Matthew Engel

Even with the price of gas at an all time low in recent memory, it is still prudent to contemplate investing in an electric or hybrid vehicle when purchasing your new car.

Alternative Motor Vehicle Credit

The federal government continues to encourage the purchase of alternatively fueled vehicles in a limited way. Qualified electric and hybrid cars owners receive federal tax credit depending on the year, model, and date of purchase. The credit amounts can be found here, provided by the IRS. These credits are for a limited time and only apply to new cars bought after January 2006.

This is both logical and inevitable, since the price of gasoline is highly variable. There is no guarantee of a steady supply of oil into the US, and fluctuations in demand cause prices to oscillate. Fierce competition for resources world wide lead to wars and enviromental wastes. Whatever the reasons, the econimic data speaks for itself. Below is the average costs for one gallon of regular gasoline in the Northeast United States (New England). An increasing trend is clearly evident.

Regular gas prices in the Northeast United States show a strong increase over the last 15 years. The trend is expected to remain positive over the coming century.

This data is publicly available and can be downloaded from the Energy Information Administration whose goal is to provide official statistics regarding petroleum, natural gas, electricity, coal, and renewable energy usage. Data on crude oil prices and refinement can readily be found. The information regarding historical gasoline prices can be accessed here and was compiled by me into the previous diagram.

Interestingly, the above data was downloaded in October 2008, and is already reflecting a strong decline in gas prices. The current meteoric drop in price is not shown here, and there is no downfall on the graph quite like the drop we are currently experiencing.

Considering this data, one should intuitively think of how to strategically plan for long term stability regarding their vehicle costs. This includes a source of energy for your vehicle, like gasoline. However, many other forms of energy are available – most notable electricity.  Tax credits for electric cars range from $2,500 to $7,500. However, this is only available for a limited time: only for the first 250,000 vehicles sold domestically. In general, the most popular cars, such as the Toyota Prius have little tax credits. However, it is expected that the newer domestic hybrid vehicles, such as the Chevy Volt will see a significant tax advantage.