New Car vs Used Car: What's the Difference in Car Insurance Savings?
If you’re shopping for a car, it’s important to remember that car insurance costs are a big part of the investment. It’s often thought that buying a used car will cut down on insurance costs, but many are surprised to find out that it’s often the opposite. Insuring a new car can be quite affordable, with rates better than expected. Read on to learn about the factors that affect the cost of car insurance, whether the vehicle is new or used.
Comprehensive and Collision Insurance Requirements
If you have a loan or lease on a car, you will be required to have comprehensive and collision coverage. This protects the lenders if you have an accident, ensuring that the damages will be paid for.
The cost of the coverage will depend on a couple of things. If the car is used, it will be lower because it costs less to fix a used car. If the car is new, the rate will be much higher because a new vehicle costs considerably more to repair.
Liability Insurance Requirements
Most states mandate that drivers must have some type of car insurance. At a minimum, this would be liability insurance. Liability insurance helps you pay for damages and injuries caused in an auto accident in which you are at fault.
The amount of coverage you carry can differ. However, state law sets minimum requirements. Often, liability insurance will be less expensive for a new car because of all the built-in safety features. These features include airbags, anti-lock brakes, rear-view cameras, and collision-avoidance systems.
The Value of the Vehicle
Used car insurance rates may be considerably higher if you are insuring a classic car vs. a new, inexpensive four-door vehicle. For example, a 1965 Ford Mustang two-door hardtop convertible in prime condition has an average value of about $22,000.
On the other side of the spectrum, a Nissan Versa four-door sedan has a manufacturer’s suggested retail price of just under $15,000. When factoring in insurance costs, make sure you are comparing cars of similar value.
Gap insurance protects you by paying the difference between what you owe on a car and its value. Let’s say you buy a car for $15,000. After one year, you get into an accident and the car is declared totaled. Your insurance company states your car value is $9,000, but you owe the bank $13,000. If you don’t have gap insurance, you will have to pay the $4,000 difference out of pocket.
Gap insurance does add to the price of your insurance premium, but it might be worth looking at depending on your financial situation.
Popularity Among Thieves
Sometimes it doesn’t matter if your car is new or used. Sometimes the factor that matters most is how popular the vehicle is among thieves. Insurance companies look at statistics on what types of vehicles are most commonly stolen in specific areas.
For example, in El Paso, Texas, Ford F-150 trucks are the most stolen vehicle. Taking this into consideration, the cost to insure a used truck of this make and model can be even greater than the cost to insure a new Chevy Charger.
When taking all these factors into consideration, you can see how insuring a new car can actually be cheaper than insuring a used car. New cars may be more expensive to repair, but they require less maintenance and have an abundance of safety features. These benefits lower the risk to insurance companies, allowing them to offer you a more affordable rate on a new vehicle. While your car payment may be higher for a newer vehicle, your overall costs should be lower.