Smaller cars cost more to insure

By G. CHAMBERS WILLIAMS III
San Antonio Express-News

In the rush by consumers to find more fuel-efficient vehicles, one aspect of switching to a small car from a pickup or SUV easily can be overlooked: It generally costs more to insure the smaller vehicle.

A new study released recently by the auto insurance consumer Web site insure.com shows that the difference between premiums for a large pickup or SUV versus a small car can be large enough to help pay the extra cost of gasoline for that bigger vehicle, even with fuel at $4 a gallon or more.

“Small cars tend to increase insurance costs because they get into more crashes,” Russ Rader, spokesman for the Insurance Institute for Highway Safety, said in an insure.com news release detailing results of the study. “There’s a myth that a smaller car is more nimble and helps you avoid crashes, but smaller cars tend to have more collision losses.

For the past three months, the compact, fuel-efficient Honda Civic has been the nation’s best-selling vehicle, replacing the Ford F-series pickup, which had held the top spot since the early ’90s. F-series sales are off more than 40 percent this year (through June) compared with 2007, although the vehicle still ranks quite high — it’s the fourth-best-selling vehicle now.

But the average national premium to insure an F-series pickup is $1,194, compared with $1,670 for the Civic, the study showed.

Even the popular Toyota Prius gasoline-electric hybrid, with the best fuel-economy ratings of any new car on the market (48 miles per gallon city/45 highway), costs more to insure than the F-series pickup: an average of $1,382 a year.

Premiums for the Toyota Camry, the third-best-selling vehicle so far this year, average $1,302 a year. But two other popular larger vehicles that offer fuel economy that’s much better than that of most pickups also had insurance premiums much lower than those of many small cars: the Toyota Sienna minivan, at $1,266 a year, and the Honda CR-V compact SUV, at $1,258.

The difference is in the vehicle’s bulk. The Sienna and CR-V are heavier and sturdier than cars such as the Civic and Prius, offering better protection to their occupants in a collision. But they are lighter than big pickups and SUVs, thereby using less fuel.

While the overall differences in premiums between small cars and larger vehicles might not be enough to justify sticking with a big vehicle and its higher fuel costs, this study does provide more evidence that switching to a smaller vehicle as a knee-jerk reaction to the high gasoline prices might not make financial sense to many consumers.

Because resale values of bigger vehicles — particularly full-size pickups and traditional truck-based SUVs — have dropped dramatically since fuel prices began their record climb in the spring, many owners of these vehicles owe much more on them than they’re now worth.

That alone can make it financially infeasible to trade. That’s because even if you could fold several thousand dollars of negative equity into the loan for a new, smaller car, the resulting monthly payment for the new vehicle, coupled with such expenses as the higher insurance premium, could end up costing you more than the extra you would pay at the pump if you just kept your current vehicle.

The auto consumer Web site Edmunds.com offers a “Gas Guzzler Trade-In Calculator” that can help you decide whether buying a more fuel-efficient vehicle makes sense for you.

Buying a used small car — with a price well under $10,000 — makes a lot of sense, particularly if you can pay cash for it and not have to worry about a monthly payment. The problem with this strategy now, though, is that as prices of used pickups and SUVs have dropped, the prices of small cars have gone up.

A small used car that you could buy for $5,000 six months ago might cost $8,000 or more today, a function of the law of supply and demand.