Expiring Hybrid Tax Credits for Toyota …#34; What Does It Mean for the Market? : Toyota new car review article 2008

Expiring Hybrid Tax Credits for Toyota …#34; What Does It Mean for the Market?
by Aazdak Alisimo
The IRS has announced that people buying Toyota hybrids will no longer be able to claim a tax credit. This raises the issue of expiring tax credits and what it means for the future of hybrid cars.Hybrid cars are extremely popular and none more so than the Toyota Prius. The popularity arises from a number of sources. They include everything from the fact the cars pollute much less than traditional gas engine autos to the fact the cars get much better mileage and so on. Another major factor is the hefty tax credit a person gets when buying a new hybrid. At least until recently.The conspiracy theorists are absolutely correct. The government does try to influence our conduct. Unlike the wild conspiracy theories you read about, the technique used is fairly mundane. The government likes to wiggle the carrot of money in front of our collective faces. Smoking is bad, so it piles tax upon tax on the purchase of smokes.In the case of cars, the process works the other way. Our oil addiction is bad, so the government is trying to motivate us to try hybrid vehicles by giving us a large tax credit for buying a new one. The credit can be up to $4,000, which is a huge amount of money.This tax credit, however, phases out over time. As a manufacture sells more hybrids, the credit is reduced by the IRS each quarter. The final magic number is 60,000 hybrids. When a manufacture sells this number, it loses the tax credit benefit. This has just happened with Toyota and, as its subsidiary, Lexus.To be absolutely clear, you decision to purchase a Toyota or Lexus hybrid no longer should involve any consideration of a tax benefit. Why? There isn’t one. Will this fact change your mind when it comes to buying a hybrid or not? Nobody in the auto industry is particularly sure nor do they really care as none of the manufacturers are remotely close to the 60,000 sold figure.It does, however, raise the issue of what will happen to the hybrid market as more manufacturers lose the tax credit. Will the market die or not? The best we have is an educated guess. Yes, the market will slow down. No, it will not disappear. Why not? A couple of reasons come to mind. First and foremost is the fact people are willing to pay to be green. Given the choice, a large percentage of people will pick an environmentally friendly car. The loss of the tax credit doesn’t change that so long as hybrids are not priced dramatically higher than other cars.The second issue is more cause and effect. Simply put, oil prices are rising and predicted to continue to do so in the future. This means prices at the pump are going to continue to go up dramatically. Some even suggest we have seen the peak of oil production in the world, which would mean prices are going to go up a huge amount. Regardless, we can all expect to pay more at the pump. Will we still be buying cars that get 25 miles to the galloon or hybrids that get 50? The answer would seem obvious.We can’t predict the future, but it appears the hybrid vehicle market will survive the loss of the tax credits that currently exist. The real question is whether you and I will survive astronomical gas prices!