How Old is My Hybrid in Dog Years?

I’ve been on the fence about hybrid cars for a while.  Not that I don’t think they’re a great leap forward from SUVs, rather, I’m worried about how the auto makers are selling them.  The story of car ownership is often marked by a series of buck-passings, and make-it-throughs as a car goes from owner to owner.  “Gotta make it to the end of the month for the oil change.”  “These shocks need to last through the winter before I replace them.”  “That dealer has no idea how much work this car is going to need before they can re-sell it, lucky it started when I went to trade it in.”  Any car owner who’s ever dealt with a car that is over 8 years old can probably sympathize with at least one of those phrases.  And since hybrids have only been around for about that time (about the car equivalent of the required colonoscopy age), only now are we as a society about to be faced with this question:

What happens when a hybrid gets old?

When my friend Johnny and I were younger (circa 2002-2003), his parents went away for a week, leaving us both to watch the house.  They left him with one simple request, try to sell his mom’s old car, a 1990 Honda Civic with upwards of 150,000 miles on it.  As Johnny and I were typical lazy guys, we spent the week lounging about, drinking beers, grilling hamburgers, and goofing off.  The day before his parents were to return, Johnny realized that he’d done absolutely nothing to sell the car.  In an effort to show that he’d at least accomplished something he drove it out on the lawn, and put a “For Sale” sign up in the window.  Now, to truly appreciate the denouement of this tale, you have to know that Johnny lived on a dead-end off of Route 9.  Even though his house was pretty close to the main road, it was at such an angle that no one could even see the car unless they were driving down his road.  And since it was a dead-end, you only drove down there if you lived there.  He knew that putting the car in the yard probably wasn’t going to move it.  He’d need to make flyers, go to Kinkos, hit up grocery stores and community boards all over the place.  But we were drunk at 2 in the afternoon with party plans that would carry us into tomorrow.  There was no way we’d be able to start any of that before his parents returned.

By the time they got home the next day Johnny had received three offers on the car.  In the eyes of his mother, Johnny looked almost responsible.  But, as we learned from that experience, even when the odds are stacked against it, a 12 year-old Honda for $1000 sells itself.  Any one who knows anything about cars knows that they’ve got another 100,000 miles of light-maintenance driving before the car really goes south.  For an initial investment of $1000, that’s a bargain.

Would the above scenario apply to a hybrid car?  Probably not.  Toyota offers an 8 year/100,000 mile warranty on the Prius, but take a look around the next time you’re out driving.  The amount of Toyotas on the road that are over 8 years old or have over 100,000 miles on them is probably not a lot different from the amount that have 150,000 miles on them, or 200,000.  The point I’m making is that the Prius may be a little too well engineered for its own good.  Mechanics have a hard enough time dealing with imports (Ever need to get work done on a Volvo?), so imagine approaching your average garage with a twelve year-old hybrid and a problem anywhere in the electricial system.  The battery pack alone costs between $4000 and $5000, and that’s just for the part.  Even if they could afford one, would a 16 year-old kid want to take on the Russian Roulette-like responsibility of owning a 12 year old Prius?  And as more and more hybrids get old, who’s taking care of all these spent battery packs?  That’s a lot of dead cells to properly dispose of.  Are we sure that we’re doing this as well as it could be done?

None of my resale qualms are really about the hybrids themselves.  Rather, I believe that the fault is not in the product, but in the distribution.  The business model, namely ownership, that works so well for traditional automobiles is a completely irresponsible one for the distribution of hybrids.

It wasn’t until I read a book called Natural Capitalism, that I really felt better about hybrid ownership, and that there was a win-win way that would benefit car companies, customers, and the environment.  In the book, the authors postulate that the business model that works for selling copier machines to offices should be adopted by the auto industry.

When Xerox first made their 914 model copier, it was a revolutionary product in terms of efficiency, materials used, time invested, and many other measurable aspects.  However, it cost six to seven times more than it’s competition.  Instead of changing the product, Xerox invented a new business model to be competitive.  They leased the copiers at substantially lower cost to the consumer and instead charged a per-copy fee for copies over 2000 per month to supplement their revenue.  Obtaining a copier became easy for the consumer, and they only had to pay if they used it heavily.  In other words, Xerox didn’t sell copiers, they sold a service.  If a copier broke, they sent someone to fix it.  Old copiers were returned to Xerox, who was responsible for the proper disposal.  This did a lot to spur Xerox to make a better product.  Since they had to handle maintenance, it paid to make a copier that wouldn’t break down all the time.

Now let’s apply this model to the Toyota Prius.  Instead of selling you a Prius, Toyota leases it to you long term.  This means that all maintenance is handled by Toyota, all replacement parts are handled by them, and when you’re done with the car, you hand it back to Toyota.  Instead of a free warranty (which lasts for a limited amount of time and ultimately bumps up the sale price of a car), the owner pays a per-month maintenance fee, which lasts the lifetime of the vehicle.  If a car is given back to Toyota, they could lease it again and the new owner would pick up the maintenance.  Toyota could charge less for the car initially because they would know that each car sold would be a guaranteed revenue stream for the next ten years or beyond.  And because of this guaranteed stream of cash, it would be incredibly advantageous for Toyota to build a car that rarely broke down and lasted forever (which is something that they already do anyways), as they’d keep making money on the cars as long as they were on the road.

And this would work for any car, with any car company.  Imagine that twelve year-old car out on Johnny’s lawn.  We could have driven down to the nearest Honda dealership and given it back.  Sure, we’d get nothing for it in trade, but I’m pretty sure that at least $1000 dollars of the price of the car would have been knocked off when it was new.  Plus dealers could probably cut some sort of deal that would hack a chuck of the down-payment cost off a newer vehicle if you kept with their brand or stayed with their lot.  How’s that for encouraging customer loyalty…

So now, using this model, a twelve year-old Prius sitting on a car-lot with an ultra-low lease cost, the typical maintenance fee, and no looming threat of an electrical apocalypse looks like a much better buy for young driver.  Pile on the fuel efficiency and sweeten the pot even more.  And what does Toyota care if you lease new or old.  They’re still making money off of a car that rolled off the assembly line before the driver was in kindergarten.

I’m sure there are parts of this cockamamie scheme that I haven’t thought of, details that I’ve neglected, etc, etc, etc, but the underlying point is this.  To make aging hybrid cars appeal to a wider range of people, more action and attention is required from the companies that built them.  However this happens, it’s not a question of if, it’s a question of when.