Hybrid Tax Credit To Expire Soon

Anthony Fontanelle
August 24, 2007

The popularity of hybrid cars such as the Toyota Prius and the Honda Civic Hybrid is due to the eco-friendliness and fuel economy of such vehicles. Aside from that, consumers are choosing hybrids over conventional gasoline-powered vehicles because of the tax credits given by the government.

The strong selling point of a hybrid is its fuel economy. With the price of gasoline skyrocketing, consumers would surely prefer hybrid vehicles which consume less fuel. But the drawback is that hybrid vehicles are priced thousands more than their conventional counterparts. The reason for this is the higher cost of production since hybrid vehicles use advanced powertrain technologies. The government, in an effort to popularize the use of hybrid vehicles, gave tax credits for consumers who buy hybrids.

But this tax credit offered by the government is not unlimited. There are already a set number of hybrid vehicles from a particular automaker which will be qualified for the tax credits. And now, those tax credits are diminishing and will soon expire completely.

Toyota is the leader in hybrid sales and tax credits for the Prius, the Camry Hybrid, Highlander Hybrid, and the upscale Lexus RX400h are now diminishing. By the end of October, tax credits offered with these hybrids will be gone. This means that if you are planning to buy a Camry Hybrid later this year, or after October, you will have to pay thousands more than what you would pay for a Camry. This expiration of the tax credit may push consumers away from buying hybrid cars. This might be the case unless Congress steps in and extends the tax credits offered to hybrid car buyers.

Honda already sold 60,000 hybrids in the United States auto market. That means that the $2,100 tax credit for their hybrids will be halved by January next year. Even with the Accord Hybrid discontinued, the tax credit will still diminish as the Civic Hybrid gains popularity. Honda is planning to release a new hybrid car for 2009 and it is not clear whether that hybrid will still be qualified for the tax incentives that are currently being offered.

Not all automakers though have already reached the threshold where their hybrid cars are no longer qualified for the federal tax credits. Mazda has the Tribute Hybrid and the hybrid vehicle recently qualified for tax credits. For the 2WD variant of the Tribute Hybrid with its Mazda air filter is qualified for a $3,000 credit while the 4WD version qualifies for a $2,200 tax incentive. The Tribute is essentially the same as the Escape Hybrid which means that if you are looking to buy a Ford Escape Hybrid and is now thinking twice of doing so because of the tax credit expiration, the Tribute Hybrid is a logical alternative.

Although Ford has shares in Mazda, the Japanese automaker is considered as a separate manufacturer. This means that the tax credit for the Tribute Hybrid will be around for a long time. And if Congress steps in and extends the tax credit scheme, auto buyers will be given more reasons to buy hybrid cars over conventional gasoline or diesel powered vehicles.

Source:  Amazines.com