The less you drive, the more you can save on car insurance.

A handful of insurance companies are offering drivers discounts of more than 50 percent if they maintain low mileage. But there are catches to these programs, including the cost of a mileage tracking device and concerns over privacy. And you’ll have to drive far less than most drivers.

Still, it might be worth it for the savings.

“The (mileage tracking) devices can track everything from your mileage to how fast you go, how quickly you accelerate and whether or not you drive in the day,” says Ken McEldowney, executive director of Consumer Action, the San Francisco-based nonprofit consumer group. “The insurance companies use the information to evaluate how good a driver a person is.”

As part of its pay-as-you-drive program, Progressive Casualty Insurance Co. in Mayfield Village, Ohio, requires drivers to pay $5 a month for a device the size of a garage door opener that plugs in below the steering wheel. That seemingly innocuous device tells Progressive the time you drive, the miles you go and how much you accelerate and stop suddenly, and based on that, the company gives you either a discount or a surcharge.

Discounts can be as high as 30 percent for the six-month policy period, but the surcharge can cost a driver an additional 9 percent, says Richard Hutchinson, Progressive’s general manager of usage-based car insurance. With a 30 percent discount, a driver who might normally pay $700 per six-month premium could cut his bill to $490.

Drivers who go less than 9,000 miles per year, drive at off-peak times during the day and don’t accelerate often get the biggest discounts. Those who drive between midnight and 4 a.m. — the time of most accidents, according to Progressive — and accelerate often could get hit with a surcharge, even if they drive less than 9,000 miles per year. Still, drivers are allowed to opt out of the program whenever they want.

“The majority of the people get an average discount in the 10 percent to 15 percent range,” says Hutchinson.

Pay-as-you-drive prompts Big Brother fears

The tracking of driving habits is exactly what irks privacy advocates, but Hutchinson argues that shouldn’t be an issue because consumers choose to opt into the program. “We don’t have a GPS. All we can (learn) is the time of day the vehicle moves and if it accelerated and decelerated. We don’t know where it went,” Hutchinson says.

The capability of insurers to know where a driver is prompted California’s Department of Insurance to prohibit car insurance companies from gathering location information on a car owned by the person insured as part of the pay-as-you-drive program, according to Consumer Action’s McEldowney. Mileage verification in California will be done through odometer readings taken by the insurers, auto repair dealers or smog check stations, via a device installed in the car and by self-reporting.

While critics bemoan the privacy aspects of pay-as-you-drive programs, the saving nationwide could be big. According to a July 2008 report by The Brookings Institution, the Washington D.C.-based nonprofit public policy organization, if all motorists in the country bought auto insurance per mile, two out of three households would save an average of $270 per car per year.

Insurance companies only want mileage

For GMAC, which offers a discount of up to 54 percent to customers who drive less than 2,500 miles in a six-month premium period, mileage is the only thing the Detroit-based firm is tracking. Drivers need to have the OnStar system installed in their car to be eligible, says GMAC Senior Vice President Wade Bontrager. Drivers who go less than 15,000 miles a year also are eligible for a discount. To get a discount of up to 26 percent for the premium period, you would have to drive 7,501 to 10,000 miles per the policy period. If you don’t have OnStar in your car, the system’s cost of $199 to $299 per year may offset some of the savings.

Safeco Insurance, which is piloting a program in Illinois, doesn’t have to contend with any privacy concerns. It relies on self-reporting and third-party odometer readings to confirm how much a driver goes. But in order to see savings, you couldn’t drive your car very much. People who drive 5,000 miles or less get a 20 percent discount for as long as the mileage stays low, says Chris Allen, Midwest regional general manager at Seattle-based Safeco. Typical policies are six months long.

On top of saving money, the programs can have another positive impact. According to Brookings, the driving reductions from a pay-as-you-drive program would lower oil consumption by 4 percent, which also saves consumers money while reducing carbon dioxide emissions in the U.S. by 2 percent.

“It encourages people to drive less,” says McEldowney of Consumer Action. “You’re not just saving on gas and auto insurance. … It helps the environment.”