With the “Cash for Clunkers” program ending today at 8 p.m. Eastern, consumers are flocking to dealerships across the country to land up to $4,500 in rebates before the deadline. But here’s something most drivers looking to trade in their ‘clunker’ before tonight’s deadline don’t realize: a brand new vehicle will cause their car insurance premium to skyrocket.

“Every person turning in a ‘clunker’ will see an increase in his car insurance premium,” explained Martin Orlowski of the McNish Insurance Group. “As the value of the vehicle you drive increases, your car insurance premium will increase right along with it.” He added that most financed vehicles require full coverage, so the rate increase will seem especially steep for drivers who kept only liability coverage on their previous vehicle.

But why? You would think a brand-new vehicle with modern safety features should cost less to insure than an older vehicle, but that’s not the case. When you swap a “clunker” for a new vehicle, you’re taking on a car with a much higher value, which means car insurance companies take more financial risk insuring it.

Paul Kremer from High Point, N.C., had a hunch that his 2001 Ford Crown Victoria was on its last leg. So when he heard that the “Cash for Clunkers” program would pay him up to $4,500 to swap his old gas-guzzler for a new fuel-efficient model, he decided it was time to go car shopping. But it was only after he and his wife had decided on a 2009 Scion xB that he discovered that his car insurance premium would increase.

“The Scion added about $200 per year to my premium,” he said. “It has the same coverage as my old car, but the Scion is worth more so my premium went up.”

Before you rush out to trade in your ‘clunker’ for a shiny new vehicle, make sure you compare car insurance quotes first and find more affordable coverage.

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