Deprecation of Hybrids

Link:
http://www.automotive-fleet.com/Article/Story/2008/01/How-Will-Future-Residual-Values-Impact-Hybrid-Lifecycle-Costs.aspx?interstitial=1

Summary:
The slow rise of fuel prices throughout the past couple of years have got people trying to find ways to reduce how much they spend on their cars. One answer to this problem is buying a hybrid. Although it is argued that hybrids are more complex, and therefore will cost more to maintain and repair if broken, the deprecation rate of these cars are quite low. Since there were only two hybrid models available in 2003, the energy efficient cars were in low supply, but extremely high demand. Due to this low supply, high demand situation, consumers settled with buying used two or three year old hybrids for about 85% of the original price. Nowadays, there are more hybrid models out there, and the demand is dying down for hybrid cars, but it is still fair to say that purchasing a hybrid would be a good idea.

Connections:
The low depreciation rate on hybrid cars relates to Ch 9's section on the Nature of Depreciation. The book describes depreciation as the decrease in value of an asset over time, but I believe that time isn't the only factor in this equation. The reason that hybrid cars retained their value was because back in 2003 to 2004, there were only about two to four models. Since there were so few models back then, there was a limited supply, and when there isn’t enough of something, consumers are willing to pay more. This is a fine example of the law of supply and demand, which I believe in this case, has more effect on the depreciation equation than time.

Reflection:
In my opinion, buying a hybrid would be a smart choice to make. Even though technology is advancing at an amazing rate, and there will probably be better energy efficient cars in the future, the hybrid seems like a good business investment at present. However, some people don’t have that kind of money to spend, and while I am all for someone buying a hybrid, I believe that it isn’t necessary, especially if such a person can just bike or take public transit. The price of gas isn't dropping because there is a limited amount of it, just as there was with hybrids. However, we are able to create more hybrids, but I’ve yet to hear of anyone creating gasoline.