Qualitative Considerations
a. safety record--does this differ between the two models?
b. reliability--does this differ between the two models? (in some cases, the reliability of new models is considerably less than the
reliability of older, more established models)
c. as noted in conjunction with the discussion of decision tables (above), we have not given explicity consideration to the decision-
maker's attitude toward risk associated with the inputs to the decision model
d."carbon footprint" issue--it is true that from an operating standpoint, the carbon footprint of the hybrid would be less than it is
for the related gasoline-powered model. However, what this comparison ignores is the total carbon footprint--from
manufacture, through operation (use), through disposal. It is possible, for example, that when one considers the relatively
energy consumption needed to build the hybrid model, depending on total miles driven, its carbon footprint might be larger
than it is for the related gasoline-powered model.
e. relationship between mpg and lifetime miles driven: ignored thus far in the analysis is the fact that the latter might be a
function of the former. Our analysis has, in fact, assumed that these two variables are unrelated (i.e., we assumed in the
base case that for both decision alernatives lifetime miles driven = 60,000). However, it is entirely possible that people who
purchase the more fuel-efficient hybrid model drive more.
Additional Quantitative Considerations
a. useful life--what is the estimated useful life for each vehicle? (this would be important if the buyer intended to use the vehicle
beyond the four-year planning horizon)
b. estimated salvage/disposal value at the end of the four-year planning horizon--does this amount differ between the
two models?
c. related to point b above, what is the estimated salvage value at the end of each of years 1 through 3? (important as a
potential "bail-out" consideration)
d. other operating expenses (e.g., insurance, repairs/maintenance)--how do these compare for the two vehicles?
What is the estimated battery life for the hybrid? What is the likelihood that the battery would have to be replaced during
e. time value of money (discount rate)--the underlying decision here is long-term in nature. As such, the decision-maker should
consider the present (i.e., discounted) value of costs associated with each decision alternative (similar to the approach
taken in capital budgeting decisions)
f. the given mpg figures are based on some type of average driving (or mix between city and highway miles driven). Is the
anticipated driving behavior of the purchaser different from this assumed mix so that the use of average mpg data would not
be appropriate? If most of the driving will be done in the city, this is a greater advantage for the hybrid, since electric propulsion
would be used more frequently in this context. On the other hand, if most of the driving will be highway driving, the fuel
efficiency gap between the hybrid and the gasoline-powered model closes.Once the hybrid gets to highway speed it is being
propelled mostly by the gasoline engine.