December 14, 2008

Will a Chevy Volt be a good buy?

I've been pretty interested in the concept of the Chevy Volt car that is supposed to start selling in 2010. The car is supposed to run off an electric battery that would drive electric motors to power the wheels. It would also have a small gas engine to act as a generator to recharge the battery if needed. It is in our nation's best interest to decrease our use of foreign oil. Switching to electric powered cars would be a good step towards that goal.

I've assumed that driving a Volt running on electricity would be cheaper than a gasoline powered car. How much cheaper would a Volt be to operate? Would the gasoline savings from a Volt alone be worth its cost?

The Wikipedia page for the Chevy Volt has some detail on pricing and specs. Much of this information is still preliminary and may change, but its the best info I can find.

Right now they are saying that the Volt will cost $40,000 new but qualify for $7,500 in tax credits. That would make the net cost $32,500. They say that the battery will get you 40 miles and it holds 16 kWh of electricity. So for the first 40 miles of travel between charges you should be able to go on full electricity without using any gasoline. Personally my electricity is about 10¢ per kWh and I only drive around 10,000 miles a year. I figure 90% of my driving is made on days when I drive 40 miles or less in a day. So 90% of my driving would be electric only. At 10¢ per kWh it would cost $1.60 to charge the batter and drive 40 miles. So the cost would be 4¢ per mile. Right now my car gets 25MPG and gas is about $1.70 a gallon so thats 6.8¢. I could however switch over my electric charges so that I pay less during off peak hours and then charge the car at night. If I did that then I could pay just 4¢ per kWh at night off peak hours. That would give me a cost of only 1.6¢ /mile to drive the volt on electric.

I figure I would save roughly $500 a year in gas costs with a Volt compared to my current car.
If I sold my current car I'd probably get about $10,000 for it give or take. If I then bought a Volt at $32,500 I'd be spending $22,500 to upgrade to the Volt.

My Verdict: Spending $22,500 is not worth saving $500 a year. Based on the savings in gasoline buying a Chevy Volt is not worth the extra cost.

I could put that $22,500 in the bank and make 3% interest for $675 a year.

What if I just bought a Prius instead? A Prius will get me 50 MPG and if I drive 10,000 miles a year then it will run be about $340 a year for gas at $1.70 a gallon. Thats half the cost of my current car.

A Prius would save me $340 a year in gasoline compared to my current car. I could buy a new Prius for about $24,000 which would be a $14,000 upgrade. The Prius would be a better buy than the Volt.

For purely financial reasons the gas savings of a Volt is not worth the cost. The Volt would have other benefits such as reducing our usage of foreign oil, but thats more a matter of personal choices and priority than a straight forward financial gain so the benefit of that would be very subjective.

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