Many people want to buy newer cars, but they may worry about the possibility of sticker shock when they go to insure these vehicles. While newer vehicles can cost more to insure, many factors determine your insurance premium. Do you plan to purchase a new car and want to know how much it may cost for insurance? Discover the answer to the question, “is car insurance more expensive for newer cars?”
Is Car Insurance More Expensive for Newer Cars Than Older Cars?
The cost of car insurance can vary based on many factors, including the age of the vehicle. In general, newer cars cost more to insure than older cars, even if they’re the same make and model. That’s because new cars usually have a higher value than older cars. When determining insurance premiums, insurance companies consider how much it may cost to reimburse you for your vehicle if it’s totaled in an accident. If your car has a high value, companies will pay more to replace it, and you’ll likely pay more for your premium.
For example, suppose you buy a brand-new vehicle for $40,000, and you’re involved in an accident within the first year of owning it. In that case, an insurance company will owe you $40,000 minus the car’s depreciated value and your deductible. On the other hand, if you bought a used vehicle worth $8,000 and it’s totaled in an accident, the insurance company will pay much less to reimburse you. The used car has a lower risk to insurers, and they charge you a lower premium.
What Other Factors Affect the Cost of Insurance for Newer Cars?
The age of your vehicle is only one factor insurance companies use to determine your premium. Consider some other factors that can affect the cost of insurance for newer cars:
Risk of Theft
Insurance companies consider the risk of theft to your vehicle when setting your premium, and newer cars don’t always have the highest risk. In its most recent survey, the National Insurance Crime Bureau found only two of the top 10 most-stolen vehicles were brand-new models. Newer vehicles typically have anti-theft technology, making them less likely to be stolen. Older cars are typically stolen and stripped for parts because there is a high demand for them, and they are easier to sell than a car that’s been flagged as stolen.
A vehicle’s safety record can affect the cost of your insurance premium. Typically, insurers reduce premiums for drivers who have cars with high safety ratings. When searching for a new car, research its safety rating with the Insurance Institute for Highway Safety (IIHS). This agency releases a list of top safety picks each year to help you choose a car with high ratings. An insurance company may also consider the safety features within a vehicle, such as airbags or blind-spot monitoring.
Cost of Repairs
In addition to vehicle replacement costs, insurers will consider how much it may cost to repair a newer car if the vehicle sustains damage in an accident. Some vehicles may cost more to repair, whether newer or older models. For example, luxury vehicles often have higher repair costs than other cars because they use specialty parts. The type of car can also affect the cost of repairs. For example, it may be more costly to repair a sports car after an accident than a sedan.
Types of Insurance for Newer Cars
When you purchase a newer car, you may require different types of insurance than you would for an older vehicle. Explore the common types of insurance you may want to purchase for a new car:
Almost every state requires drivers to carry liability insurance with minimum limits, covering damages and injuries to others if you’re the at-fault driver in an accident. Typically, your vehicle’s make and model doesn’t affect the likelihood you may cause an accident, and this insurance cost may remain the same if you purchase a newer car.
Comprehensive and Collision
These two insurance types pay for repair costs to your vehicle after an accident or other event, such as vandalism. You will likely need to have this insurance if you lease or finance a newer car because many lien holders require this coverage. The high value of a newer vehicle can cause the price of this insurance to increase.
Uninsured and Underinsured Motorists
This type of insurance pays for repairs to your vehicle if the at-fault driver in an accident doesn’t have enough insurance to cover the expenses. Some states require you to have this type of coverage, whether you drive an older or newer vehicle. Even if your state doesn’t demand it, this insurance can be good for a newer car because it helps you protect your investment.
If you finance a newer vehicle, gap insurance (an acronym that stands for “guaranteed asset protection”) will cover the difference between the amount left on your loan and the amount paid by your insurance after an accident. Newer cars can depreciate quickly, so it’s helpful to purchase this type of insurance until you can begin to pay off some of your loan. For example, if your one-year-old vehicle is totaled, you may still owe $25,000 while its depreciated value may only be $21,000. Gap insurance will cover the $4,000 difference so that you don’t have to pay the difference out-of-pocket.
Tips To Lower the Cost of Insurance for Newer Cars
Discover some tips to help you lower the cost of your insurance for a newer car:
- Get multiple quotes: It’s essential to get quotes from several insurance companies because they often charge different rates.
- Choose a high-deductible plan: If you can afford it, a higher deductible can lower the cost of your premium, and the high value of your newer vehicle means insurers will still pay for most costs after an accident.
- Ask for discounts: You may be eligible to receive discounts if you meet specific criteria, such as taking a driving class or installing an anti-theft device in your new vehicle.
If you’ve ever wondered, “is car insurance more expensive for newer cars?” now you know the answer. Even if you choose to purchase a newer vehicle, you can work to lower the cost of your premium and spend less time worrying about bills and more time hitting the open road.
At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.