Tax incentives

Some hybrids and all diesels are still eligible for federal tax rebates. When fuel prices are low these credits are a key aspect of whether or not many of the vehicles break even.

Many hybrids are no longer eligible for the tax credits, which phase out once an automaker produces 60,000 hybrids across all of its brands. As a result, hybrids built by Honda and Toyota (including the Lexus brand) are no longer eligible. Ford passed 60,000 last year, so incentives phase out by Dec. 31, 2009. Current hybrid incentives range from $488 for the Ford Escape Hybrid and $850 for the Fusion Hybrid to $2,350 for the Nissan Altima Hybrid. Counting those credits, you'll save money in the first year by buying an Altima, Escape, or a Fusion. The 2010 Chevrolet Malibu Hybrid is only available in fleet sales.

Diesel tax credits are available in full for the hand-ful of diesel cars and light-duty SUVs on the market. They range from $900 for the 335d to $1,800 for the X5 35d and GL320. Taxpayers subject to the Alternative Minimum Tax (AMT), however, might not be able to get the full credit, if any. Regional incentives are also available in some areas.

Bottom line: at higher gas prices, many hybrids provide a definite benefit in overall owner cost, despite an initial price premium. Still, if saving money right out of the gate is important, there are many conventional cars that provide very good fuel economy and cost less than hybrids. Decide what type of vehicle is best for you. Then choose one that gets good gas mileage for its class and rates highly in our road tests and in our reliability, safety, and owner-cost Ratings. In the hot pursuit of saving at the pump, you don't want a car that will let you down in other areas.