It's no secret that the car you drive will play a role in what you pay for auto insurance. But a new study finds that some vehicles offer a much better insurance value than others.
A recent Quadrant Information Services study, commissioned by insuranceQuotes.com, examined which vehicles give drivers the most insurance bang for their buck. The study looked at the 20 most popular vehicles and divided the average annual cost to insure each vehicle by its manufacturer's suggested retail price (MSRP).
insuranceQuotes calculated an insurance-to-cost ratio to determine which cars are relative bargains to insure and which carry a surprisingly high insurance burden.
For instance, the Ford Explorer has an MSRP of $34,345, but only costs an average of $1,300 per year to insure. Meanwhile, the Ford Focus has an MSRP of $18,045 but costs nearly $1,400 to insure, making it a relatively poor deal when it comes to the cost of insurance.
"This is a really important factor to consider when it comes to buying a car, because you may buy a less expensive vehicle that will wind up costing you more in the long run because it's relatively expensive to insure," says Karl Brauer, senior analyst for Kelley Blue Book. "But it's also something people often forget to consider. You may be able to afford the car, but can you afford to maintain and insure that car after it leaves the lot?"
Auto insurance-to-cost ratio rankings
Sport utility vehicles and trucks account for eight of the top nine best insurance values, according to the insuranceQuotes.com study. Meanwhile, the 11 worst deals are all sedans.
At the bottom of the list is the Ford Focus. Its insurance cost is unusually high for its price range. Even in total dollars — no longer adjusting for the purchase price — the Focus is more expensive to insure than the Explorer. Consumers may find that shocking because the Explorer costs nearly twice as much to buy.
"There are so many factors that go into pricing an insurance policy for a vehicle, but the average driver rarely takes these into account," says Christopher Paradiso, owner of the Connecticut-based Paradiso Financial & Insurance Services. "A lot of drivers think that a cheaper car means cheaper insurance, but that's not necessarily the case."
What accounts for auto insurance-to-cost ratios?
The reasons behind these insurance-to-cost ratios are numerous and nuanced, according to insurance experts.
First, there's the issue of safety. According to Brauer, larger, heavier vehicles are not only less likely to sustain significant damage in an accident, but they also provide greater protection for passengers and drivers. That means when actuaries determine the cost of insurance for these vehicles, the statistics will favor relatively cheaper premiums for SUVs and trucks.
"The bottom line is that you're less likely to sustain severe injuries in a truck or SUV," says Brauer. "Insurance companies know how often they pay out settlements for SUVs versus sedans. They also know how much money they pay out for claims made on SUVs versus sedans, not only for vehicle damage but also personal injury for the people inside the vehicle."
Second, Paradiso points out that there are "buying personalities" to consider. For instance, the typical driver of a $30,000 SUV is different from the typical driver of an $18,000 sedan. The more expensive SUV is likely being driven by an older, more experienced driver, and the cheaper economy sedan is probably being driven by someone with less experience behind the wheel.
"When you look at the buying personalities behind these various vehicles, you start to see what insurance companies take into account when pricing a policy," says Paradiso. "The middle-aged father of two driving the Ford Explorer is going to be a statistically safer, more experienced driver than your typical 20-year-old driving a Ford Focus, which means he's also cheaper to insure."
|Make/Model||Annual average insurance cost||MSRP||Cost ratio|
|1. Ford Explorer||$1,301||$34,345||3.8%|
|2. GMC Sierra||$1,272||$28,315||4.5%|
|3. Chevrolet Silverado||$1,269||$27,815||4.6%|
|4. Chevrolet Equinox||$1,265||$26,105||4.8%|
|5. Dodge Ram 1500||$1,302||$26,855||4.8%|
|Make/model||Annual average insurance cost||MSRP||Cost ratio|
|1. Ford Focus||$1,391||$18,045||7.7%|
|2. Toyota Corolla||$1,400||$18,665||7.5%|
|3. Hyundai Elantra||$1,384||$19,085||7.3%|
|4. Honda Civic||$1,368||$19,910||6.9%|
|5. Chevrolet Cruze||$1,318||$19,695||6.7%|
What's more, age plays a role in the amount of money a consumer is willing or able to spend on a vehicle, says Ian Adams, western region director and insurance expert with the nonprofit R Street Institute. That means older drivers with well-established driving records -- and therefore lower insurance rates -- are more likely to be able to afford the more expensive vehicles on this list, which tend to be the SUVs and trucks.
Adams says that perception of safety also figures prominently in a consumer's likelihood of purchasing a certain type of vehicle, particularly as they age.
"Therefore, my thesis is that older buyers who are safer and more able to purchase SUVs are also more likely to self-select into the vehicles that they believe are safer and more secure," says Adams. "This leads to higher relative insurance costs for the sedans in the top 20 and lower relative insurance costs for the SUVs in the study's ranking."
Third, a particular car's theft frequency will also play a role in insurance premiums. For instance, the Ford Focus, Chevrolet Cruze and Toyota Corolla were all listed in the National Insurance Crime Bureau's 2014 annual Hot Wheels report, which identifies the 10 most stolen vehicles in the United States. The more likely a vehicle will be stolen, the more expensive it is to insure.
Shop for auto insurance before you buy a vehicle
According to Paradiso, the vast majority of his clients have no idea what they're going to pay for insurance until they've already bought the car. But he says this study accentuates the need to shop for insurance beforehand.
"Unfortunately, people are very impulsive and they buy what they want and then worry about the rest later," says Paradiso. "But it's much wiser to call your agent first and ask what you're going to pay for insurance on a particular vehicle before you decide to buy it."
Study methodology: insuranceQuotes.com commissioned Quadrant Information Services to measure average car insurance premiums using data from the largest carriers (representing 60-70% of market share) in each state.
Assumptions included: Driver is a 45-year-old married, employed female with a clean driving record. The hypothetical driver has a bachelor’s degree, an excellent credit score, no lapses in coverage and the following limits: $100,000/$300,000 (bodily injury), $100,000 (property damage), $100,000/$300,000 (UI/UIM), $10,000 (PIP) and a $500 deductible.