Insurance Expectations – What New Hybrid Owners Can Expect

It has always been a known fact that hybrid cars are more expensive to buy; nobody has ever disagreed about that point. Therefore, judging from the scores of people who quote their number one reason for buying a hybrid car is ‘to save money’ hybrid cars must be less expensive to OWN. This means that they must use less gas, which is true, but does the difference in fuel cost make a significant enough difference to match the initial high sticker price? The answer, for all but the lowest priced hybrid cars, is a resounding NO—not in the first five years of ownership anyway. Consumers are looking to add other variables to the equation in order to make the numbers come out in the end proving that their ‘green choice’ refers not just to the environment, but to good old-fashioned personal economics.

In the past few years, the chief financial benefit for consumers has been the tax break incentive, which was a significant sum in most states. The buzz around this tax break was one of the most frequent reasons given for going ahead and taking the plunge for a hybrid instead of for a traditional vehicle. These tax credits, unfortunately, are soon to be a thing of the past. In order to analyze the possible financial benefits of purchasing a hybrid car with any accuracy, we have to look far beyond the obvious components of sticker price, tax deduction or credit (which will soon no longer exist), and gas.

The other costs of owning an automobile, the ones that tend to blend more easily into the woodwork, include the excise tax and the initial registration, neither of which is insignificant. Some states boast a lower tax rate for hybrid vehicles than for those with a traditional engine, ditto for the registration; however, neither is enough to even begin to offset the initial increase in sticker price. If we’re trying to save money as the ‘big picture’ of owning a hybrid, we have to look even deeper into the costs associated with owning and driving a vehicle.

Additional major costs are maintenance and insurance. Maintenance costs are not quite a part of the picture yet because hybrids have only been around since the year 2000, which puts the vast majority of these vehicles as still falling under the manufacturer’s warranty. This means that maintenance is not being paid for, only the time it takes out of the day.

In terms of long-term costs, as opposed to the initial purchase and registration costs, the only hope for saving money in the long term with a hybrid is the insurance. But are insurers cooperating in this endeavor? A select few auto insurers are beginning to offer incentives for customers with hybrid cars. The reasons for doing this are many; they lie not in the safety rating of the vehicle but in the usage habits of their drivers.

Statistics show that hybrid purchasers, and therefore drivers, are not likely to fall in the category of ‘young adults’, hybrids are much more likely to be bought by a 40-something than by a 20-something. After all, insurance rates DO decline after 25. Hybrid buyers are also more likely to have a college degree than to not. ‘Good student’ discount anyone? Some argue that for these reasons, hybrid drivers are less-than-average in terms of expense to the insurance company. Some insurance companies are offering the lower rate incentive advertised simply as a ‘thank you for being green’. Regardless of any of the reasons behind these hybrid incentives, the fact is that most companies are not offering such an incentive…and those that are offering an incentive are reducing their rate by about $100 per year.

Other insurance companies state that hybrid drivers are just as likely as non-hybrid drivers to get into an accident. Furthermore, some insurers are worried about how the electrical components of the car will perform in an accident. Hybrid manufacturers assure us all that the hybrid models are just as safe as traditional cars, both in normal usage and in analyzing performance in an accident, but insurers are waiting to see more hybrid accidents before analyzing their actual cost-effectiveness for insurance purposes. Perhaps if the numbers come out right, these insurers will, indeed, offer a lower insurance rate to hybrid owners, but for the time being, do not hold your breath.