Yes, hybrids cost more than conventional vehicles. They bring a lot of additional equipment to the highway including electric-drive motors, computer control, advanced batteries and often electrically driven or enhanced subsystems like braking, steering and air-conditioning. All this comes at a cost that's difficult to quantify, because automakers don't break out their hybrid component costs.

The Saturn Vue Green Line is the least expensive hybrid SUV, as of Q1 2007. view gallery >

Automakers have not been forthcoming about whether they're making money on sales of hybrid vehicles these days, or if some models result in a loss for every unit sold, as has been the case in the past. Regardless, it's all part of a process that's creating a substantial market for hybrids and that's been deemed worth the investment.

Early on, automakers determined that a retail cost of under $20,000 was an important threshold, which is why the Honda Insight, Honda Civic Hybrid and Toyota Prius were initially priced below that figure. That’s now changed as the Insight has now faded away and the second-generation Prius and Civic Hybrid have crept up above the $21,000 mark. Hybrid price points now vary widely because hybrid SUVs are on the scene and Saturn has entered the market with a less-costly, and simpler, hybrid system in its Vue Green Line. Plus, some hybrids like the Honda Accord Hybrid are positioned as top-of-the-line trim levels that command higher prices because of their performance or luxury appointments.

There has been much discussion in the media about hybrid purchases in terms of time it would take to recoup the added expense. It's tough to determine exactly what a differential cost for a hybrid model might be, because some hybrids offer features not found on conventionally powered counterparts, and there is no conventional counterpart for Toyota's Prius. Still, there seems to be an inordinate focus on this, with several studies pointing out that hybrids do not make sense because gas savings alone may never make up a perceived differential cost; and with other studies pointing out the opposite.

Hybrids like the Honda Accord are top-of-the-line trim levels that command premium prices. view gallery >

In its 2006 hybrid study conducted for USA Today, Edmunds.com concluded that with the exception of the Toyota Prius and Ford Escape Hybrid, the payback period in which fuel savings offset a hybrid’s differential cost was much too long — up to 15.5 years in the case of the Toyota Highlander Hybrid versus the conventionally powered Highlander Limited. While J.D. Power and Associates concluded that the price premium for hybrid vehicles continues to be a prohibiting factor in its 2006 report on hybrid and diesel vehicles, it also pointed out that despite this premium, the number of hybrids on the market will increase to 44 by 2012. Obviously, with this many models coming there is the expectation that price issues will be resolved in the years ahead.

From our perspective, placing emphasis on recouping the purchase-price premium of a hybrid through fuel savings is misguided. A large number of buyers aren't comparison shopping hybrids and conventionally powered variants of the same model. What they're doing is looking to get out of the inefficient vehicle they're now driving and into a better and more economical vehicle with accompanying cost savings at the pump. It's a lifestyle choice. If fuel savings help offset the purchase price over time, all the better. But it's not necessarily a make-or-break part of the purchase equation.