A good number of drivers are now looking at ways to keep their costs down as a driver. They may pay more attention to the type of vehicle they are buying based on fuel economy. They may take more interest in the variations in insurance based on the make and model of cars. Some may consider whether it would be cheaper to insure a new vehicle vs. a used one.
New Car Vs Used Car Insurance Rates
In many cases insuring a used car will be cheaper compared to the insurance for the new one. However, there will be exceptions to this.
A high end used vehicle may have more replacement value to it compared to an economy vehicle. This means that the used vehicle would cost more to replace, for the insurance company.
Some used vehicles are much more expensive to repair compared to some of the older ones. If the insurance company has to pay for the repairs then this is a higher risk for costs for them. They are going to protect themselves with higher rates.
Even though the used vehicles are older there are some that are still very high up on the list for risk of being stolen. They could be targeted for parts or for shipping out of the country. The insurance company will have access to data about cars with respect to their risks for theft.
Why Buying A New Car Is A Bad Idea?
Although most everyone likes the thought of buying a new vehicle, practicality will often overrule. A driver will look at the cons of this type of investment, which can include:
The full value of the new vehicle is reduced the moment the driver takes ownership of it and drives it off the lot. Not just by a few dollars either, but many vehicles can see a depreciation of a few thousand dollars. Statistics show that a new vehicle will be worth 34% less than what it was bought for after the first year. Five years later it will have lost about 67%. This is important to know for insurance purposes. The insurance company is only going to replace the value of the car at the time of the claim. They will use the Canadian Black Book to determine its value. So a five-year-old vehicle that is a write off will only have a 33% retained value.
When buying a brand new make and model there are a lot of unknowns about it. The marketing hype will focus on its best features. However, there will not be any solid data based on consumer use to support this. For example, a vehicle manufacturer may install a new safety device in a new make and model. But there is no data to determine how effective this will be, other than their testing data. The insurance companies may recognize this depending on the past history of the manufacturer. Or they may not until there is more consumer use data. So this new device may not provide an insurance discount.
The Cost Factor:
It is a lot more expensive to buy a new vehicle compared to a used one. In most cases, the driver is going to want to put a lot more insurance on it. This combined with the cost of the vehicle can be substantial.
In general, it will cost the insurance company more to replace a new vehicle compared to a used one, aside from the exceptions previously mentioned.
Why Buying A New Car Is A Good Idea?
While there may be some red flags as to why it may not be a good idea to buy a new vehicle there are also many positives to buying it new.
A lot of the new cars have some proven safety features built into them which is something that is important to the Insurance companies. Buying a new vehicle that has put a lot of emphasis on safety features can help with the cost of insurance.
New cars have no vehicle history. Meaning it has not been in an accident. Anyone selling a used car has to provide a vehicle history. This will indicate whether the vehicle has been in an accident. There are no guarantees that the repairs will have been done correctly. An insurance claim for repairs will only restore the vehicle back to its pre-damaged condition. It will not cover any betterment of the vehicle. This is not something that has to be worried about with a new vehicle.
Aside from how a new car purchase can positively affect insurance, there are other reasons to consider buying a new car such as:
- Warranties that come with the vehicle
- Options for the extras that can be bought with a new car
- Better fuel economy and efficiency
- Better interest rates for financing
Making The Decision
The final decision is going to come down to the personal circumstances of the individual. What they are willing to pay for a vehicle as well as insurance.
There are some additional ways to keep the insurance costs down on a new vehicle such as:
- Making sure the vehicle does not come into the high-risk bracket for theft.
- That it has made the list for the cheapest cars to insure
- Shopping around for insurance. A good example is using quote services that will provide multiple quotes so there are some choices. Getting a quote before buying the insurance allows a driver to make a more informed decision.
- Ensuring that the driver has a clean driving record
- Taking advantage of any potential discounts that can help to reduce insurance.
There is a lot to consider when deciding between a new and used vehicle. It is worth taking the time to think it through and considering the pros and cons of each.