Whether it’s your first or fifth time purchasing a car, there are many exciting and difficult questions you’re asking yourself. Do I want a SUV or a sedan? Will I purchase new or used? Do I like the white or the silver color? You should also consider how the car you choose will impact your insurance premiums.
New Car or Used Car
There are pros and cons to both buying new or used vehicles. When a car is newer the replacement cost is higher in the event of an accident, so insurance rates are often higher on new vehicles and lien holders may require higher limits on coverages. Purchasing a used car often saves you money up front and on your insurance rates, but you don’t always have additional dealership warranties or, if you purchase from a private party, none at all.
Car Safety Rating
A better car safety rating not only protects you and your passengers, but can also mean a lower insurance premium.
Prior damage to a pre-owned car means there is a greater chance of something going wrong in the future and could negatively affect your insurance premiums.
Even if you’re buying new, the model of your car can negatively affect your insurance premium if the model has a history of more accidents.
You could qualify for additional discounts based on the features of the model you choose. Discounts are often provided for:
Anti-theft protection – This includes alarms, tracking systems, and kill switches. Your insurance company may require that they are factory-installed.
Anti-lock brakes – This includes vehicles with anti-lock brakes.
Green or Hybrid car discounts – This includes owning or leasing a hybrid or electric car.
Additional safety or restraint discounts -The number and type of airbags in the vehicle.
New car – Owning or leasing a car that is 3 years old or newer.
Collision and Comprehensive Coverage
Your new vehicle is likely worth a lot more than the one you are replacing so the premium for comprehensive and collision coverage will be higher too.
- Collision coverage covers repairs to your car in the event of a collision with another car or an object like a tree.
- Comprehensive insurance covers everything else. Damage due to fire, animal collision, or natural disasters are covered by comprehensive car insurance.
One way to reduce the premiums for Collision and Comprehensive coverage is to increase the amount of your deductible. A higher deductible means a higher expense in the event of an accident, but lower annual premiums.
Loan/Lease and New Car Replacement
If you purchase a new or newer vehicle and the car is determined to be a total loss soon after the purchase you may find yourself in a situation where the loan balance or lease payoff exceeds the insurance payout. Loan/lease coverage will cover this deficit. This is also called gap insurance. Some loans or leases may include this coverage automatically. The cost to add this to your auto policy may be much lower than the cost of optional coverage through the bank or finance company. We can quote and add this when you purchase a new or newer vehicle.
If you buy a brand new car, many companies will agree to cover the cost of a new vehicle if your car is totaled in the first few years. The cost for this new car replacement may be substantial and not many new cars are total losses. Some TV commercials infer that this is an automatic coverage. It is not automatic, but the cost can be quoted at the time the new car is purchased and added to the policy.
You want to find a car that fits your lifestyle and personality, but don’t forget to consider these insurance factors when you make your decision.