Insurance Facts on Used Cars

Posted on: 15Jan,2016

In addition to the fact that purchasing a new vehicle will cost you more than buying an older, previously-owned version of the same model, there may be differences in the amount of insurance premiums that you pay for a new vehicle vs. a used one. Many individuals oftentimes overlook this factor when trying to decide whether they should buy new or used. As a result, buyers of fancier, newer vehicles are shocked when they get a quote from their insurance agents or companies.

You can avoid a lot of grief and stress if you remember the general rule of thumb regarding auto insurance premium rates and that is the newer and more expensive the vehicle is, the higher the rate to insure it. So if you have budget issues and finances are a factor in the decision to purchase a new or used vehicle, just be aware of this before you make it. There are certain advantages to purchasing a used vehicle instead of a new model but the value of it will always have an impact on the insurance coverage your purchase.

The primary reason that insurance costs more for a new vehicle than a used one is based on its higher value which in turn makes it a greater risk to insure as the cost of repairs could be significantly greater as well as any replacement costs involved. Add this to the fact that the risk of theft is greater and you have the formula for higher insurance premiums. However, there are other factors involved, one of which is that a used vehicle may not need collision coverage which will save you money in the long-run.

Although collision coverage is a recommended option when purchasing a new vehicle, there is less value involved in the event of an accident and in most cases, the insurance company will total a used vehicle if it costs more to repair than what it is actually worth. If you have comprehensive coverage, you’ll be covered against non-accident related damages such as theft or vandalism. This won’t cost you as much as it would on a new vehicle since it will be cheaper to replace the older one.

On the other hand, newer vehicles that are equipped with more safety and security features may be cheaper to insure because of the discounts you would qualify for. For instance, the new vehicle will be equipped with multiple air bags to protect the driver and any passengers that are on board whereas older vehicles may only have a driver’s-side air bag. Also, seat belts did not come as standard equipment on vehicles. However, due to changes in federal law within the past 20 years, all vehicles are required to have them.

Although older vehicles may not be equipped with what the law now requires in the way of seat belts, all auto manufacturers today install seat belts for every legal seat that a vehicle contains. However, buying a used vehicle does not eliminate your obligation to the safety of those individuals riding with you and you may be required to install legal seat belts if you don’t want to pay a higher premium. One way or the other, things eventually even out. The bottom line is that a used vehicle could be more of a risk to insure than a newer one.

Fortunately, you can still save money when purchasing insurance for a used vehicle as well as a newer one. Basically, the same factors that will save you money on a newer model will also help you save when insuring an older, used car. One way to save is by purchasing less coverage, especially where collision and comprehensive are concerned. Lower-valued and older vehicles will be totaled if the repair costs exceed what the car is worth plus there is a much lower risk of them being stolen.

In closing, it always pays to do a little bit of research whenever you are considering a major purchase such as car insurance. Additionally, you should sit down with several insurance agents and discuss your needs as well. They should be honest enough to tell you what coverage is necessary and what you do not need to purchase. Keep all of this in mind when you start shopping for used vehicles and want to insure it.