Have you ever wondered why car insurance companies charge different people different rates? How come some people get to pay less for the same auto insurance policies while some people pay a fortune?
Not just people, different cars are charged less for car insurance policies. Expensive luxury cars are more expensive to insure than small, daily commuting cars. But is it true for all cars? A question that pops up often is are used cars cheaper to insure than new cars?
Let’s take a look at whether you will be charged less if you insure a used car or not, and why. Plus, we’ll also mention some other ways you can save money on car insurance policies. Let’s get started.
The difference in Car Insurance Rates
Why do auto insurance companies charge some people more while some less? This difference in rates comes from the risk management and statistics car insurance companies use to prevent losses. Let us elaborate.
The higher the risk of a car accident, the more insurance companies charge to offset the risk of an auto insurance claim. If a person is more likely to get in a car accident, it is better to charge them more first.
This risk is calculated using different factors such as driving record, past insurance claims, age, gender, etc. These are the best ways companies can assess risks. But there are some other ways to find the possible cost of repairs; the make and model of the car.
Are Used Cars Cheaper to Insure?
No matter which car insurance company you choose, used cars are always cheaper to insure than brand-new cars. But why? This is because used cars have lost almost all their value in depreciation and are now worth only a fraction of what they were worth.
A new car is very expensive to maintain and repair. Think about it, if a brand new car got in an accident, the cost of repairing it will be way more than repairing an old, used car. The spare parts are more expensive, the labor cost is high, and since the value of the entire car is high, it is more expensive to fix. This is why new cars cost more to insure, as car insurance companies are the ones paying for them.
The same goes for totaled cars when the insurance companies have to reimburse you. If a new car gets completely damaged and unusable, the car insurance company must pay the actual cash value if the car was insured. This “actual cash value” always will be higher than the actual cash value of a used car.
So the bottom line is this; if you are looking to save money on car insurance rates and premiums, then it is better that you go for a cheap, small, used car than buy a new car. Not just low car insurance rates, but there are other things you can do to save more money. Here’s how.
Save More Money on Insurance with Used Cars
Not only you’ll have to pay less for car insurance if you get a used car, but there are other ways you can save money on insurance expenses. Let’s take a look at all of these simple yet useful ways.
While there is no way of skipping some important car insurance policies such as liability insurance, personal injury protection plan, etc. But having a used car can allow you to skip on some very expensive and optional car insurance policies.
Collision Damage Waiver
Collision damage waiver or simply collision insurance is the policy that covers the cost of repairs for all the damages to your car that may happen in a car accident. It can be claimed irrespective of whose fault the accident was.
Not just car to car accidents, but even if you drive into a wall or a pole or a tree, you can claim collision insurance. It can even be claimed if your car is damaged due to bad road conditions.
But the problem with collision insurance is that it is very expensive, as expensive as liability insurance. You cannot skip collision insurance for a new car, since the cost of minor repairs would be much higher, making a collision damage waiver necessary.
But when it comes to used cars, the expensive collision coverage can be skipped since it is very cheap to fix used cars. It is better to skip collision coverage and use the saved money to pay for the repairs yourself.
Another optional car insurance policy is comprehensive coverage, and while it is not as expensive as collision insurance, you can skip this insurance policy for used cars.
Comprehensive coverage covers the cost of repairs for damages due to natural disasters such as floods, earthquakes, projectile damage, falling trees, hurricanes, and animal damage. Not just that, it also covers the damages due to vandalism, riots, etc.
Comprehensive coverage also covers theft. In case your car is stolen, the insurance company will reimburse you by paying the actual cash value of the car. When it comes to used cars, you do not need to pay for a comprehensive policy if you can keep your car secure enough. Find more here about great car insurance policies at affordable prices.
Yes, used cars are much cheaper to insure than new cars. This is mostly because of the actual cash value of these cars. New cars are more expensive while used cars are cheap. Not only that, but the repair costs, spare part costs, etc are all higher for new cars.
So if you are planning to save some money on car insurance policies, then going for a good used car is much better than buying a new car.