Total Cost of Ownership Comparison of Gasoline, Hybrid, and Diesel Vehicles

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The increase in fuel prices since 2008, and the US government’s target of reducing US dependence on foreign oil through increased Corporate Average Fuel Economy (CAFE) regulations has led manufacturers to develop new fuel saving powertrains. It has also offered consumers opportunities to purchase vehicles with these new technologies, such as gas-electric hybrids (including plug-in hybrids), clean diesels, and pure electric vehicles. Though these vehicles are not reaching high levels of sales penetration, they have increased significantly since they were introduced, showing that many consumers have an interest in improved fuel economy.

One way of measuring the value consumers and dealers place on these vehicles is to measure the cost of vehicles with these technologies compared to identical gas-powered vehicles when they come into the pre-owned (used) market. Another way of measuring the value consumers place on these vehicles is to measure the total cost of ownership consumers experience when owning vehicles with these new technologies. The total cost of ownership includes costs related to annual depreciation, fuel, repairs, maintenance, licensing fees, registration, insurance, and taxes. These costs accrue annually over the ownership cycle, thereby allowing analysis of total cost of ownership over any number of years of ownership. This paper looks at the differences between these pairs of gas/hybrid and gas/diesel vehicles in the U.S. in order to show how these new technologies are performing from a customer perspective.