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Incentives running out for hybrid car buyers

The end of the year is coming fast for buyers of hybrid cars, as tax incentives run out when the new year arrives, according to the Wall Street Journal (subscription required)

The tax credit for the Honda Civic hybrid ends at the end of the year, just like it did about a year ago for Toyota Motor Corp.'s Prius, a strong-selling hybrid that gets about 46 miles per gallon. The federal government is phasing out the same incentives for Honda Motor Co.'s Civic hybrid, which gets 42 miles a gallon.

According to the Journal, hybrid tax incentives start to go away when a car maker sells its 60,000th alternative-fuel vehicle, a level Toyota reached in mid-2006 and Honda hit in the third quarter of 2007. The amount of the tax credit is first reduced by 50% before disappearing altogether over several months. Honda's $525 tax credit will be phased out by Dec. 31, according to the Internal Revenue Service. The Civic credit had been as high as $2,100 before the phase-out began in January 2008.


Sales of hybrids are about 2% of the overall market, but they've grown rapidly since the Prius made its debut in the United States in 2000. Toyota and Honda were the first to have these vehicles in dealer showrooms when fuel prices started skyrocketing in the past few years.

Hybrids get better mileage because they pair a traditional internal-combustion engine with an electric motor, which is powered by a rechargeable battery. Electric motors boost power to the regular gas engine, allowing auto makers to install smaller, more efficient motors in hybrid cars. Some hybrids run on electric power alone at low speeds, further saving fuel.

A Honda spokesman told the Journal that it has no plans to discount its Civic hybrid as the credit disappears. Next year Honda is releasing a new Insight model, expected to be priced around $19,000, though it will not be eligible for a tax credit.

Manufacturers currently offering full tax credits for their hybrids include General Motors Corp. and Ford Motor Co. GM's 2008 Chevrolet Malibu hybrid, which gets about 27 mph, offers a $1,300 credit. Ford's 2009 Escape hybrid, a small sport-utility vehicle that gets about 32 mph, has a $3,000 credit for its two-wheel drive version. The same goes for Ford's two-wheel drive Mercury Mariner hybrid.

Aaron Crowe is an unemployed journalist in the San Francisco Bay Area. Read about his job search at www.talesofanunemployeddad.blogspot.com

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