are actual reductions to the amount paid. For leases, the government incentives are already rolled in, but purchases are trailing but for simplicity I roll them in now.

Term 2: Operating difference per month

This is a complex function of miles driven, MPG, MPGe, blended MPGe, and energy costs, and have to be answered for both the Volt and the victim vehicle with the same constraints.
These constraints include:

• How many miles a month do you drive?
• For the Volt:
  • How many of those miles are CD miles?
  • What is the price of a KWh?
  • What is your effective miles/KWh?
  • What is your CS MPG?
  • What is the average price of gasoline for the Volt (premium, remember)?
• For the victim vehicle:
  • What is the victim vehicle's MPG?
  • What is the average price of fuel for the victim vehicle?

(If the victim vehicle is an EV, then some other questions apply, but I'm ignoring this case)

I've been doing this mostly as a chalkboard exercise at work and about 5 minutes into it the other people typically bail, but for those who have suffered through the entire rant I've had results as quick as 7 months and as long as 6.5 years for my particular situation (~75 CD miles every day) depending on the victim vehicle. I've also had "immediate" when compared to my colleague's brand new A4, but that's a much quicker discussion.

The major "aha!" that these guys get (remember, the majority of them are EEs and understand the gross efficiencies and inefficiencies of both electric motors and ICEs) is that the efficiency of the electric motor combined with my commute distance and battery capacity allows me to go those 75 miles a day for about $0.50, or under a penny a mile. Given that the same distance with even a high mileage car (say Prius) uses at least 1.5 gallons of fuel at ~$4.00/gallon = $6.00, every work day I'm gaining $5.50 for a monthly advantage of 22*5.50 = 121 in fuel; this makes an annual savings of ~$1450/year vs a Prius and more like $250/month ($3000/year) vs. the Passat I was driving. I really only consider cars I would have actually bought, not just ones that make it look bad. For example, I'm not at all interested in a Cruze or a Spark or anything Scion, but a Jetta TDi or a new Hyundai (not normally on my list but there's a bunch in our parking lot so that's raised my interest level) are game for comparison. I'm not really interested in a Prius either, but it's such an obvious comparison that I have to be open to it.

This works for me because now I can charge at my office for free, and with that I can do my daily commute gas free. When I was not able to charge at work, I was using between 1/2 and 3/4 of a gallon per day; that changes the results for this question substantially. I avoid answering that problem because that's not my reality right now.

To make this easier going forward, I think I'll add a calculator to my EV Assistant app that asks all of these questions and provides an answer.

[Graham]

In having this discussion with many of the anally-retentive engineers that I work with (I speak their language, after all), I don't let them get away without framing the question fully. If they won't, I frame it for them. The question that I pose is to provide a solution to the following equation:

Ron, You fight the good fight. Any expense has competing alternatives. As mentioned, vehicles are considered depreciable assets (whether your call this an investment is a matter of semantics ).

All vehicle purchases should be made on base on present cost analysis. For whatever reason, we as a consumer group loose our hard heads for personal vehicle purchases -opting for style, status and fun. Fleet vehicle purchases are more likely to be analyzed using discounted cash flow as well as most heavy equipment purchases.

For those you you saying old cars are ever a good investment - or to use the parlance - have a more positive (less negative NPV) - can only do this if 1) they are personally servicing the vehicle 2) time opportunity cost of servicing vehicle is low 3) cost of being late to work is near zero. By any other assumption, owning aging cars never saves you money - EVEN a fuel efficient import. That being said, there is nothing wrong with lightly used cars. - Millionaires do not buy used up cars - they just avoid frequent,recurrent first year depreciation.

ASSUMING: Crude oil does not inflate or deflate, the best new or old car gets 42 mile per gallon (gas) average, insurance is equivalent, Volt has no oil changes, Volt has 35% Residual (after tax incentive - i think is actually a very low estimate) at 8 years (an assumption from the current used Prius market), 17,000 miles per year at 80 electric (the average middle aged American annual commute), $0.055 per KWH on time of use charge, 30 kwh/100 miles, IRR is 5%, economic Inflation at 3.4%, Useful battery life is 12 years, .... amongst others.

Conclusion: NPV is equivalent to the most economic alternative - including any old foreign econo-box you wish to compare. You can assign variance to any of these DCF's, and get some sensitivity information. The most sensitive elements are IRR and fuel price. There are HUGE risk premiums on fuel prices out 8 years. I can forward spreadsheets to those interested.

Bottom Line: 1) Any average American NOT buying a Volt is accepting a risk premium to fuel (and I bet a poor choice). 2) Any Volt buyer is accepting at least an equivalently economical vehicle to any past or current vehicle.

Yes, emerging technology is a risk. It is, however, shadowed by the risks premium in the energy forecast.

Note: None of this includes the expense of the 5th Fleet.

[ronr64]

Ron C - And they're the anal retentive ones??? LOL Just kidding. I'll let you in on not much of a secret. I also am a marginally socialized EE...

[jeffhre]

You get it back from day one because if you bought a comparable entry BMW or Audi it would cost more to fuel those...

MrEnergyCzar

Yes, the only reasonable way to view it. If a Volt owner wouldn't be happy with a Leaf or Prius, it doesn't make sense to compare with a ScionIQ or even a Cruze.

[Watt-son]

It never is a good investment to buy a new car. The press and nay-sayers who talk "return on investment" for an economy car is silly.

Millionaires out there drive 10+ year old vehicles (that they may have bought used) to 250,000 miles or more. They save money - that's why they are Millionaires One frugal move is to buy a $4K car in 2011, invest wisely for 3-4 years and buy a used 2013 Volt in 2015 with 20K miles on it. People buy new Volts for a wide variety of reasons. Some want to try new, interesting technology. Others don't want to use gasoline/foreign oil. Others want to move from a 20mpg car to 40mpg CS-mode along with the benefit of the CD-mode too. But if you want to "save money" don't buy any car - keep your existing car and just buy gas. You spend far less putting gas in a wholly-owned 20mpg car than buying a new Volt, installing a 240V charger, etc.

With Ally offering 0% loans, you can't beat the free-money on the new models.

I had a paid for 1999 Camaro, my volt saves me 50 dollars a month, and my girlfriend 150 dollars a month. so, the car can pay for itself. this is based on the last 2 years of ownership where i was spending 250-350 a month in gas, and over 2400 a year in maintence..... i was barely able to sell the car for what maintence was last year...... not to mention the time / money lost from having it towed to get it fixed 3 times..... before cash for clunkers, you could find a good used car for cheap, not so much now.... i know, cause i tried. a used honda insight was the only car that i found that had a higher return then the new volt.... however, a 50k+ mile used insight doesnt compare to the volt in quality, which is why i bought the volt.

[Pierce]

Go to kbb.com or Edmunds.com or Yahoo Autos and you will find something shocking.

The cost of a car is now almost the same as you will spend on gas over five years even with high MPG cars.

That is, they estimate gas at $2k/year, so that's $10k. They guess $3k on the volt, but I think that's high based on other peoples experience. Plus gas here is 4.25 to 4.50 not 3.50. So make that $12k for ice and $2k for gas plus electricity and your $15k **** box is now $25k.

It shocked me. When I as looking at cars I was looking at cars between 15k and 30k and the volt.

But the above sites were estimating that the five year cost of the car would be as much or more than the volt. Especially with the 0% 72 month financing. Subtract out financing costs and the volt ended up being cheaper over five years.

That was a mind blower for me. Gas and maintenance are so much cheaper on the volt that a $15k car is comparable.

I don't have hard numbers yet because my volt is still on a train in OH, but with the tax rebates, the government could very easily end up paying me to drive a volt the first year.

That's pretty cool.

[Brian Loves Cars]

5 seconds if you compare it to a comparably priced luxo import and then compare the ownership experience.