As the price of gasoline tops four dollars a gallon nationwide consumers who are driving less could save an average of 5 to 15 percent on their automobile insurance rates - about $47 to $142.
That's according to the Consumer Federation of America (CFA), which says that skyrocketing fuel costs could mean savings on automobile insurance as drivers react to high gas prices by using mass transportation, car-pooling, taking fewer trips to the store or curtailing their vacations.
"Auto insurance rates are partially based on how much you drive and how you use your car," said J. Robert Hunter, director of insurance for CFA and former Texas Insurance Commissioner and Federal Insurance Administrator said in a consumer press release. "If you drive less to save money on gas, these driving changes might mean that you qualify for immediate insurance rate relief."
His group is urging all drivers to call their insurance company or agent and ask if they qualify for a rate reduction.
While savings will vary based upon the specific auto coverage a driver has, it is worth a call, according to Hunter. "Simply explain the actions you are taking to drive less and estimate how many fewer miles you are driving a month," he said. "Tell the agent or company representative that you want the cheapest rate they have for drivers reflecting your new driving circumstances."
His organization also wants state insurance officials to take note.
In a letter sent earlier this week, CFA called on the nation's governors to require insurance companies to lower their rates as Americans drive less.
"As Americans drive less because of the price of gas, fewer claims will be filed with insurance companies," said Hunter. "Whether this will mean windfall profits for insurers or rate cuts for the consumers is up to governors and state regulators to determine. We ask that each state immediately call hearings to determine the right auto insurance prices under the changed driving situation."
Source: Insurance Journal
By Jim Malmberg
Virtually anyone you ask will tell you that gas prices are impacting their standard of living. As a result, many people are considering trading in their cars for more fuel efficient models. While this may sound like a good idea, it can be a mistake that will only cause you to run up additional debt. The only way to know if changing your mode of transportation is a good idea is to do the math. Regrettably, this is a step that many people are not going through when they evaluate a new car.
The idea of purchasing a car that gets better gas mileage sounds great. Car manufacturers know this, and they are capitalizing on it. And there is a secret that they don't want you to know. As a consumer, if you are thinking about trading in your existing automobile for a hybrid, you may actually wind up spending more money than you actually save.
Take for instance the GMC Yukon hybrid SUV. GMC's website says that you can get up to "50% better city fuel economy when compared to the conventional engine." But what does that mean in terms of your wallet? To find out, we have to do a little math.
The difference in cost between the base model of Yukon hybrid and the standard Yukon with a conventional engine is significant. The hybrid starts at just over $50,000. A base model Yukon can be purchased for around $35,000... a difference of approximately $15,000. That's a lot of gas.
According to GMC, the combined city/highway mileage for their hybrid is 21 miles. Giving GMC the benefit of the doubt, we'll agree that they actually do improve mileage by 50%. This would mean that the regular Yukon gets a combined city/highway mileage of 14 miles per gallon.
Now let's say that you drive 12,000 miles per year. Driving the regular Yukon, your bill for gas for the year would be $4,286 at $5 per gallon. In the Yukon hybrid, it would be $2,857. That's a savings of $1,429 per year driving the hybrid.
While that savings may sound good, remember that by purchasing the hybrid you spent an additional $15,000. If you divide the $15,000 additional expenditure by your savings per year - $1,429 - you will get the number of years it will take to pay for the additional expense of purchasing the hybrid. In this example, it would take you nearly 10.5 years to justify the additional expense.
Whether or not it will pay you to change vehicles is dependent upon how much you drive, and how long you think you will own your next car. Most people won't hold onto a car for 10.5 years. It may also depend on how high the price of gas actually goes. If it continues to rise, then the amount of time it takes to pay for a hybrid will actually go down provided that the manufacturers don't increase their prices.
It's also important to note that this is just one example. ACCESS is unaware of any hybrid cars that are less expensive than their conventional counterparts. Even so, the difference in price between a hybrid and a conventional car may be more or less than the example we gave. Again, the less the difference in price between a conventional car and a hybrid, the faster it is to recoup any difference.
One final note here is that if you owe more on your current car than it is worth, then you should keep it. Many dealers can offer you the ability to role your existing payments into a new loan. This would allow you to trade in your old car for a new one. It would also mean that even before you drive that new car off the lot, you owe more in it than it is worth. Many consumers have been bamboozled into this type of loan. It is a bad idea and should be avoided at all costs.
The bottom line is that the only way to know if you should make a switch is to do the math yourself.