Volt Sticker Shock?

Posted by Brian Dumaine

When we wrote about the Chevy Volt's entry into the electric car race in Time's July 26 issue one of the outstanding issues was the sticker price for this unique electric-hybrid vehicle. Today GM gave the answer: $41,000, not far off from the $40,000 that Time and others estimated. With a federal tax credit of $7,500, that knocks the price down to $33,500, but that still makes the car at least $10,000 more expensive than a comparably sized gasoline-powered car. Load up the Volt with goodies like leather seating, add taxes and destination charges and the sticker gets quickly into the luxury-car level.

Will the money you save on gasoline make up the difference? Driving the Volt in its all-electric mode—it can go 40 miles on battery power before a gasoline engine kicks in for another 300 miles of range—is cheaper per mile than gasoline. Depending where you live in the country, each electric mile costs about three cents compared to 10 cents for each gas mile. A driver traveling 10,000 miles a year in a Volt on electric power will save roughly $700 annually in fuel costs. That makes the payback for the Volt owner about 14 years—a long time to keep a car—especially one with first-generation technology.

GM contends volume will bring the price down dramatically over time. And that's crucial because it's not clear how many buyers will be willing to pay a “green” premium for the Volt.

The better deal seems to be to lease the Volt. GM also announced that it would offer a 36-month lease for as low as $350 per month with $2,500 due at signing, including security deposit. GM is applying the $7,500 tax credit against the monthly lease payments. By leasing, you get the full benefit of the $7,500 over three years as opposed to stretched out over a longer period if you owned it and kept to for, say, seven years. Whether GM will be able to sell three–year-old Volts coming off lease for a profit is another question. (GM would need to sell the used Volt for roughly $20,000 to break even.) A new one three years from now with subsidies would cost $33,500 and that's assuming GM doesn't figure out how to reduce the price on new Volts by then.

But that's the company's problem. Your problem will be trying to get a Volt at all. The first year's production will only be 10,000. The Volt will be initially available to Chevy customers in California, New York, Michigan, Connecticut, Texas, New Jersey and the Washington D.C. area. To sign up you need to visit a Chevrolet Volt dealer. Happy hunting.