Bernard Hickey: Plug in to save money

Hybrids such as the Mitsubishi Outlander PHEV are starting to stack up financially.

I have often dreamed about being able to drive a car without having to burn oil. Surely New Zealand could use all its water and wind and steam to power a big, comfortable car without pumping more carbon dioxide into our atmosphere.

But it has been much easier to dream about than do.

Purely electric cars have been prohibitively expensive and the business of recharging them has been risky and financially mysterious.

Hybrids such as the Toyota Prius have become more popular, but more so with taxi drivers doing many thousands of kilometres a year. Such non plug-in hybrids still use petrol, but the savings are worth it when you're doing taxi-like kilometres.

So this has meant hybrid and electric-only cars have not taken off as some might have hoped.

That may be about to change because of better battery technology, the high New Zealand dollar and a new way to buy power.

Just before Christmas I test drove a Mitsubishi Outlander PHEV (Plug-In Hybrid Electric Vehicle).

It is unique in that it is a full-size SUV with a big enough battery to run purely on electric power for your daily commute. But its two-litre petrol engine kicks in if you run out of electric power and when you're accelerating up hills.

Unlike a normal hybrid, the petrol engine hardly ever runs on a usual commute and you plug it into your mains power to recharge it overnight.

It means you can relax about a long trip or running out of electricity, and you can be confident of using little petrol during normal commuting.

I thought it was worth running the calculator over it to see if buying such a car stacked up financially.

Our house in Brooklyn, Wellington is hooked up to Flick Electric Co. The new "virtual" electricity retailer buys power on the wholesale market and sells it to householders at the wholesale price plus a margin.

Flick offers a better night rate when demand is lowest.

I used that cheap power to charge the Outlander.

Over 15 days in December I drove the car 357km and recharged it in the evenings and overnight on 13 of those days. I used 118.4kw/h of power at a cost of $14.29.

The petrol engine kicked in a few times going up the Brooklyn Hill and on longer trips.

I used $11.37 worth of petrol; about 1.6 litres per 100km. That works out at a total fuel cost (power plus petrol) of about 7.2c a kilometre.

A petrol-only Outlander would have cost about 18c a kilometre.

Over a year of driving 20,000km I would save around $2180 in fuel. That's about enough to compensate for the extra $15,000 for a PHEV Outlander over a petrol-only Outlander.

You can pick up a plug-in for $59,990, compared to a petrol or diesel model at $44,990.

Given the depreciation rates and interest costs on that extra $15,000 of capital, I estimate the car would pay for itself in seven years.

It's more attractive than I thought. But my ultimate carbon zero daydream is to avoid the depreciation and capital costs by buying this type of hybrid second-hand when the bulk of the depreciation has happened.

That way I can avoid breaking my big personal finance rule: never borrow money to buy a car, never buy a new car (and absolutely never borrow money to buy a new car).

These PHEVs will make an awful lot of economic sense as 3- or 4-year-old second-hand vehicles.