Assaulted Batteries

Despite eBay's booming battery bazaar, Toyota, Honda and Ford all say hybrid battery failures are extremely rare. Out of more than 100,000 Honda hybrids on the road, the automaker says fewer than 200 have had a battery fail after the warranty expired. Honda, like Toyota and Ford, covers the cost of battery replacement for the first 100,000 miles in most states and 150,000 miles in California and a few other states with tough green car laws.

Toyota says its out-of-warranty battery replacement rate is 0.003 percent on the second generation Prius that debuted in the 2004 model year. That equals about one out of 40,000 Priuses sold, says Toyota spokesman John Hanson. That's a vast improvement over the first generation Prius, which had about 1 percent of the batteries fail after the warranty expired. Hanson says today's Prius batteries are designed to last "the life of the car," which Toyota defines as 180,000 miles. (Toyota and Panasonic announced Friday that they will build a new $200 million factory to produce more hybrid batteries to meet the automaker's goal of selling 1 million gas-electric cars a year.)

For those unlucky few who have to replace their own batteries, the cost is coming down. On June 1 Honda is slashing the cost of its batteries from $3,400 (excluding installation) to as low as $1,968 on an Insight or as high as $2,440 on an Accord hybrid. Toyota also plans to substantially cut battery prices, which now stand at $3,000 (excluding installation), down from $5,500 on the original Prius. Both automakers attribute the price cuts to improved technology and lower production costs. But some analysts think Toyota and Honda are really trying to get ahead of consumer concerns about battery replacement. "PR is a very important factor in the hybrid market," says J.D. Power's Omotoso. "Honda and Toyota have the oldest hybrids on the road. And when a hybrid gets to be that old, you have to factor battery replacement costs into your purchase decision."

So far, the high cost of battery replacement isn't having much impact on the resale value of hybrids. The Automotive Lease Guide (ALG)—the resale value bible—only recently began assessing hybrids. "We had concerns about battery life," says ALG CEO John Blair. "But our analysts told us that battery life was really a nonissue. They found that the batteries have a 10-year life expectancy, which is quite reasonable."

Still, hybrids don't hold their value as well as their gasoline-powered siblings, batteries aside. For example, a three-year-old Honda Civic is worth about $12,000, retaining about 60 percent of its original sticker price of $20,000, according to Blair. But a hybrid Honda Civic holds only 58 percent of its original sticker price after three years, giving it a used price of $13,630, down from a new price of $23,500. "The new car buyer is more into bells and whistles, while used car buyers are all about value," says Blair. "If a hybrid is near the end of its warranty, what could creep into the mind of the used car buyer is, 'I still have a doubt about the battery, and it's just one more big thing that could go wrong.'"

Anytime you buy a used car, there's always a risk that something big and costly could wear out. That's why the experts recommend having your mechanic check out any used car you're thinking about buying. The problem is there aren't that many mechanics who know how to tell if a hybrid battery is running out of juice. "We're on the front edge of figuring out how this all plays out," says Rob Chesney, vice president of eBay Motors. "As a hybrid owner, you're kind of playing a game of Russian roulette." Precisely why I was happy to drive away from that seemingly good deal at the Y.

© 2008