Most of the time, insuring a new car is more expensive than insuring a used one. This may be a major factor in many drivers’ decision making, but there are also other costs associated with cars, such as monthly loan payments, registration, taxes, and maintenance costs. In some cases, it might be more costly to insure a used vehicle than a new one.
Right now, it is estimated that Americans spend around $10,000 a year on transportation. This is in addition to the $1,674 an average driver spends on car insurance each year. It becomes clear that approximately one-fifth Americans’ transportation budget goes toward car insurance.
You can save money on transportation by doing some research before you decide whether to buy a new or used car. Insurance and other costs may vary.
What is the difference between an insured new car and an insured used car?
There are many differences between insuring new cars and used cars, but there is no universally correct statement about the cost of used car insurance versus new. Generally speaking, used car insurance is cheaper than new car insurance but when you start comparing the cost difference between different makes and models, it gets a bit more complicated.
Some cars are safer and easier to repair than others. However, newer cars can be more costly to fix or replace. This can increase your car insurance premium. Oftentimes, the cheapest cars to insure surprise a lot of car buyers.
There are many factors that can affect the cost of car insurance, other than whether your car is brand new or used. The amount of coverage you buy, your driving record, and the type of financing you choose can all impact how much you pay each year.
Types of coverage
The first question to ask when you are looking for car insurance is “How much financial protection do I need?” Liability insurance will only protect you financially (up to your coverage limits) against misfortunes that you cause to others while driving. It won’t repair or replace your vehicle, nor will it cover you if another driver hits you or has insufficient insurance. For that type of protection, you might want to consider full coverage car insurance. Full coverage insurance refers to both collision and comprehensive coverage.
Some of the other coverage types offered by many insurance companies include these types of policies or endorsements:
- Personal injury protection
- Medical payments protection
- Uninsured/underinsured motorist coverage
- Rental reimbursement coverage
- Ridesharing coverage
- Sound-system coverage
- Towing and labor costs coverage
- Protection for new car replacement
- Gap coverage
Not everyone requires ridesharing coverage. It is important to think about what financial protection you require. If you have questions about which coverage is right for you, speak to a licensed agent from your insurance company.
Do I need car insurance to purchase a car? Or do I only need it to insure my used car ? The answer to both of these questions depends on the way you buy it.
Your lender may require that you purchase comprehensive and collision coverage when financing a new or used car. Some lenders might also require gap insurance. Gap insurance covers the difference in a car’s value and remaining loan amount, if the car is stolen or totaled. Gap insurance is not often available when purchasing a used vehicle. Insurance companies have strict rules about what cars can be covered.
Although some states have banned the use of your gender or credit score, most states allow car insurers to consider this information. Your driving record and where you park your car may also impact your premium.
How can I find the best car insurance?
Consider your specific needs to determine the best type of car insurance. Each driver may not require the same coverage, regardless of whether it is required by their state. For example, some drivers may want insurance that includes roadside assistance, while others may be more concerned about finding the cheapest car insurance policy possible.
These are some things to consider when searching for the best car insurance.
- Customer satisfaction: There are many organizations that can measure customer satisfaction. J.D. J.D. Power is a reliable source for auto insurance information. The best companies are rated on a 1,000 point scale. They usually score between 830 and 850/1,000.
- Financial strength: The financial strength of an insurance company is a good indicator about how fast and efficiently it can handle claims. Strong financial strength scores are often accompanied by high customer satisfaction scores. A.M. Best is a good place to start when looking for car insurance companies with A++ or A+ ratings.
- Options for coverage: Make sure you only choose the car insurance company that offers the type of coverage you need. While some companies offer many endorsement options, others have more limited policy options.
- Cost: Although cost may not be your main concern, it is a good idea to compare car insurance rates from multiple companies. After you’ve decided on the type of coverage that you want, compare quotes from different companies to get the best rates. To save even more, ask about the discounts offered by each insurer.
Commonly asked questions
Which is the best auto insurance company?
Car insurance companies do not come in a single package. You may not find the right car insurance company for yourself. To find the right fit, shop around and get quotes from several companies.
What is the average price of car insurance?
Each state has a different average car insurance cost, but the national average annual car insurance cost is $1,674 per year for full coverage. Some of the most expensive states for car insurance currently include Louisiana and Florida, while some of the cheaper states in 2021 are Maine and Ohio. You may pay more or less than the average state because of many factors other than your ZIP code.
Which insurance companies are the most affordable?
The cheapest car insurance companies are not necessarily the best. If you have a poor driving history, you may find better rates with a company that specializes in high-risk drivers and offers lots of discounts. If you are a very safe driver, but own a more expensive car and live in a congested area, you might benefit from looking at companies that offer usage-based, or telematics, programs to help you save.