Many policyholders are concerned that premiums would increase a lot when they replace an older car with a latest and more expensive model. This switch doesn’t always result in increased rates because there are mitigating factors. Also, the cost difference between new and used auto insurance may be negligible to worry about, especially if they are the same make and model.
One of the more significant features of the last twenty years is that technological advances are impressive and fast, especially in the automobiles sector. Understandably, many insurers pay close attention to the latest theft, accident and injury prevention features and offer discounts for qualifying cars.
Furthermore, used auto prices have actually been going up and increased 40% recently that reduced the value gap between old and new. This will certainly reduce the pressure to increase rates because of the increased value of the new car.
Generally, motorists replacing their 4-5 years old cars with the brand-new same make and model shouldn’t see big increases in their insurance premiums. Of course, the latter will be more valuable and there will be additional premium for it. However, the latest model should have enough safety features to qualify for offsetting discounts to level things out.
If the above switch results in a large premium increase, the reasons behind it may be different. For example, latest premium increases are mainly due to inflation and if this carries on people may see dropping credit scores that affect rates.
In any case, it may be time to look for alternative quotes. Companies look at valuation and safety features differently. If you are with a vehicle insurer who pays extra focus on the value and care less about the many crash avoidance improvements that come with new models you would be losing on both ends. Switching to a carrier that thinks exactly the opposite can save you money.
When a Latest Model Car Costs More to Insure
Recent changes in the automotive industry is not only amazing but also there is a shift in the market towards serving different functions and purposes. So, vehicles are differentiated more lately than ever before. There are many models that aren’t even produced by manufacturers. Here are some of the circumstances that may warrant paying higher premiums when you buy a new car, even if it is a close enough replacement of what you had before.
Desire to Insure Your New Ride Better: People can easily get carried away with all the coverage add-ons they can get to protect their shiny new ride better. When you invest a lot of money buying it, you may feel you are justified to spend a bit more for insurance.
Going for Fancy Upgrades: From body work, paint job, fancy interior and gadgets to advanced functions there are so many customisation options today to open up the gap between the upgraded and standard model. People can easily spend $20,000 – $30,000 on upgrades alone these days that differentiates their brand-new car from what they had before substantially.
Some of those features may be positive but they are mostly costly work to repair and replace should something happen to the auto in the feature. Companies have to take this into account as the wages aren’t cheap anymore, which pushes up repair costs.
Electric Cars: This is the biggest switch and many motorists go for the electric models of their favorite cars. Essentially, their technology is fairly different in many ways. Electric automobiles are expensive to buy and repair and they are likely to suffer larger damages in collisions due to additional parts like batteries. That is why, motorists replacing their petrol models with electric cars are expected to see a 10-20% increase in insurance premiums, due to them being priced higher and having more parts to be damaged in accidents.
Higher Risk Situations: Deteriorating driving and claim records, expensive zip codes, addition of young drivers are some of the things that increase the risk levels which opens up the premium gap. When the applicants are middle aged good drivers coming from safer zip codes the premiums don’t go up much even if they buy a lot more fancy and sporty cars because their base rates are low. The opposite is true when the risk levels are already high.
Loan Conditions: With attractive interest rates and great credit facilities offered even by manufacturers directly, more and more people may be buying automobiles with loans. You may have already cleared any credit facility on your current vehicle and you may now be starting all over again. This would mean that you need to comply with the lender’s insurance requirements like requiring Comprehensive, Collision and GAP coverage and keeping the deductibles low.
When It Is Cheaper to Insure a New Auto
Complex nature of quote calculations makes it harder to give a conclusive answer. Companies pay more attention to things like how good a vehicle is in protecting its driver and passengers from injuries. There are several other reasons why your latest model ride can come with lower or similar premiums.
You may be able to find cheap insurance for new cars depending on make, model and safety features. You may not need to pay additional premium if you had the similar coverage for the last one and if it was rated poorly on safety and auto thefts. The latest model will have a higher price tag though.
It is highly likely that discounts you get because of better crash safety and theft prevention features in new cars can negate any increase due to its higher value. Most people may not realize but they do affect rates more than open market value. So, replacing an older car with the same make and model but latest addition may not make a huge difference in insurance premiums either way because of the just mentioned give and take.
Simple safety updates like better seat belts and airbags save lives every day. They also reduce injuries that cost millions to carriers every year in claims. Underwriters carefully follow the effects of these modern safety and crash avoidance features on preventing injuries to motorists. When car insurers find a vehicle to be good at preventing collisions and injuries, they can slash the premiums to surprisingly low levels.
Security features are not ignorable too. Why do you think you don’t see news about expensive cars being stolen? They are harder to steal due to preventative measures installed. That is why it is possible to get a reasonable new car insurance premium as long as the owner and listed drivers have good records.
Also, type of vehicles is important. If you are selling a sports car and buying a family sedan you may actually see drops in rates. The best way is to check before making the decision of switching cars. This way, you will be prepared for any increase.
Until now, we assumed that it is a straight like for like and newer model replaces the older type of switch. This is usually not the case in real life since people’s needs and tastes change. In general, you can get cheaper insurance for older automobiles than younger ones. However, that would very much depend on make and model as well as age. You may find that it isn’t really cheap if you own an older automobile that is easy to steal and hard to find parts.
Switching a trusty minivan with a plush convertible wouldn’t help your case and you will be in a discovery territory in terms of rates. Without knowing what sort of an auto you had and what is the one you just bought, it is difficult to give a specific answer that will satisfy the curiosity.
Another example, if you did not have collision and comprehensive coverage on the old car you probably see some automobile insurance premium increase as you would most likely include these for a much more valuable automobile.
Conclusion
If you’re planning on buying a more expensive vehicle, you may be worried that already high rates will only end up going up even higher as a result of it. This can be especially important if you’re on a tight budget and you can hardly afford the current prices. The fear of increasing costs to an unaffordable level might make you decide against it altogether. And you may actually need a better vehicle because the one you’re currently driving is old and always in need of repairs.
So, forget the myths and check the insurance rating of the automobile you like. Usually, it is listed under vehicle’s particulars. Furthermore, you can get yourself some quotes for a vehicle you like. There is no reason why you cannot do full-blown quotes comparison online for the vehicle you are planning on buying, as long as you have its particulars.