Does the age of a car affect insurance?

If you drive a newer car, you can expect higher-than-average car insurance rates.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Feature Writer Rachel Bodine

Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: May 14, 2022

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Things to remember...

  • Many different factors affect the cost of car insurance
  • Older cars are typically less expensive to insure because they are less valuable
  • If you drive a new car, you may be eligible for a discount on coverage

If you are shopping for car insurance, you may find that your rates are more expensive than you expected. Because there are so many factors that affect a person’s car insurance rates, you may not be able to pinpoint exactly why your car insurance rates are so high. 

If you’re driving a new car, it’s safe to assume that your rates are higher. While many people wish it were not the case, the truth is that a car’s age affects car insurance rates.

Will I pay more for insurance if I have a new car?

You will pay more for insurance if you have a new car for several reasons. The first reason that new cars cost more to insure is that they are worth more. Your insurance company assesses worth and risk with each policy it offers, so if your car would cost $10,000 more to replace than someone else’s vehicle, your rates will likely be higher.

Driving a new car can also cause you to pay more for auto insurance because of the type you purchase.

While people who do not make payments on their cars can get away with having liability-only policies, most people driving new vehicles have taken out a loan with a company or individual. If you have financed your vehicle, you are more than likely required to carry full coverage on your car.

Because full coverage combines liability, collision insurance, and comprehensive coverage, a full coverage policy can cost hundreds or even thousands of dollars more per year than a simple liability policy. And if you add other coverage options to your policy, you can expect to pay even more in monthly rates.

The table below shows the different coverage options available with most car insurance companies. 

Car Insurance Coverage Options
Coverage ConsiderationsDescription
LiabilityMost states require a set amount of liability coverage that protects other drivers in the case of an accident
ComprehensiveThis coverage is typically required by your lender or leaseholder. If you own your vehicle outright, this is optional. It will pay for damage from non-accident-related events such as hail, vandalism, and theft.
CollisionThis provides financial protection for your vehicle. It will pay for damages after a crash.
Personal Injury Protection (PIP)This coverage will pay for your own medical costs, including lost wages.
Medical Payments (MedPay)Similar to PIP, MedPay covers injury costs but doesn't cover lost wages as PIP does.
Uninsured/Underinsured Motorist ProtectionInsurance companies are required to offer this coverage to you, and it will pay for your own damages beyond what another's liability covers when they're responsible for an accident.
Guaranteed Auto Protection (GAP)You may owe more on your vehicle than it's worth because of how quickly cars depreciate. This coverage will pay the difference between the value and what you owe if your vehicle is totaled.
Personal Umbrella Policy (PUP)This option provides an "umbrella" of coverage over several types of insurance.
Rental ReimbursementIf your car is a total loss or needs repair, do you have another vehicle you can drive? If you need a rental, you should consider this option.
Emergency Roadside AssistanceYou can purchase this option from your insurer or a driving club.
Pay-As-You-Drive or Usage-Based InsuranceThis isn't a good choice for everyone, but if you drive very few miles, it might be cheaper for you to purchase this kind of coverage.
Non-Owner Car InsuranceThis option is for people who do not own a car but borrow one occasionally.
Modified Car Insurance CoverageIf you've made modifications to your vehicle, your regular full coverage won't take those changes into consideration when paying for damages. Adding special coverage for those modifications will protect them.
Windshield CoverageWindshield coverage will help you pay for the replacement of your broken glass (check state laws for specifics)
Mechanical Breakdown InsuranceThis coverage is similar to a manufacturer's extended warranty, and you should weigh the benefits of both a warranty and breakdown insurance to see which is best for you.
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For each coverage you add to your policy, your rates will increase. One of the best ways to keep rates down with a full coverage policy is to shop around online and compare quotes from multiple companies at once. 

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How are car insurance rates determined?

All car insurance companies determine rates a bit differently. If you shop for coverage, you will notice that your rates are slightly higher or lower with each new company you contact because different factors carry a different importance level with each car insurance company.

Most companies consider the same major factors when determining a person’s auto insurance rates. Some of the most common factors include your:

  • Age
  • Gender
  • Location
  • Credit score
  • Driving history
  • Vehicle type
  • Vehicle age
  • Occupation
  • Driving frequency

Your vehicle’s make, model, and year will impact your car insurance rates with virtually any car insurance company. If you drive a newer vehicle that has a higher actual cash value, you can expect to pay more in insurance rates to account for that.

How can I save on insurance with a new car?

It can feel daunting to have a new car and know you’ll pay more in car insurance rates, but there are a few ways to save money on your new car insurance.

Many companies offer numerous discounts to policyholders. If your car insurance company offers a new car discount, you should speak with a representative to ask whether you are eligible to receive it.

Discounts with car insurance companies can save you as much as 20% on your policy, so it’s good to ask about a new auto discount and any other discounts that might apply to you.

Another way to save on car insurance rates is to choose a higher deductible. Your car insurance deductible is the amount of money you will pay out of pocket before your insurance must help with any repairs or other costs.

If your insurance deductible is $500, you could ask an agent with your company how much your rates would change if you had a deductible of $1,000 or more. The downside of increasing your deductible is that you would pay more if you filed an insurance claim.

Can I find cheaper quotes for a new car?

If you are driving a newer car, you should shop around to see if you can find cheaper auto insurance with a different company.

The best way to find and compare car insurance rates is by using an online quoting tool, which allows you to assess different companies and rates simultaneously. It’s important to take your time when comparing car insurance quotes to ensure you find a company that offers the coverage you want at a price that works with your budget.

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What’s the bottom line regarding new cars and insurance rates?

If you drive a car that is several years old, you may be pleased with your rates. This is especially true if you do not have extensive coverage on your vehicle. But if you are driving a new car, you may find that your rates are higher than you would like.

It’s important for you to carry the coverage required for your car if you are financing it. Even if you own your new car, you may want to consider purchasing a full coverage policy to ensure it is protected if you are ever in an accident or if something happens to your car while it’s parked.

You can always ask about car insurance discounts, choose a higher deductible, and shop around for insurance to try and lower your monthly rates. If you have a good driving record, there’s a chance you’ll be able to find better coverage and cheaper rates with a different insurance company.

Free Auto Insurance Comparison

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