Higher Insurance Costs Whack Small Car, Hybrid Buyers

by John Horner

Published: October 23rd, 2008

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.

John Horner

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2 of 27 comments

Demetri on Oct 23, 2008

"Remind me again why I would want to buy a new car?" I bought a new car, but I sure as hell don't buy full coverage insurance. If you can afford to replace your car, there is zero reason to buy it. Financially, you will always lose when it comes to car insurance. If you finance, you don't have any choice, but that's another losing proposition. As for the story, I think it's bs. A smaller car brakes and maneuvers better to avoid a crash in the first place and is a smaller target. The only rationale is that small cars simply can't do much costly damage when they get run over by an SUV, so the SUV gets the sherman tank discount. It's not a matter of the SUV being safer, it's that the only thing that can squash it is an 18 wheeler. If everyone drove big ass vehicles, the rates would go through the roof and we would all be less safe.

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David C. Holzman on Oct 23, 2008

Good points, Demetri. One of my friends says his insurance did not go up at all when he traded the minivan for a Prius.

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