Higher Insurance Costs Whack Small Car, Hybrid Buyers

Buying a small car or hybrid to save money at the pump? Be warned, Big Insurance might get your cash instead of Big Oil. Today’s Wall Street Journal chronicles the tales of woe being told by recent automotive down-sizers. “A 40-year-old male driver would pay an average of $1,704 to insure a 2009 Mini [MINI] Cooper that gets 37 miles per gallon on the highway, according to a study by Insure.com, an online insurance broker. That same driver would pay only $1,266 — a difference of $438 — to insure a Toyota Sienna Minivan, which gets 23 mpg. Similarly, a Honda Civic compact that gets 36 mpg on the highway costs $412 more a year to insure than a Honda CR-V, a small sport-utility vehicle that gets 27 mpg.” The problem: smaller vehicles get in more accidents and those accidents result in higher claims than do larger vehicles, even when driver age and other demographics are factored out. “‘There is always a safety trade-off when you move from a large, heavy vehicle to a smaller, lighter one,’ says Russ Rader, a spokesman for the Insurance Institute for Highway Safety, a nonprofit industry-funded group.” But wait, there’s more!

“Alternative-fuel vehicles in general are even more expensive to insure, though several insurers offer discounts for hybrids. In this case, the main culprit is higher repair costs. The 2009 Camry hybrid, for instance, costs an average $1,957 to insure for that 40-year-old male driver, while a similar conventional 2009 Camry costs just $1,302, according to Insure.com.” Ouch, beside the higher purchase cost and the question of eventual battery pack replacement you have a $655/year insurance adder just for buying the hybrid version of your new Camry. At $2.91/gallon for gasoline you have to drive your Camry over 20,000 miles per year for the fuel cost savings of a hybrid (compared to a base 4 cylinder Camry) to recover at the pump to cover the extra insurance cost. Check out the fuel cost compare side-by-side calculator at fueleconomy.gov to do your own comparisons. Mark my words, there will be laws written to avenge this injustice, or at least to try and make math and statistics go away.