If you live in Colorado and own a Prius, here’s a New Year’s Day gift for you: $6,000 off a plug-in hybrid conversion.
Earlier this year, Colorado passed House Bill 1331, “Incentives for Efficient Motor Vehicles,” which creates new tax credits of up to $6,000 for the purchase of, or conversion to, a plug-in hybrid electric vehicle.
Background: plug-in hybrid and electric car retrofits.[social_buttons]
The new credit will be a substantial discount off the average price of a plug-in conversion, which generally run around $10-14,000. On top of the Federal Tax Credit of 10% (up to $4,000), plug-in retrofits could start to make a lot of sense for some car owners.
If you’ve been out of the loop, the Federal 10% credit was included in the American Recovery and Reinvestment Act:
New plug-in conversion credit. A new plug-in conversion credit of 10% of the cost of converting any motor vehicle (new or used) to a qualified plug-in electric drive motor vehicle. The maximum credit is $4,000 per vehicle. This credit is claimed on Form 8910, Alternative Motor Vehicle Credit, and applies to property placed in service after February 17, 2009. Source: IRS.gov
While it was nice of the Feds to throw us a bone here, I don’t think it’s not enough to entice anyone to act. A buyer on the fence about spending over ten grand will hardly be persuaded by a $1,200 discount.
The Colorado bill also offers other credits for the purchase of new hybrids, diesel-electric hybrids, or hydrogen vehicles. Some of these are complimentary—buy a qualifying hybrid and you will receive a tax credit for purchasing the vehicle, as well as for the conversion to plug-in electric vehicle.
Estimated Plug-in Retrofit Cost Breakdown
Assuming you live in Colorado, and assuming you can find a shop in your area to do the conversion (try Burt Automotive Group) you’re looking at a cost breakdown like this:
- $12,000 – Full Prius conversion price (estimated).
- 10% off for Federal Tax Credit = $1,200
- 85% up to $6,000 applied to CO Tax Credit = $6,000
= $12,000 – $1,200 – $6,000 = $4,800 total cost
You just got more than half off that plug-in conversion.
The only problem here is that the initial out-of-pocket charge will be the full $12,000, since tax credit money won’t be available for months after next tax season.
Will a plug-in retrofit ever pay itself off?
If economics aren’t your primary motivator, you can stop right here.
I’d like to pass on working out the number, since I think it shifts the focus from where it should be. As Calcars.org wrote in response to this question:
People routinely pay more for such options as sunroofs, automatic transmissions, V8 engines and leather seats. These are “features” — and no one asks about the payback. A JD Power survey shows buyers will pay more for cars with the “environmental feature.” How much more? The high demand for the Honda Civic hybrid tell us it’s at least $3,000.
While plug-in hybrid retrofits still seem best suited to the truly committed, there are a number of scenarios where the economics do pan out. Despite the large up-front conversion cost, buying a used Prius and converting it to plug-in hybrid could still be cheaper than buying a brand new 2010 Prius (see: Want a Plug-in Hybrid Now? Luscious Garage in San Francisco is Your New Best Friend). It may be used, but it’s twice the car for about the same price.
Having a car that can run virtually without gasoline is also a hedge against future increases in the cost of oil. Strictly speaking, the economics don’t make sense at $3 per gallon, but the payoff time decreases quickly with rising fuel costs.
However, I will placate the economists:
How long would it take to pay off a $5,000 conversion? Let’s say average yearly miles driven in the US is 12,000 and that a Prius averages about 45 mpg. That’s about 266 gallons of gasoline per year. At $3.00 per gallon, that’s roughly $800 per year on fuel.
Unfortunately, it’s hard to estimate what mileage will be with the new plug-in system (depends on driving habits, climate, topography of the area, how often it’s actually plugged in, etc), although it’s probably safe to say 70+ mpg (feel free to comment if I’ve made incorrect assumptions).
- 70 mpg works out to 171 gallons x $3.00 per gallon = $514 per year.
- Net savings = $286 per year, which would take 17 years to pay off.
- If we’re not conservative and say the conversion will get 100 mpg, pay-off time drops to 11 years.
From a purely economical standpoint, this still isn’t the best deal in the world. But, at least for now, let’s just be satisfied that this technology is available and relatively affordable—at least in Colorado.
- Burt Automotuve: CO-based prius plug-in conversions
- Colorado.gov: Information on the $6,000 tax credit
- IRS.gov: Federal Tax Credits for plug-in hybrids
- Calcars.org: Information on Plug-in Hybrids
- Get a plug-in prius hybrid conversion through 1BOG.org