Does Insurance Go up with a New Car?

When you buy a new car, insurance premiums are likely to increase due to several factors. New cars typically have higher values and more advanced features, which can lead to higher repair and replacement costs and insurance rates. If you finance or lease the new car, Comprehensive and Collision coverage might be required, further contributing to the higher costs. However, you can get insurance quotes for a car you are considering buying and if you can choose a vehicle with good safety ratings, accident, injury and theft prevention features, you may keep the premium increase under control.

Many policyholders may worry about potential hikes in auto insurance premiums when upgrading from an older car to a newer, more expensive model. While it’s true that a new vehicle often leads to increased costs, making the switch may not necessarily result in a substantial premium increase due to various mitigating factors. Moreover, the disparity in insurance costs between a new and used vehicle may not be as drastic, especially if they share 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 been going up recently to reduce 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 may not see big increases in their insurance premiums. Of course, the new car 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.

Regardless of the situation, it might be a good idea to explore alternative insurance quotes. Different insurance companies assess vehicle valuation and safety features differently. If your current insurer prioritizes the value of the vehicle and overlooks the many crash avoidance enhancements that newer models offer, you could be missing out on potential benefits. By switching to a carrier that values and rewards the safety improvements in new models, you might be able to save money.

When a Latest Model Car Costs More to Insure

The recent developments in the automotive industry are truly remarkable, bringing about not only amazing advancements but also a significant shift in the market’s focus on serving diverse functions and purposes. As a result, vehicles are now more differentiated than ever before. Consequently, when purchasing a new car, there are certain circumstances that may justify paying higher insurance premiums, even if the new vehicle closely resembles your previous one. Let’s explore some of these factors:

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 $10,000 – $20,000 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 to repair and replace should something happen to the auto in the feature that pushes up insurance premiums a bit.

Electric Cars: This is a big 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 larger increase in insurance premiums, due to them being priced higher and having more parts to be damaged in accidents.

Higher Risk Situations: When the applicants are middle aged good drivers coming from safer zip codes, the premiums don’t go up much even if they buy more expensive cars because their base rates are low. The opposite is true when the risk levels are already high. Bad driving and claim records, expensive zip codes, younger drivers or having a teenage driver on the policy are some of the things that increase the risk levels which opens up the insurance premium gap between an old and new car.

Loan Conditions: You may have already cleared any credit facility on your current vehicle and have been arranging your auto insurance freely since you owned it. If you get a loan on your new auto (while there wasn’t a loan on the old vehicle), you need to comply with the lender’s insurance requirements like requiring Comprehensive, Collision and GAP coverage and keeping the deductibles low. That is why you may need to pay considerably higher auto insurance premiums.

When a New Auto May Not Raise Insurance Premium As Much

The intricate process of premium calculations gives insurers the flexibility to assess risks from various perspectives. Factors like the safety features of a vehicle, which can effectively protect its occupants from injuries, become significant considerations for insurance companies. Furthermore, there are several additional reasons why your newer model car may result in only a marginal increase in your insurance premium, no increase at all, or even potentially lower costs, as outlined below.

Even 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. Today there are many other crash avoidance features like lane departure warnings, blind spot detection and automatic emergency braking. Underwriters carefully follow the effects of these modern safety and crash avoidance features on preventing accidents and injuries. When car insurers find a vehicle to be good at preventing collisions and injuries, they can slash the premiums to surprisingly low levels.

In addition, it may be harder to steal newer automobiles 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.

Another data auto insurers closely watch is safety ratings of cars. The National Highway Traffic Safety Administration (NHTSA) carries out crash tests every year. If your new car has scored highly on those tests, your vehicle may attract lower rates.

It is highly likely that discounts you get because of better safety ratings, crash, injury and theft prevention features in new cars can negate any insurance premium increase due to its higher value. Most people may not realize but they may affect rates more than open market value, depending on the company. So, replacing an older car with the same make and model but latest addition car may not make a big difference in insurance premiums because of the just mentioned give and take.

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 to insure if you own an older automobile that is easy to steal and hard to find parts.

Moreover, the type of vehicle you choose to switch to plays a crucial role. Transitioning from a sports car to a family sedan could lead to a reduction in insurance rates. Conversely, replacing a reliable minivan with a luxury convertible might result in higher insurance costs. This highlights the importance of obtaining insurance quotes before finalizing a car purchase. By doing so, you can accurately gauge the expenses involved and determine any additional amount you may need to pay compared to what you were previously paying to insure your old vehicle

And, if you didn’t have Collision and Comprehensive coverage on your previous car, you might experience a significant increase in your automobile insurance premium when switching to a more valuable vehicle, as including these coverages becomes essential for protecting the higher-value asset.

How Much Does a New Car Raise Insurance Premiums?

It’s important to bear in mind that your liability coverage is likely to remain the same for both cars. Moreover, if you have a safer automobile, the liability coverage portion of your policy might become more affordable. However, it’s worth noting that premiums for Collision and Comprehensive coverage could increase. This is because in the event of your new vehicle being totaled or stolen, the insurer would have to pay a higher amount due to the increased valuation of the new car.

Nonetheless, it’s essential to acknowledge that Collision and Comprehensive coverage can be costly. The actual difference in insurance premiums will be influenced by the factors discussed earlier, including the make, model, value, engine size, and type of both your old and new cars. If there are significant disparities between the two vehicles, the difference in premiums is likely to be more pronounced as well.