Why is car insurance more expensive for new cars?

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Things to Remember...
  • New auto insurance is more expensive for a new car for a variety of reasons. One is because the repairs are more costly
  • Collision and comprehensive coverage is the most expensive part of auto insurance. When an average consumer receives a quote, the sum is greater with these two levels. That is because collision and comprehensive will pay for the damage
  • Liability is not just the minimum amount required by law it is also the least expensive
  • While comprehensive will pay if your car has damage, you may still have financial obligations
  • New cars can be substantially cheaper to insure than old cars when the old car is a classic

New auto insurance is more expensive for a new car for a variety of reasons. One is because the repairs are more costly. When a car insurance company prepares a quote, they consider the make and model of the vehicle. They also review the year.

Auto insurance rate calculations depend on many factors. Most consumers are more than familiar with the list. They also expect to pay more when they purchase a new vehicle. However, the reasons for the extra costs have always been speculative.

You may be one of the many who assumes the cost of the car is the reason. This is certainly true. There are other issues to take into account too.

The price of your car insurance is always only dependent on the price on the sticker of your new car. The design of the vehicle, for instance, and the number of options you select all play a role.

While new cars have a multitude of safety features, many of which are optional. They only serve as a way to decrease your quote to keep the rates comparable. The bottom line is simple, new car owners should always expect to pay more.

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Levels of Insurance Increase the Rates

According to a nine-year study performed by the Insurance Information Institute, the auto insurance industry spent an average of $53,460,108 in 2001 on collision and comprehensive claims.

The number soared to $62,589,229 by 2010. The reason for the increase has a direct correlation to the cost of repairs.

Collision and comprehensive coverage is the most expensive part of auto insurance. When an average consumer receives a quote, the sum is greater with these two levels. That is because collision and comprehensive will pay for the damage.

Collision protects against impact, like car accidents. Comprehensive protects against weather-related issues, like fire or floods as well as vandalism and theft.

New cars are more expensive to repair and they are costly to replace. If someone steals your car and no one finds it, your comprehensive coverage takes care of the problem. The combination of new car prices and repairs equal higher car insurance rates.

Liability is not just the minimum amount required by law it is also the least expensive.

Unfortunately, most people do not choose liability because it is very limited. Even with the highest limitations, liability will not fulfill your expectations.

When you purchase a new vehicle, it is important for you to complete a bit of research. You need to find out which cars cost the least to repair. You should also think about theft and how much a new vehicle costs.

Your auto insurance provider will certainly consider these factors.

The Cost of a New Vehicle is Not Always a Factor

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Just because a vehicle has a high retail value, does not always mean the rates will be higher than one that does not. In actuality, most new cars cost more to fix than old cars. Some models will just cost more than others do.

The type of vehicle you purchase will play into your rates. For example, the Insurance Institute for Highway Safety shows some vehicles are riskier than others because of the way they are built.

According to their data, many newer vehicles have less capacity to withstand low-impact collisions. The designs of the bumpers do not match universally. Passenger vehicles have federal regulations they must meet.

 

When an SUV and a passenger vehicle collide, the damage is quite severe. This is at low speeds of 10 miles per hour. They used several examples including the Honda CR-V versus a Honda Civic and the Ford Escape versus the Ford Focus.

When assessing front bumper damage, the repair costs were huge. The low bumper on the Honda Civic did not align with the higher bumper of the Honda CR-V. The damage to the SUV was $1,721, while the Civic received $1,274 in damages.

They proved the need for the automotive industry to comply with the current federal regulations.

Ironically, not all new cars fit into this category and each year they make subtle changes. Unfortunately, the auto insurance industry tends to combine the makes and models. They place them in specific risk groups and rarely make updates. Things are unlikely to change.

The National Highway Traffic and Safety Administration discusses the Federal Motor Vehicle Safety Standards and Regulations regarding bumpers.

They understand the importance of these parts. They are the first line of defense against serious injuries.

Unfortunately, until the regulations spread to SUV’s car insurance rates will continue to increase. New cars will see higher rates. Consumers will continue to pay more.

Average Cost of Parts

Newer cars have expensive parts. This increases the estimate by the body and repair shops. Since most states have laws regarding aftermarket parts, they must purchase original manufacturer parts.

When a customer submits a claim for damage, the insurance company pays close attention. With the exception of the deductible, they are responsible for the costs. This means they monitor every step to ensure quality and performance.

Insurance companies also measure safety, to ensure the vehicle receives proper repair.

Replacing parts damaged in a collision must be up to par. Most aftermarket parts are of a lower quality. They may not fit correctly or corrode too quickly. This compromises the integrity of the vehicle. It can place the insured at risk for future accidents.

Since the auto insurance industry is in the business of risk assessment, they consider this unacceptable. If they discover inferior products, they have the right to refuse payment to the body shop. As they make a direct payment, they control the outcome.

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Extra Options Purchased

Consumers with new cars often purchase extra options. This includes GAP coverage and rental car reimbursement. Optional auto insurance coverage is another way to increase your annual premium.

It only makes sense to choose certain little extras when you have a new car. This is especially true when the vehicle has monthly payments.

You want to make sure you have all of the protection you need. Many consider this wise, in light of the number of thefts in certain areas.

While comprehensive will pay if your car has damage, you may still have financial obligations.

Consider a theft, for example. The finance company will expect your monthly payment regardless.GAP insurance is an excellent option.A car is an investment and certain sacrifices accompany your privilege as an owner.

It is also a good idea to add rental car reimbursement. While your car is in the body shop, your life continues. This means you either pay out of pocket for a rental or utilize your benefits. Rental cars can get rather expensive.

Although your rates will be slightly higher, it can provide you with ample peace of mind.

When New Cars are Cheaper than Old Cars to Insure

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New cars can be substantially cheaper to insure than old cars when the old car is a classic. This means a 1952 Thunderbird may cost three or four times as much. While it is true most cars depreciate, it does not apply to some.

Classic vehicles are more expensive because they are specialty vehicles.

Their parts are rare and this makes them difficult to locate, repair, and restore. They often require regular maintenance and this gets costly. There are not too many mechanics trained to work on classic cars.

They also have high visibility. Car thieves know the value and take more risks. Consider two cars in the same parking lot.

One is a classic and the other is a brand new Ford Mustang. Each looks appealing to an undesirable person, but one is worth much more. The odds of the Mustang remaining parked safely are much higher.

When you add all of these into the equation, it is easy to see why the rates are higher.

The car insurance companies absolutely understand. This is why most classic car owners have specialty insurance. They seldom use a standard agency.

Face the Reality of High Auto Insurance Rates

You will need to face reality. If you buy a new car, your rates will be higher than a used car. This does not mean you will not have the opportunity to save money.

Many car insurance companies want your business. The odds are still in your favor. All you need to do is take your time and find the one that works for you.

There is always good news when it comes to auto insurance. Even if you have a high premium, it will not remain high. After the first term, your rates should start decreasing.

Review your renewal carefully. Do all you can to ensure you receive a fair price. Remember, if you do not see changes soon, you can always switch companies.

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