When buying a new car, an important financial aspect you should consider is auto insurance. Your insurance coverage can vary depending on what kind of vehicle you buy. Insurance companies package different types of cars into categories to calculate quotes and determine how much to charge for coverage.
Certain factors concerning your vehicle can greatly impact your insurance cost. Here are a few questions you should keep in mind before buying a new car:
How Much Newer Is Your New Car?
The price of an insurance policy is based on a car’s value, which, in turn, depends a lot on how old the car is. For typical mainstream vehicles, the relationship between age and value is also relatively clear: As a car or truck gets older, its value decreases. New cars depreciate in value by about 20% in year one of use. Newer cars with a higher price tag will result in higher insurance rates.
Does Your New Car Have More Technology?
If you’re going from a car that is several years old to one that’s brand new, you can look forward to an increase in technology. Today, even mainstream cars come packed with high-tech features like massive touchscreens, mobile Wi-Fi, LED lighting, and cutting-edge safety systems. These can be expensive to replace or repair. Insurance companies consider this when they set their rates. Thus, buying a newer car with more high-tech features can lead to higher insurance costs.
Did You Upgrade Elsewhere?
Insurance companies will typically charge higher rates if you opted for upgrades or a better trim. For instance, if your new car comes with upgrades like updated shock absorbers, high-quality speakers, heated seats, etc., you can expect to pay more for auto insurance.
Is Your New Vehicle Likely to Be Targeted by Thieves?
Besides considering the risk of an accident, insurance companies also consider the risk of any damage caused by theft or other such intentional actions. Certain cars are much more prone to being stolen than others. A study reported that the highest claim frequencies were for luxury flagship vehicles. These vehicles will cost more to insure.
