Could green motoring save you money?

Published by Nick Gibbs on 24 January 2008.
Last updated on 01 June 2011

A man with his car

Ever since Neil Weedon swapped his company Lexus for a Toyota Prius hybrid, he’s had to endure teasing from his colleagues: “I’m known for driving a milk float,” he says. But for Neil, a Midlands-based quantity surveyor, the benefits are well worth the jibes: “I reckon I’m saving around £1,900 a year on company car tax compared to my old car.

"On top of that I’ve virtually halved the cost of my fuel, which saves me another £40 to £50 a month.” His colleagues are making the jokes, but Weedon’s the one laughing all the way to the bank.

Saving money is one benefit of driving a hybrid, but its their green credentials that’s really made them popular.

So entwined have they become with the environmental movement that all you need to signal your green-ness is jingle the keys to your Toyota Prius.

Hollywood celebs like Leonardo DiCaprio and Cameron Diaz were first, but there’s now a strong British contingent including the likes of Ewan McGregor, promoter Harvey Goldsmith and actress Thandie Newton. The government offers them as company cars to civil servants, London taxi companies buy fleets of them and even the car-hating Ken Livingstone exempts them from his congestion charge.

So what are the hybrid’s special powers? The ‘milk float’ jibe endured by Neil is rooted in the electric power source at the heart of these cars. But crucially it’s not the only source. In the Prius and others such as the Honda Civic and the Lexus RX SUV, there’s also a regular petrol-supping engine to share the load.

Don’t go looking for a retractable cable with a plug on the end – the on-board batteries are charged either by this engine or when the car brakes or slows. That slug of stored power then chimes in to effectively turbo-charge the engine at no extra fuel cost. That allows for a smaller engine and therefore a smaller carbon footprint.

How efficient is the system? Well, the Toyota Prius – by far the best-selling hybrid in the UK - is ranked as one of the most frugal cars you can buy. According to the official fuel figures, it’ll travel 66 miles for every gallon. A similarly sized Renault Laguna with a standard two-litre petrol engine can only manage 35 miles.

Some petrol cars are equally frugal, but they don’t have five seats and 408 litres of boot space. The similarly rated Smart ForTwo is, as the name implies, for two people only.

All this does good things to both your carbon and financial footprint. The fuel-saving aspect is easy to understand. Over 60,000 miles, fleet-cost company TopCalc puts the Prius fuel bill at £3,388. Over the same distance, that petrol Laguna will have cost you £6,235.

There are also myriad tax benefits, as the government and local councils link more and more motoring taxes to your carbon emissions. Because the Prius emits less CO2 – 104g/km vs 185g/km for that hapless Laguna – the road tax is just £15 a year. The Laguna driver has to fork out £185. Then there’s the London congestion charge – free for the Prius, £8 a day for the Laguna and just about everyone else.

Local councils are also getting in on the act, linking parking charges to CO2 in places like Lambeth and Richmond in south London. Richmond residents with a Prius or Honda Civic IMA now get half off their annual street permit bill.

The biggest savings are to be had for company car drivers, as Neil discovered. Cars handed out ‘free’ to employees are taxed partly according to their carbon dioxide and drivetrain – so the Prius bill is just 12% of its purchase price thanks to a hybrid discount. That means this year a 40% taxpayer shells out £890 annually, compared to £1,710 for the driver of the similarly-priced Laguna, charged at 24%. Weedon’s old car was even worse on CO2 than the Laguna, hence his nearly £2,000 saving.

The British public is starting to pay attention. The Prius first went on sale in 2000, before being replaced by a much better one in 2004 that costs from £17,800 to £20,700, depending on the spec. That year it sold 1,588, the next 3,749 and last year 5,108. In 2007 Toyota reckoned it will have flogged 8,500.

The hybrid explosion

Toyota is gets the most mentions here because it’s quite simply the biggest player. Along with the Prius, it sells hybrid versions of its Lexus RX 4x4, the GS executive saloon and LS limo. By 2010 the company hopes to sell a million hybrids annually.

Toyota is not the only manufacturer feeling confident. On track to join Toyota and Honda in the UK are the likes of Audi, Porsche, Mercedes, and Peugeot-Citroen, the latter currently trialling a diesel hybrid with a CO2 figure of just 74g/km.

It’s taken a while, but finally drivers are waking up to hybrid savings – both financially and environmentally. They also seem to genuinely enjoy driving the cars. The Prius hybrid experience includes periods of silent running on the battery alone, and complete engine shut-off when stopped in traffic.

A digital read-out charts your economy over five-minute intervals, encouraging many to better their performance. Prius owner Mike Cronin, an engineer from St Neots in Cambridgeshire, is one: “It’s probably quite sad, but I look at the screen, and think, oh dear, I’m down into the low 50s. So I freewheel more to get the battery charge up.” Neil is also impressed: “If technology can stop the engine and allow things like the air conditioning to still work, why sit in the traffic with smoke belching out when you don’t need to?”

However, just as people are starting to understand the hybrid and what it can do, the reasons for buying one are slowly being eroded. For a start, the hype that first greeted petrol-electric technology is beginning to wane in the corridors of power.

First up, the congestion charge. New proposals from Ken Livingstone to link the charge to CO2 emissions from February will still exempt the Toyota Prius, but they’ll also exempt a whole tranche of low-emission diesel and petrol cars, like the new VW Golf TDI Bluemotion, or the latest versions of the Ford Focus diesel. It’s one less reason to choose the more expensive Prius or Honda Civic IMA.

It’s happened because the mayor has adopted the latest government buzzphrase when it comes to emissions-based taxes – ‘technology neutral’. It doesn’t matter what’s under the bonnet, it’s the CO2 that counts. With the proposed barrier set at 120g/km, that rips up the free entry to the hybrid Lexus 4x4s and limos.

That ‘technology neutral’ approach is also being used for road tax (Vehicle Excise Duty), company car tax and the first emissions-based parking-charges. Expect any future road-charging to adopt a similar solution, too. Take company car tax. From April a new 10% band has been created for cars under 120g/km (roughly 62mpg). The Prius is there, but so is the Golf Bluemotion – a regular Golf diesel but with a few small tweaks like traffic shut-off for entry into the tax-efficient sub 120g/km zone.

The Richmond street-parking charge works using the same philosophy. The Prius and Civic IMA might get 50 % knocked off, but so does any car under that 120g/km gate. For cars under 100g/km (currently just two diesel versions of the VW Polo and Seat Ibiza) it’s free. Suddenly the costs gap is narrowing, particularly to a new breed of diesels.

These low-emission diesels have appeared in response to the government’s latest carrot-waving. They emit less than 120g/km, so they fall into tax band B, which in turn drops the road tax bill to £35 from £115. Along with the Golf and Focus there’s 60mpg-plus versions of the BMW 1-series, Volvo C30 and Audi A3. All of which have more appeal to the keen driver than the less road-focused Prius. Also on sale are frugal band B versions of the Renault Megane, Citroen C4 and Kia Cee’d. Smaller than the Prius, yes, but cheaper and more conventional.

Hybrids also suffer from a larger gap between official fuel figures and those recorded by owners in the real world. All cars are afflicted to some extent but because hybrid batteries are charged most efficiently through braking and deceleration, they work much better around town. On long, continuous-speed motorway journeys the battery has to be charged by the engine, which is already working to power the car. Result: economy that’s now a lot closer to the latest diesels at between 40-50mpg. Even a bigger car such as a Mondeo diesel could match or beat a Prius on a motorway slog.

If that wasn’t bad enough, a contentious US report from 2006 actually ranked the Prius below 4x4s such as the Hummer H3 on environmental impact. It’s ‘dust-to-dust’ survey reckoned that because of the energy used to manufacturer the Prius’s batteries and hi-tech, low-weight body shell, its fuel savings were more than cancelled out. Toyota angrily refuted the study from Oregon-based CNW Marketing Research, rightly pointing to other studies that concluded 85% of car’s emissions take place while in the hands of their owners.

There’s no doubting that the technology makes the hybrid pricier. Two motors instead of one, plus batteries, is a tough combo to sell cheaply. The relatively good-value Prius is said to be costed below the industry norm, and it’s no coincidence that most new hybrids heading this way are versions of luxo 4x4s such as the Audi Q7 and Porsche Cayenne. The Audi hybrid will officially use more fuel than the diesel version, suggesting these companies are treating the technology more as free power than a green solution.

The hybrid will still have its place. New plug-in technology that gives enough range to commute entirely on the battery alone is being trialled by Toyota in France, while Honda’s new zero-emission hydrogen fuel-cell car, the Clarity, uses hybrid tech to capture lost energy.

Yes, the hybrid is being forced to compete with cheaper technology as the government turns the volume down on tax-breaks, but there are still sound financial and environmental reasons for choosing one. More than worth putting up with a few wrong-headed milkfloat jokes.

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