Methodology

Vehicle Ownership Costs

The calculation for the costs of owning and driving both high efficiency and gas engine vehicles includes the vehicle’s purchase price, resale value, some maintenance costs, and fuel costs over time. The calculation can be expressed as follows:
Formula
where T is the year the car will be sold and r is the discount rate.

The Manufacturer’s Suggested Retail Price (MSRP) is taken as the upfront cost of purchasing a vehicle. From the purchase price is subtracted any government subsidies. Then annual fuel costs (which are either gasoline, electricity or a combination of the two) as well as maintenance costs (which currently only include battery replacement for battery electric and plug-in hybrid vehicles) are added. Additionally, future fuel and maintenance costs are discounted to determine the net present value of cash flows. Finally, the resale value is the depreciated value of the vehicle at the end of vehicle ownership period, also put into net present value terms. The resale value is subtracted from the total cost of ownership.

Assumptions

Regular maintenance*, repairs, insurance, taxes, licensing, and fees are not included in the cost of owning and operating the vehicle. * Note: we do include battery replacement costs for battery electric and plug-in hybrid vehicles.

Current gasoline prices are recent averaged weekly prices for regular, mid-grade, and premium unleaded gasoline, using data from the Energy Information Administration. When available, data is provided by state or region.[1]

Electricity prices are the average price paid by residential customers in each state.[2]

Gas and electricity price escalation rates are included in the calculation to project future energy costs. Conservative estimates of escalation rates (corrected for inflation) are taken from changes in gas prices from the past 20 years and electricity prices from the past 10 years.[3]

A discount rate on annual fuel costs is used to bring future costs to the net present value.

Annual operating costs for each engine-type of vehicle is as follows:

Gas engine: Hybrid: Battery: Plug-In Hybrid:

Fuel economy for vehicles is calculated as an average of the city and highway fuel economies, weighted by the average of number of city or highway miles driven per year. For plug-in hybrid vehicles, we assumed that all the miles would initially be electrically powered until the electric range of the vehicle was met. Subsequent miles beyond the electric range were assumed to be gasoline powered.

An annual depreciation rate of 15% is used to calculate the resale value.[4]

Greenhouse Gas Emissions

Annual greenhouse gas (GHG) emissions from driving a particular car are calculated as follows:

Assumptions

The greenhouse gas emission factor is 8.887 kg CO2/gallon for gasoline.[5] Because emissions from electricity vary considerably by state, state-specific emission factors were used for electricity.[6]

2.6 tree seedlings grown for 10 years will sequester 100 kg CO2.[7]

The average carbon footprint of a person living in the U.S. is 28,600 kg CO2e.[8]

[1] Energy Information Administration. U.S. All Grades, Areas and Formulations. Retrieved from http://www.eia.gov/oog/ftparea/wogirs/xls/pswrgvwall.xls. (Note: The Energy Information Administration updates price data every week, so the calculator may not reflect the most current data.)

[2] Energy Information Administration. Average Retail Price of Electricity to Ultimate Customers: Total by End-Use Sector. Retrieved from http://www.eia.gov/cneaf/electricity/epm/table5_3.html.

Energy Information Administration. Average Retail Price of Electricity to Ultimate Customers by End-Use Sector, by State. Retrieved from http://www.eia.gov/cneaf/electricity/epm/table5_6_a.html. (Note: The Energy Information Administration updates price data every week, so the calculator may not reflect the most current data.)

[3] Energy Information Administration. (2010). Retail Motor Gasoline and On-Highway Diesel Fuel Prices, 1949-2009. Retrieved March 5, 2011, from http://www.eia.doe.gov/aer/txt/stb0524.xls
Energy Information Administration. (2010). Average Retail Prices of Electricity, 1960-2009. Retrieved March 5, 2011, from http://www.eia.doe.gov/aer/txt/stb0810.xls

[4] Edmunds.com. (2010). Depreciation Infographic: How Fast Does My New Car Lose Value? Retrieved June 3, 2011, from http://www.edmunds.com/car-buying/how-fast-does-my-new-car-lose-value-infographic.html. The average annual rate of depreciation ranged from 13% to 19% in the first five years of ownership. We chose a fixed 15% annual depreciation rate.

[5] Environmental Protection Agency. (2011). Emission Facts: Greenhouse Gas Emissions from a Typical Passenger Vehicle. Retrieved February 16, 2012, from http://www.epa.gov/otaq/climate/documents/420f11041.pdf.

[6] Environmental Protection Agency. (2008). eGrid2007 Version 1.1 Year 2005 Summary Tables. Retrieved February 16, 2012, from http://cfpub.epa.gov/egridweb/document/eGRID2007Version1.1Year2005SummaryTables.zip. Note that these emissions are from power generation and do not include losses from transmission and distribution.

[7] Environmental Protection Agency. (2011). Greenhouse Gas Equivalencies Calculator. Retrieved June 3, 2011, from http://www.epa.gov/cleanenergy/energy-resources/calculator.html.

[8] Norwegian University of Science and Technology. (2009). Calculator of Carbon Footprint for Nations. Retrieved June 3, 2011, from http://www.carbonfootprintofnations.com/content/calculator_of_carbon_footprint_for_nations/.

Vehicle Technology

A conventional gas vehicle is powered by a traditional internal combustion engine using gasoline.

A conventional hybrid vehicle combines an internal combustion engine propulsion system with an electric propulsion system. The presence of the electric powertrain is intended to achieve either better fuel economy than a conventional vehicle, or better performance.

A battery electric vehicle runs on a battery recharged solely by electricity. Electric vehicles use electric motors and motor controllers instead of internal combustion engines for propulsion.

A plug-in hybrid is a hybrid vehicle which utilizes rechargeable batteries, or another energy storage device, that can be restored to full charge by connecting a plug to an external electric power source (usually a normal electric wall socket).

Select the car’s primary use

By selecting the car’s primary use, you provide general information about your driving habits, which the calculator will then use to provide more accurate analysis. The default annual miles driven, percentage highway/city driving, and distance between charges (for plug-in hybrid vehicles) for each primary use is given below, but you will have the opportunity to change these values on the next page.

Primary Use Description Annual Miles Driven Percentage Highway Driving Miles Driven between Charging Opportunities
Primary (or only) car This car may be your only car or the car you use the most for all types of driving. 12,000 45% 87.5
Work vehicle An example of a work vehicle would be a delivery car or a car driven by a contracted plumber. This car is driven mainly in an urban environment and makes many short trips per day. 15,000 25% 67
Short-distance commuting This vehicle’s primary function is short-distance commuting (~10 miles roundtrip) and may also be used for running errands nearby. 8,000 25% 20
Long-distance commuting This vehicle’s primary function is long-distance commuting (~80 miles roundtrip). 18,000 75% 80
 

Select the state you live in

If you specified the state you live in, then the default value for the gas price will be based on average gas prices in your state over a recent time period.

Distance driven annually (miles)

If you specified the car’s primary use, then the default value for the number of miles you drive annually will correspond to the use you chose. Otherwise, the calculator uses the average number of miles driven per vehicle in the U.S.

% of highway miles

If you specified the car’s primary use, then the default value for the percentage of highway driving will correspond to the use you chose. Otherwise, the calculator uses the default highway driving percentage used by the EPA (45%).

Average distance driven between charging opportunities (miles)

Some models of plug-in hybrids, such as the Chevrolet Volt, are considered “Extended Range Electric Vehicles,” meaning that they run on the vehicle’s battery until its charge runs out. After that, the gasoline-powered internal combustion engine acts as a generator to recharge the battery.

In order to calculate the fuel costs for driving a plug-in hybrid, the calculator needs to estimate the number of miles that will be electric-powered versus gas-powered. With information about the electric range of the vehicle and the average distance driven between charging opportunities, the calculator can determine the approximate percentage of miles that will be powered by electricity as follows: electric range / average distance between charging opportunities (capped at 100%).

If you specified the car’s primary use, then the default value for the average distance between charging opportunities will correspond to the use you chose.

Gas price ($/gallon)

If you specified the state you live in, then the default value for the gas price will be based on average gas prices in your state over a recent time period. Otherwise, it will be based on national average gas prices. Visit the Energy Information Administration website for the current gas price in your state.

Annual % increase in gas price

The annual percentage increase in gas price is used to calculate the gas price in future years. For example, if the current gas price is $3.00/gallon, and the annual percentage increase is 4%, then next year’s gas price will be $3.00/gallon * 1.04 = $3.12/gallon.

According to data from the Energy Information Administration, the annual increase in gas prices has averaged about 4% for the past 20 years, adjusted for inflation.

Electricity price ($/kWh)

If you specified the state you live in, then the default value for the electricity price will be based on the average price paid by a residential customer in that state. Otherwise, it will be based on national average price for electricity. Visit the Energy Information Administration website for the electricity prices in your state.

Annual % increase in electricity price

The annual percentage increase in electricity price is used to calculate the electricity price in future years. According to data from the Energy Information Administration, the annual increase in electricity prices has averaged about 1% for the past 10 years, adjusted for inflation.

Length of vehicle ownership (years)

The length of time you plan to own the vehicle can dramatically change which vehicle is more affordable. The longer you own the car, the more important fuel efficiency will be in determining the vehicle’s affordability.

Include resale value in calculations

This field allows you to determine whether or not you would like the calculator to include the car’s resale value in its calculations of which vehicle is more affordable. The resale value is determined by applying an annual depreciation rate to the car’s value.

Vehicle depreciation rate

Every year you own your car, its value depreciates. In order to estimate the resale value of the car, the calculator applies an annual depreciation rate to the car’s value. For example, if the car is worth $10,000 this year, and the depreciation rate is 15%, then next year the car will be worth $10,000 * (100% - 15%) = $8,500.

Discount rate

Many people would rather spend $101 next year rather than $100 today. Some expect they could invest the $100 and earn more than $1 in returns over the next year, or some just prefer keeping their money now and paying later. When people choose to spend more money in the future over spending less money now, they are applying a discount rate to the future money. The calculator uses the discount rate to convert future expenditure on fuel and maintenance into your present valuation of that money. For example, if your discount rate is 3%, then you would value $100 today the same as $103 next year. If you were to choose between spending $104 next year or $100 today, you would choose to spend $100 today. Alternatively, if you were to choose between spending $102 next year or $100 today, you would choose to spend $102 next year. Note that the discount rate is separate from the inflation rate.

Government tax incentives for conventional hybrid vehicles

Federal, state, and local governments often provide tax or other types of incentives to encourage drivers to purchase more environmentally-friendly cars. The IRS provides a list of hybrid models that currently qualify for federal tax incentives. There is currently no government-supported database of state and local tax incentives for hybrid cars, so you may also want to check local or state government websites.

Government tax incentives for electric/plug-in hybrid vehicles

Federal, state, and local governments often provide tax or other types of incentives to encourage drivers to purchase more environmentally-friendly cars. The IRS provides a list of electric or plug-in hybrid models that currently qualify for federal tax incentives. There is currently no government-supported database of state and local tax incentives for electric or plug-in hybrid cars, so you may also want to check local or state government websites.

Battery replacement cost for electric and plug-in hybrid vehicles

Compared to a conventional gas vehicle’s internal combustion engine, an electric vehicle’s engine is much simpler and easier to maintain. The most expensive component in an electric or plug-in hybrid vehicle is its battery pack, which will eventually have to be replaced as the car ages and the battery degrades. Future prices for battery packs are still unknown, but car manufacturers have estimated that replacement costs may be similar to a gas engine vehicle’s powertrain. Most manufacturers warranty their battery packs for 8 years.

Battery replacement year for electric and plug-in hybrid vehicles

Most manufacturers of electric and plug-in hybrid vehicles warranty their battery packs for 8 years. Therefore, drivers will likely not have to replace their cars’ batteries until the ninth year or later.

Greenhouse gas emissions from gasoline (kg CO2e/kWh)

According to the Environmental Protection Agency, a gallon of gasoline produces on average 8.887 kg CO2.

Greenhouse gas emissions from electricity (kg CO2e/kWh)

Electricity emission factors can vary greatly from state to state. If you specified the state you live in, then the default value for greenhouse gas emissions from electricity will be based on the electricity fuel mix in your state. Otherwise, it will be based on national average fuel mix.