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Other vehicle and credit alternatives
Honda is the leader in another fuel-efficient auto area: the compressed
natural gas, or CNG, vehicle. The energy legislation that created
the hybrid credit also included tax breaks for three other fuel-efficient
vehicles: advanced lean burn, fuel cell and alternative fuel.
Alternative-fuel vehicles run on compressed or liquefied
natural gas, liquefied petroleum gas, hydrogen or any liquid that
is at least 85 percent methanol. Honda's Civic GX operates on compressed
natural gas and the IRS has certified its 2005 through 2008 model
years as tax-break eligible.
CNG vehicles have two advantages over hybrids when it comes to taxes. The credit is usually larger and it does not phase out.
Home highway advantage
Domestic manufacturers have remained a lap down to Toyota and Honda in the hybrid race. That's why the provision penalizing the Japanese hybrid leaders was added to the energy bill. But it hasn't helped as much as lawmakers or Detroit executives might have liked. Judging from the numbers so far, not to mention the Big Three U.S. automakers' financial woes, industry analysts say that it will be years before buyers of American brands face any tax credit reductions.
Energy conservation advocates generally appreciate the tax effort
to encourage drivers to switch to fuel-saving hybrids. Many, however,
say that politics trumped a more aggressive -- and to their way of
thinking -- and more sound approach to reducing US driver dependence
on gasoline.
"It's obvious that
our government has a problem with creating an energy policy with any kind of vision,"
says Bradley Berman, editor of HybridCars.com. "The creation of the 60,000
cap was by and large designed to cut some slack to Detroit automakers, who are
way behind." Berman says the credit isn't likely to convert
someone who was not even considering a hybrid. At best, it will simply make a
potential hybrid buyer look a little more closely at all the alternative fuel
makes and models.
Overall automotive costs are a bigger drive when it comes to picking
a particular car, Berman says.
"Gas
prices have a greater impact than the tax credit. People tend not to think of
a large purchase in the big picture over the course of several years," he
says. "There are too many factors -- maintenance, resale
value, interest rate on your loan -- that have a pretty significant impact over
the long-term analysis of whether an auto purchase is a sound financial decision." Cindy Knight, environmental communications administrator for Toyota in Los Angeles County, agrees, saying it was difficult for Toyota to determine whether the company's hybrid-leading sales were helped more by the tax break or high gasoline prices.
"We think that the tax credit is really nice,"
Knight says. "But we're not sure that it really influences
a buyer. There's a combination of factors that makes a hybrid a
popular choice right now."
Freelance writer Kay Bell writes Bankrate's tax stories from her Austin, Texas, home. She also maintains two tax blogs, Bankrate's Eye on the IRS, and Don't Mess With Taxes.
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