Archive for Jan, 2013

Car Power Plants Reviewed: Electric, Hybrid, Gasoline and Others

Have you thought about buying an all-electric vehicle, or hybrid with the costs of gasoline being so high. Maybe you are ecologically minded, and think electric power is better for the environment. Before you run out and buy an alternative fuel car, I thought it would be good to cover the advantages and disadvantages of the various types of engine systems that power cars.

Within the next 10 – 20 years it is quite possible that all-electric plug-in vehicles will be the majority of cars being purchased, yet today they represent less than 5% of new-car buys. Hybrids are really popular today, and plug-in hybrids are gaining in popularity, but if you are confused by all of the options read on.

  • Traditional gasoline powered, internal combustion engine. Within the last 30 years this reliable power has gotten very efficient, light weight and low polluting. The improvement in engine technologies have been aided with lower weight chassis to expand the miles per gallon of all trucks, cars and SUV. Contrary to conventional wisdom, and media criticism, gasoline engine vehicles use a very efficient power plant.  I’ve read articles about the science of them, and they convert power from fuel very efficiently considering all the things they do. In addition they are low in maintenance, accelerate quickly and can go nearly everywhere. Their biggest advantage over any all-electric vehicle is that they can go for hundreds of miles before needing a fill up. The worst SUV may still get less than 15 miles per gallon, but the best subcompact may obtain MPG ratings in the high 40′s. The world wide supply of oil seems to be adequate to meet the demand for the balance of this century, however the ecological and political issues surrounding its use, exploration, extraction and its increasing costs make gasoline and diesel power problematic for some.
  • Diesel powered engines also have come a long way in the last dozen years. They don’t pollute nearly as much as they used to, accelerate faster than the diesel powered cars of the 70′s and 80′s. They have tons of torque, which is very helpful if towing or trucks carrying a lot of weight.  Diesel powered cars get better gas mileage than their gasoline brethren, however since most diesel powered cars cost more than equivalent gasoline models and the price at the pump of diesel costs about fifty cents more per gallon, it may take 5 years or more to recoup the additional cost. Some maintenance is less for diesel cars, but it seems diesel is best for those putting very high mileage on their cars every year, and keeping them for a very long time, such as 10 years or more.
  • Natural Gas powered vehicles are on the road today, but mainly Compressed Natural Gas (CNG) or Liquefied Natural Gas (LNG) power fleets of city vehicles. Natural gas costs less than gasoline, doesn’t get as good miles per gallon, however unlike diesel, the increased cost of the vehicle and the less MPG is more quickly offset by the reduced price of natural gas.  There are not many CNG or LNG fueling stations in the U.S. to make this a viable alternative for most people. The supply of gas in the U.S. seems to be strong, however the controversy over fracking puts gas in question whether it will be the fuel answer in the coming years.
  • Hybrid powered cars and SUV’s are a blend of internal combustion and electric engines, using sophisticated systems for the efficient balance between both plants, and some extract energy from braking. In my mind there are two types of hybrids; one I call dedicated hybrids, for these the entire vehicle design and construction was built to highlight the advantages of these mated technologies, like the Toyota Prius or Ford C-Max. The second type takes an existing platform, such as a Toyota Camry or Ford Escape and swaps in the hybrid components- I call these modified hybrids.  Clearly the price of  modified hybrids can be several thousands of dollars more than the non-modified version of the same model, again like diesel, the increases costs of modified takes many years to recoup, making them a bad deal in my opinion.  The dedicated hybrids get a lot better gas mileage than the modified, because they were designed around that technology from the ground up. Dedicated hybrids still cost more when you compare cars of similar internal space and trunk size, such as if someone were considering a Toyota Corolla verses a Prius, but if someone usually purchases a car in the price range of a Prius, they are attracted by great gas mileage and well thought out design that makes their smaller space seem roomier and with hatch back’s great use of space. Prius owners love them. The other draw backs besides space and price, are the price of battery replacements if owned for a very long time. I am not a fan of modified hybrids, but like the dedicated hybrids a lot, especially if you can a great deal on one.
  • All Electric Plug-In vehicles are wonderful because you never have to buy gasoline. If you have a convetional car getting 25 miles per gallon, you can easily spend $200 or more per month on fuel, depending on the length of your commute.  The cost to recharge plug-ins are about $3, so if you drive it 28 days per month, and have to give it a full charge, your electric bill will go up by $84, maybe more if you recharge it twice a day, maybe less if you recharge it every other day, or only need partial charges. Individual buyers will need to calculate the costs for themselves. The drawbacks are they all run $30,000 – $40,000 or more for most all electrics, more than double that for a Fisker or Tesla. The Federal government provides $2,500 – $7,500 in tax credits, which helps to make them more affordable. Plug-ins are very small- not good for those wanting more space or safety of large cars. The biggest draw-back of plug-ins is their range. Most can only go 60 to 100 miles per charge, so unless there is a charging station where you are going, plug-ins are best for shorter commutes and around town driving, making them a good thing to consider if you have a second vehicle used for longer trips.  Plug-ins may not be good for apartment dwellers and condo owners who are not able to find an easy place to recharge them. One last thought- within the last several years we have had several multi-day power outages. During such times, my local coffee shop didn’t mind my camping out there to recharge my phone and laptop, but I think they would draw the line with an extension cord out to the curb. Not having a reliable gasoline powered car available could be problematic for  some.
  • Hybrid Plug-ins combine the long range and efficient capabilities of dedicated hybrids to achieve all electric use for low cost shorter trips, yet gasoline power for acceleration and longer trips. The Chevy Volt, Toyota Prius Plug-In, and Ford C-Max Energi provide these types of power plants. These cars don’t have quite have the range in all electric mode as the all electric plug-ins, since they have more weight to carry with the gasoline engine and heavy fuel on board. Expect a range in the neighborhood of 11 to 50 miles depending upon the model, for electric-only mode. However when using the combination of gas and electric, the range will be as far as many cars with just gasoline engines, and some much farther. Hybrid plug-ins seem to offer the best of both worlds, however the costs can be high for these models even after tax credits, usually making the increased cost of the purchase of the vehicle in excess of the energy saved.

Conclusion: If someone is considering the purchase of a car, I think it would be best to decide what they want in a car, such as performance, space, safety, purchase price and reliability first. Once they have arrived at that, then consider what cars are available in that price range.  If one the non gasoline-only cars fall into consideration, then calculate the fuel savings and overall features for what you are looking for- always doing the math to decide if the increased costs of the hybrid will be offset by the fuel savings. In other words don’t just look for efficiency and forget safety and price, in the end you might not be happy with the performance.

Unemployment Numbers Update, December

Unemployment, New Jobs, and Jobless Claims Statistics:*

  • Monthly change in non-farm payrolls – Flat: 155,000 new jobs were added in December, compared to 146,000 added in November, and 171,000 in October.
  • Unemployment – Flat: December’s rate of 7.8 matched the revised November rate of 7.8% (previously estimated to be 7.7% – which would have been the lowest since December 2008). This is better than some 2012 months over 8% – showing very little improvement. However, keep in mind this ‘Official Unemployment’ rate only tracks those who are without jobs and have actively sought work within the past 4 weeks. Since this statistic does not track all people who are not working, some websites report that the ‘Real Unemployment’ rate is about 15% when all able-bodied people of working age are considered. For a historical perspective: The unemployment rate during the Great Recession peaked at 10.10% in October 2010. In 2012 it has varied in the range of 8.10% – 8.30%, so we are not seeing a lot of change this year. It could be worse when you consider that during the Great Depression it peaked at about 25% in 1933.
  • Initial Jobless Claims for Unemployment Insurance – Positive: The four week rolling average, remained the same at 360,000 as last week. Looking back 52 weeks, the four week rolling average, averaged about 374,750, so we are seeing slight improvement. This number is much better than it was in 2009 when it peaked at over 650,000, better than 2010 when it went from nearly 500,000 to the the low 400,000′s and for 2011 when claims were in the low to mid 400,000′s. The lowest we have seen this rate in 10 years is 282,000 in January of 2006, and the earlier part of the last decade we saw the average similar to what we are seeing now. During the Great Depression from 1929 – 1941 there was not the same level of unemployment insurance that we have today, although unions may have had some. It wasn’t until the Social Security act encouraged it in 1935. Today we have the Federal Unemployment Tax Act (FUTA) tax to fund state agencies.

*Unemployment statistics are an important indicator of how our economy is doing; more people employed points to stronger business growth and to fewer people receiving government entitlements. However, this is a little difficult to track, since the government doesn’t really publish a combined statistic that truly indicates what is happening. Most people who study this issue follow these three indicators: percentage of people unemployed, monthly change in non-farm payrolls, and jobless claims for unemployment insurance. The most discussed statistic is the unemployment rate; reading the explanation above illustrates how this number falls short.

The Fiscal Cliff Deal, Winners and Losers & What It Means To Your Personal Finances

The showdown in Washington over Federal taxes and spending ended with an agreement signed into law this week. Here are the losers and winners that we can see at this point. Further analysis is forthcoming of H.R.8 – American Taxpayer Relief Act of 2012, and will be reported to you later this month.

Winners

  1. Overall Taxes: Joint filers with incomes below $450,00, individuals with incomes below $400,000 and heads-of-households with incomes below $425,000 WILL CONTINUE to enjoy tax reductions put in place by George W. Bush.
  2. Alternative Minimum Tax: Tax payers with incomes below $50,600 (individuals) and $78,750 (married couples filing jointly) respectively, WILL NOT be faced with the Alternative Minimum Tax (AMT). It was set to go to $33,750 (individuals) and $45,000 (married couples filing jointly). This will be indexed for inflation.
  3. Unemployment Benefit Recipients WILL have benefits EXTENDED this year.
  4. Entitlement Recipients of things like Social Security, Medicare and Medicaid WILL NOT face reductions, however expect battles over this one in the coming year, and changes affected by Obama Care, as the economy continues to struggle and deficits increase.
  5. Investors owning stocks that pay dividends, or the long-term sales of stock WILL NOT face increased tax on dividends and capital gains if their income is below the above amount.
  6. Itemizers: Tax filers with incomes below $250,000, heads of households below $275,000 or married joint filers below $300,000, WILL CONTINUE to enjoy the same itemized tax deductions for things like home mortgage interest and contributions to charities.
  7. Politicians benefit by not having to reduce spending for entitlements or cut back on special deals made to specific industries, thus enabling them to continue to receive political support from those groups and entities – in the short run.
  8. Pork Recipients: About $70 billion worth of special tax breaks were written into the bill.

Losers

  • Employees: Anyone paying federal payroll taxes will see an INCREASE in the amount withheld from their paychecks from 4.2%  to 6.2%. If you make $50,000 expect your pay to decrease by 2% or approximately $1,000 for the year, or about $83 per month. This restoration of a tax holiday was inevitable to pay for current and future Social Security and Medicare benefits.
  • Self-employed people will see an INCREASE in their payroll tax from 8.4% to 12.4%, or an increase of about $2,000 if making $50,000.
  • High Incomes Earners with incomes above $450,000 will see an INCREASE in their top tax rate to 39.60% from 35% (individuals with incomes above $400,000 and heads-of-households with incomes above $425,000).
  • High Income Investors owning stocks that pay dividends, or those that sell stock (held long-term), will face INCREASED tax on dividends and capital gains to 20% from 15%, if their incomes exceed the levels described above.
  • Large Estates: Individuals dying with estates in excess of $5 million will see the tax on their estates INCREASE from 35% to 40%.
  • Alternative Minimum Tax (AMT) Payers: Tax payers with incomes above $50,600 (individuals) and $78,750 (married couples filing jointly) respectively, will CONTINUE to be faced with the Alternative Minimum Tax (AMT). Many have hoped to see the AMT go away completely, or income minimums increased substantially.
  • High Income Itemizers: Provisions of the Bill will REDUCE itemized deductions such as mortgage interest and charitable contributions to those with incomes $250,000 and above, $275,000 for heads-of-households or married joint filers above $300,000.
  • Those served by charities: Anyone who benefits from not-for profit enterprises that rely on charitable contributions, may see less benefits being provided to them, or increased costs.  This is due to some limits now being placed on tax deductions given for contributions made to these institutions, from higher income people. Charities and non-profits may be faced with shrinking budgets due to lower contributions.
  • Charities MAY LOSE income due to the reduction of itemized tax deductions for high income donors.
  • Politicians on the right may LOSE political clout, since they relinquished some of their goals for reduced spending. Politicians on the left may LOSE political clout in the long-term, if the the economy fails to recover or we go through another recession. Most US citizens overall opinion of all political leaders continues to decline amidst poor leadership.
  • All US Citizens and succeeding generations will suffer from poor federal leadership when it comes to current economic policy of run-away spending and lack of balanced budgets.

This battle took so long to remedy, due to major philosophical differences, that I wrote about earlier this week, “Do you want to know what the fiscal fight is really about.” Expect the battle to rage on in the coming year. This information should not be relied upon for your individual tax situation: consult your tax, legal and financial advisers.

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