Do hybrid vehicles retain their value better?

Gallery: Hybrid Cars. Will the 2011 Honda Civic Hybrid retain its value more effectively than the standard 2011 Honda Civic? Explore more images of hybrid cars. American Honda Motor Co., Inc.

It’s common knowledge that a new car's value depreciates the moment it leaves the dealership. This is indeed accurate. As soon as the purchase is made, the vehicle’s worth drops by 15 to 20 percent, depending on its wholesale value compared to the price you paid [source:

Lazarony]. This holds true across all makes and models. So, why is this the case? And do hybrids fare better in terms of resale value?

When it comes to vehicle resale value, brand and demand play crucial roles. For instance, two hybrids—Honda Civic Hybrid and Toyota Prius—were among the top 10 cars with the best resale value in 2009, according to Kelley Blue Book. However, the 2011 Kelley Blue Book Best Resale Award did not feature any hybrids. Rising fuel prices, especially the 2008 gas crisis, might explain this shift. During the summer of 2008, gas prices spiked over $4 per gallon, while they were under $3 in 2010 [source: USEIA].

To assess whether a hybrid vehicle holds better resale value, let's compare two similar models: a 2009 Honda Civic EX and a Civic Hybrid. Using Kelley Blue Book for reference, the 2009 hybrid had a manufacturer's suggested retail price (MSRP) of $23,550, while the Civic EX four-door was priced at $20,005. After 23 months and 26,500 miles (42,648 kilometers), the hybrid's suggested retail value is $18,730, reflecting a depreciation of $4,820. Interestingly, the KBB lists the EX at a suggested retail value of $17,380. With depreciation of $2,625 over two years, the EX retains 87 percent of its value, whereas the hybrid retains 79.5 percent.

Studies indicate that the overall cost of owning a hybrid vehicle often surpasses the savings it generates. Two contributing factors are the higher initial cost of a hybrid and its greater depreciation. Depreciation typically depends on market demand. When gas prices are not as extreme as during the 2008 crisis, the demand for hybrids decreases. Additionally, the fuel savings may not be enough to balance out the premium price of a hybrid. Some studies even suggest hybrids are more expensive to maintain [source: CarGurus]. It's important to keep these factors in mind when considering if purchasing a hybrid is worthwhile for you.