‘Total cost of ownership’ information gives hybrid, plug-in vehicles a boost

Sales of hybrid and plug-in electric vehicles have slumped, but new Indiana University research shows some consumers are more likely to buy when they see data that shows the total cost of owning a hybrid or plug-in electric vehicle compared to a conventional car.

The researchers surveyed car shoppers online, asking them to react to a variety of EPA fuel economy labels for generic cars with no brand names attached. Those in the market for a mid-sized car weren’t influenced by the current EPA labels that show only that electric vehicles use less fuel. But when the labels added total cost-of-ownership information summarizing financing, depreciation, registration, maintenance and insurance costs, consumers saw hybrids and plug-in electric vehicles in a new light.

“Consumers have been slow to buy hybrids and plug-ins because they cost more initially than conventional cars,” said Indiana University-Purdue University Indianapolis professor Jerome Dumortier, one of the authors of the study. “Our research indicates car shoppers are less hesitant when they see the big picture, what it really costs to own a vehicle over 10 years.”

In the survey, which originated at the School of Public and Environmental Affairs at IU Bloomington and IUPUI, potential car buyers saw an example of the EPA fuel economy label in use now. It showed a mid-sized gasoline vehicle had an annual fuel cost of $1,845, while a hybrid rang up only $1,272 at the pump. Despite the fuel savings, consumers showed no preference for the hybrid. That changed when the label also revealed the total monthly cost of ownership ($460 for the gasoline vehicle compared to $448 for the hybrid). The results were even more significant for plug-in electric vehicles.

“The implications are clear,” Dumortier said. “If automakers and policymakers want more Americans to buy environmentally friendly small and medium-sized cars, we should be telling consumers as much as we can about the real cost of ownership.”

Here are other key findings based on the 2013 survey of about 3,200 responders in 32 U.S. cities. All said they were planning to buy a new car within two years:

  • Potential purchasers of increasingly popular small SUVs were unmoved when shown the disparity in total cost of ownership of gas vehicles compared to hybrids and electric vehicles.
  • The EPA’s labels that show five-year fuel expenditure savings may not be effective because consumers don’t have a way of taking into account the premium price of alternative fuel vehicles. That’s why total cost of ownership is more meaningful.
  • Automakers and car dealers should consider highlighting total cost of ownership in promotional materials so consumers will have more complete information.

The research is described in the article “Effects of providing total cost of ownership information on consumers’ intent to purchase a hybrid or plug-in electric vehicle” in the journal Transportation Research Part A: Policy and Practice. Dumortier and co-author Saba Siddiki are on the faculty at the School of Public and Environmental Affairs at IUPUI. Co-authors Sanya Carley, Joshua Cisney, John Rupp and John D. Graham are associated with SPEA at Indiana University Bloomington, and co-authors Rachel Krause and Bradley Lane are at the University of Kansas.

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