By Rachel Pleasant
Staff Writer

In early November, a customer at West Ashley Toyota was interested but not totally sold on a hybrid Highlander SUV.

The hybrid vehicle costs more than the non-hybrid version but gets just a few more miles to the gallon than its non-hybrid counterpart, making it difficult for this customer to justify the extra cost for hybrid technology.

Then he heard about the $2,000 tax deduction he could take advantage of if he opted for hybrid and, combined with a $1,250 rebate, it was enough to seal the deal. Another hybrid Highlander was driven off the lot.

“He was happy to hear about it,” said Dennis Craven, a Toyota sales consultant at the dealership.

The Internal Revenue Service currently offers the $2,000 deduction for the first year a hybrid vehicle is used, but beginning in 2006, the deduction will be replaced with a credit of up to $3,400, according to Valerie Thornton, IRS spokeswoman for South Carolina.

Sales associates are using the current tax incentives when they make their pitches—and say they’ll use the revised incentive when it goes into effect—but many say tax savings are effective with only a select group of buyers.

The tax deduction does the most to persuade those uncertain of buying a hybrid Highlander, Craven said.

Ranging in price from $33,000 to nearly $40,000, the hybrid version is nearly $10,000 more expensive than the same vehicle with a traditional combustion engine, depending on the features included.

But unless customers are driving primarily in the city, they aren’t likely to recoup much of that difference in gas savings.

According to a side-by-side comparison on Toyota.com, a 2006 hybrid Highlander with a 3.3-liter, six-cylinder engine that costs $33,030 will get 33 miles to the gallon in the city and 28 to the gallon on the highway. A 2006 non-hybrid Highlander with a same-sized engine that costs $26,440 will get 19 miles to the gallon in the city and 25 to the gallon on the highway.

“The Highlander hybrids sell a little slower,” Craven said, adding that Toyota’s other hybrid model, the Prius, does offer significant fuel economy savings, making the tax incentive simply icing on the cake.

At Gene Reed Toyota, general sales manager Ted Blankenship said the tax deduction serves as one more selling tool for the sales staff, but most often it is business owners who pay attention to the pitch.

Blankenship said business owners, landscape companies and print companies have snatched up hybrid vehicles, particularly the Highlander, because of the tax incentive.

The dealership typically sells about five hybrid Highlanders a month—about half the number of Priuses it sells in the same amount of time—but recently sold 30 of the hybrid SUVs to Enterprise Rent-A-Car.

“(Businesses) have a very big interest in the tax savings. As the year-end comes to a close, a lot of businesses are leaning in that direction,” Blankenship said.

At Hendrick Honda, general sales manager Jeff Aysse said the tax deduction is an incentive for buyers—at least those who file a specific tax form and can get their hands on a hybrid.

“It’s a motivator for someone who files the long form. It’s kind of cool,” Aysse said.

But “We are out of hybrids right now, and we have pre-sold the next five or six hybrids that come in and that takes us through December. The tax incentive played a part in that,” he said, though he added the gas savings that come with the hybrid Civic in particular is typically enough to convince buyers. A hybrid Civic will get 19 miles more to the gallon in the city compared to a traditional Civic and 11 more miles on the highway.

The tax deduction, Aysse said, has become a part of the sales presentation when it comes to hybrid vehicles, and sales people often present customers with information about the deduction printed straight from the IRS Web site.

“But we always suggest the customers talk to their tax accountant,” he said.

Although his sales people may use the tax incentive when making deals, in general, the selling of hybrid cars has become much easier than it was just a couple years ago. It now takes less convincing to make a sale, Aysse said.

“People were scared of it at first, and people still look for a plug to plug the car into the wall,” he said. “The technology has evolved over the last few years, and more people accept it. Eventually it will become mainstream.”

Although a tax incentive is helpful to some customers, hybrid cars are simply too expensive for a lot of shoppers, he said, but like computers or DVD players, the more the technology catches on, the cheaper it will become.

The list of vehicles that qualify for the IRS deduction include: Ford Escape Hybrid, Mercury Mariner Hybrid, Lexus RX 400h, Toyota Prius, Toyota Highlander Hybrid, Honda Insight, Honda Civic Hybrid and Honda Accord Hybrid.

The IRS does not track statistics on how many times the hybrid tax deduction has been used.

Rachel Pleasant is a staff writer for the Business Journal. E-mail her at rpleasant@charlestonbusiness.com.

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