How can you get the most juice for your buck in the rapidly changing plug-in hybrid and all-electric car markets?

In California and some other states, plug-in hybrid vehicles qualify for a green sticker that allows the driver to drive solo in the HOV (carpool) lanes. And obtaining one of these magic stickers is a primary reason for buyers to choose these vehicles (and for others to get green with envy).

According to a just-released survey by the Center for Sustainable Energy California, 59% of plug-in hybrid car buyers said that HOV access was “very” or “extremely” important in their purchase decision. To Prius Plug-in buyers, carpool-lane access was the single most important purchase consideration, and to Chevrolet Volt buyers second only to saving money.

Only 40,000 plug-in hybrids in California can get these stickers – after that, new plug-in hybrids will no longer qualify for solo HOV-lane access. Gary Richards of the San Jose Mercury News writes that nearly 29,000 stickers have already been issued, and the limit may be reached this summer.

What will be the impact of hitting the green-sticker limit on sales of these vehicles, on their new car prices, and on the used car market?

Given the importance of HOV access to new plug-in hybrid sales, clearly demand for plug-in hybrids will fall after the limit is reached, and some of that demand will shift to buying a used model that already has an HOV sticker find more information. Plug-in manufacturers will have to decide whether to lower the price (by directly reducing the price or by offering incentives) to maintain sales, or to accept a lower level of sales.

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As we get closer to the limit, we’ll probably see a “land rush” for new plug-in hybrids that qualify for HOV-stickers. This will increase the average transaction prices of those vehicles – just before the prices fall off a cliff.

While demand will drop for new plug-in hybrids such as the Prius, Volt, and Ford C-Max, used HOV-sticker-equipped plug-in hybrids will command a market premium. It’s possible that an HOV-sticker equipped  Chevrolet Volt owner who bought in April 2014 can sell his Volt in August for more than he paid!

To make matters more complicated, all-electric vehicles (such as the Nissan Leaf, Tesla Model S, and Fiat 500e) are not subject to the limit – these vehicles will still qualify for solo HOV lane access and demand for them will soar, increasing the average price paid.

What are the takeaways from all this?

  • If you are considering a plug-in hybrid and HOV access is important to you, buy the vehicle right away, before the the price spike, and before the limitation of new HOV-qualified plug-in hybrids goes into effect.
  • If you are considering a plug-in hybrid and you don’t care about HOV access, DON’T buy now – wait until the limit is reached and save a bundle.
  • If you’re considering an all-electric vehicle that is not subject to the HOV sticker limit, buy now before the prices spike based on the “crowding out” effect of more HOV-lane buyers buying a fewer number of models that still qualify.
  • If you want to look into the future, consider that all the HOV stickers will expire on January 1, 2019, and the market value of the HOV sticker equipped vehicles will probably begin to dip a year or so before then. So selling your HOV sticker equipped vehicle in 2017 would be prudent.
  • If you’re inclined to pure speculation, buy a plug-in hybrid now, get your HOV sticker, drive it for a few months, then sell it. My guess is you’ll sell it for a profit (not including tax implications, etc.). Beware, however, first because speculation is always risky, and second because other factors, such as the length of time you need to own the vehicle to qualify for federal and state tax credits come into play.
  • If you’re the price guru for any of the plug-in hybrid model manufacturers, you’re thinking about this a lot, and probably waking up in a cold sweat more than you’d like to admit.

Should you really buy a plug-in hybrid just to speculate, or sell one in 2017 that you’re happy with? I think that would be silly. But the notion of buying now if you’re HOV-motivated and waiting if you’re not HOV-motivated, that’s green dollars in the bank.