Tax Breaks Being Phased Out For Honda Civic

After December 31, 2008, car buyers will no longer be able to claim a tax break for buying a Honda Civic. The phaseout of the tax break for this particular model began in 2007, when Honda sold its 60,000th hybrid vehicle. Tax breaks for the Toyota Prius also expired in 2007. Shopper can still get full tax breaks of $3,000 for buying a Ford Escape hybrid or Mercury Mariner , both of which are rated at 32 mpg. The Chevrolet Malibu will still earn a full $1,300 credit.

The loss of the tax break may mean the difference between buying a hybrid and buying a conventional vehicle, as gas prices have dropped by more than 50% from this summer's peak, and consumers are becoming more careful about how and where they spend their money. Added to the mix for car buyers is the availability of consumer credit.

Consumers are starting to pay closer attention to the economics involved in buying a hybrid vehicle. While the payoff of the so-called hybrid premium ranges depending upon the price of gasoline, the loss of the tax break virtually ensures that many consumers will never hit the break-even point on their hybrid vehicles. This fact combined with a new crop of lower-cost, highly efficient conventional vehicles means that consumers who are looking to save money may be able to strike a much better deal with a conventional vehicle than with a hybrid.

Hybrids are popular among the environmentally conscious, but studies of consumers show that more than three-fourths of consumers who consider purchasing a hybrid vehicle do so for monetary savings rather than out of concern for the environment. Toyota is now offering incentives on its highly popular Prius, something that was unheard of just two years ago.

Congress may revisit the idea of incentives for hybrid cars as part of a stimulus package for the US auto industry, but new incentives are most likely to focus on other hybrid-electric, electric and other alternative propulsion technologies.