Small car fuel savings offset by higher insurance costs

Posted Sun Oct 26 2008 10:41 AM by Nelson Ireson

Historically higher injury claims, theft rates the driving forces behind higher insurance rates

Savings at the pump may be a false economy for small cars, as higher insurance costs offset the financial benefits of higher fuel efficiency. For many popular models, the difference in insurance costs can exceed $500, wiping out the savings of a car that gets 35mpg on average over one that gets 25mpg.

For a typical driver that travels 15,000mi (24,000km) annually, a car that gets 25mpg on average will cost about $1,800 in fuel per year at $3/gallon. A car rated at 35mpg will cost about $1,285 - a savings of $515. But the difference in insurance premiums between a 2009 Mini Cooper rated at 37mpg, and a Toyota Sienna Minivan rated at 23mpg is about $438, reports The Wall Street Journal, leaving the savings of the smaller vehicle at about $75 per year, or a little more than $6 per month.

Insurance companies typically relate the historical trends of a vehicle's class to the type of driver in order to determine policy rates. The data for small cars, while reflecting lower property damage liability rates, does show higher theft rates and higher personal injury rates than larger cars and SUVs.

Hybrids are also typically more expensive to insure than their standard-engine counterparts. The reasoning behind the difference is based on similar grounds: according to the Highway Loss Data Institute, an affiliate of the IIHS, crash damage costs are higher for hybrids in 11 of 12 cases, or about 92% of the time.

Reader Comments

Sun Oct 26 2008 11:10 AM
Gus says

This makes sense, unfortunately.
Typical buyers of the smaller vehicles have historically been younger, less experienced drivers.
But the higher propensity for serious injury is a no-brainer (no pun intended)...
Sun Oct 26 2008 1:17 PM
james says

first of all, that was the best no pun intended ever.
second, i wish this problem didn't arise. this is just really bad news topping of some horrible financial times. just keeps getting worse and worse. motor authority has become more of an economy predictor site than it used to be
Mon Oct 27 2008 3:38 AM
HECTOR says

Leave it to the insurance companies to come and ruin the fun. Additional premiums from insurance companies for things like car color, where's the car kept, etc are nothing but gimmicks to get additional money out of you.

Now apparently driving a small car is a bad thing for them.

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