Auto insurance generally costs less for a used car than for a new car, but this is not always the case. Additionally, if you’re driving a used car, you may be able to withdraw some types of car insurance that are recommended or even required by many new car owners, such as collision insurance.
Find out how much used car insurance costs and how to develop the right strategy for getting the cheapest insurance for your situation.
How to buy used car insurance
Before you buy used car insurance, there are a few things you should know. Each state sets minimum coverage requirements and you must purchase insurance with at least this amount of coverage for every vehicle you own.
However, many choose higher compensation amounts. If you’re unsure if it’s a good idea for you, chat with your financial advisor or independent insurance agent to walk you through these decisions.
If you’ve ever been a drunk driver or are having trouble getting coverage approved, such as trying to insure a restored Shelby Mustang or another classic car, talk to an independent insurance agent is particularly valuable.
You can also purchase a policy by contacting your insurance company directly. If you are looking for the best deal, contact multiple insurers and compare quotes. You can also use reputable insurance comparison sites such as The Zebra or QuoteWizard.
If you do not have car insurance yet, you should do so as soon as possible. If you already have auto insurance, you may be covered during the grace period.
The exact length of the grace period depends on your insurance company and where you live. Many insurance companies allow him a 14-day grace period during which the new vehicle will be insured.
If you’re looking to buy a new car (for yourself), we recommend that you check our policies to fully understand the length of your grace period. Then contact your insurance company or agent to add the used vehicle to your policy as soon as possible.
If you buy a used car from a dealer, you may be required to show proof of insurance before taking ownership of the car. If you buy a car from a private seller and you don’t already have car insurance, you must get insurance before you can drive the car.
How much does used car insurance cost?
A 2022 study by The Zebra found that the average monthly premium for a pre-owned 2013 Honda Accord was $123 across eight popular auto insurance companies. The average monthly premium for the same car is $141 for the new version in 2019, which is $18 more per month.
Generally speaking, used cars are cheaper to insure than new cars. However, many factors affect the cost of auto insurance, so it’s not uncommon for newer cars to be cheaper to insure than older used cars.
Factors that affect used car insurance premiums include:
In addition, every auto insurance company has a different formula for how premiums are calculated. Given the right circumstances, it’s actually pretty easy for a new car to have lower insurance premiums than a used one.
Type of insurance
Depending on your state, you may be required to have certain types of auto insurance and coverage amounts. Most states require personal injury and property damage liability insurance, for example. But there are other types of coverage as well.
Common car insurance coverage includes:
Personal Injury Liability: This helps pay for medical bills and lost income for other parties if you are involved in an accident at fault. We may also pay attorneys’ fees to defend you in court, if necessary.
Property Damage Liability: This helps pay to repair the damage you caused to someone else’s property, such as rear-ending a car or doing someone’s expensive curb landscaping.
Drivers who are not fully insured: This will help protect you if you are involved in a collision and the other party does not have sufficient compensation to pay for all the damage you are owed.
Uninsured driver: This goes a step further and helps cover you if you are hit by someone who has no car insurance at all. This is unfortunately common.
Personal injury protection: Mandated in some states, the program pays for medical bills, lost income, funeral costs, and even, if necessary, hiring a domestic helper for you and others in your vehicle. Help pay for expenses. You will be covered whether or not you caused the accident.
collision: This helps in repairing your vehicle if it gets involved in a collision with another car or an object such as a light pole (wildlife collisions, however, are not covered). Collision coverage covers you whether you caused an accident or not.
comprehensive: This can help you repair or replace your car if it hits a wild animal or has a non-collision accident such as a weather-related event, riot, or natural disaster. An insurance policy with collision insurance and comprehensive insurance is sometimes called a full coverage insurance policy.
Gap coverage: Gap Insurance pays the difference between what the insurance pays and what the rest of the loan would have been if the car had been financed and fully added up.
Rideshare Coverage: If you’re driving with a rideshare app, insurance usually doesn’t cover it. Also, the app itself may not provide sufficient compensation. Many insurance companies now offer separate rideshare policies to cover you.
Non-Owner Coverage: This helps cover you when you’re driving someone else’s car if you don’t actually own the car yourself.
Please note that you will only be compensated up to the limit of your auto insurance policy. For example, if you purchase state minimum insurance covering $20,000 for personal injury and cause an accident with damage worth $100,000, you will have to pay the remaining $80,000 (minus the deductible).
How to get cheap used car insurance
Considering car insurance is a big part of the total cost of ownership of a car, it makes sense to try to save money. Luckily, there are many proven ways to do this. Here are some things people commonly do:
safe drive. The biggest thing you can do to save money is drive safely. By doing so, not only can you avoid paying deductibles at all, but you can also avoid the higher rates normally associated with tickets, lawsuits, and accidents.
to shop. Just getting insurance quotes from a few different companies doesn’t mean you’re really getting the best deal. Instead, set aside time to get quotes from as many companies as possible.
Improve your credit score. It’s prohibited in Massachusetts, Hawaii, and California, but many insurance companies charge more if you have a bad credit.
Consider insurance when purchasing a car. Different cars have different prices. If you want to make sure you’re not buying an expensive car, you can get quotes from the same insurance company and compare premiums.
Choose the highest deductible you can afford. The higher the deductible, the lower the car insurance premium. However, you want to make sure you can afford the deductible amount if necessary, so keep that in mind as well.
Consider removing conflicts and inclusive coverage. Lenders typically require collision and comprehensive insurance when financing a car. If your car is paid off, you can opt out of these coverages if it makes financial sense for you.
Common insurance discount
Most auto insurance companies offer various discount options to further reduce costs.
Here are some popular auto insurance discounts.
I have multiple auto insurance policies with the same company
be a safe driver
be a good student
Installation of anti-theft device
complete a defensive driving course
I’m a college student away from home and don’t have a car
Installing a device or using an app that records your driving habits
Bundling other types of insurance, such as life insurance and homeowners insurance
How to choose an insurance company
With so many car insurance companies out there, it can be difficult to choose. Here are some things to keep in mind that may help guide you to the right company.
What rates can it offer you? Lowest price is the biggest factor for many people, and the only way to know it is to get a quote.
What discounts are available? Some auto insurance companies offer more discounts than others. Of course, this factor only changes the cost, but if you find plenty of potential discounts that you might qualify for, it’s a good bet that it’s on the cheaper side.
Does your company offer an app? Many insurance companies offer apps that you can use to present your insurance card, report claims, and manage your account. If you want to do something on the go, try to avoid companies that don’t offer apps.
Want to work with an agent? Many insurance companies have independent agents in communities across the country. If you prefer to work one-on-one with someone rather than doing everything online, choose one of these companies.
What is your reputation for customer service? Check out the JD Power Rankings to see if the company is satisfying customers in your area.
What is the company’s financial strength? Auto insurance companies often check your credit report. You can do the same by looking at the AM Best ratings. This will let you know your chances of receiving money should you ever need to submit a claim.
Are used cars cheaper to insure?
Auto insurance is often, but not always, cheaper for a used car. It depends on a number of factors, including the vehicle’s safety features, the cost and difficulty of the repair, and where you live.
Where is car insurance cheaper?
Cheaper insurance companies depend on your situation. The insurance company will determine the rate based on your age, gender, vehicle type, model year, etc. The best way to find cheap coverage is to get multiple quotes.
What is the most expensive car insurance type?
Liability insurance is the most expensive type of auto insurance. According to NAIC data, in 2019 the average annual cost for different types of insurance was $650 for liability insurance, $381 for collision insurance, and $172 for comprehensive insurance.
What is the deductible?
A deductible is the amount you pay before your insurance applies. For example, if you have a $500 deductible and you have an accident that causes $1,000 in damage, you will pay $500 and your insurance will pay $500.
Auto insurance prices can be very difficult to keep track of because they vary so much from company to company. The only way to know if you’re getting the best car insurance rates is to look at as many companies as possible. We monitor the best auto insurance companies to give you a head start.
This article How To Get The Best Deal On Used Car Insurance originally appeared on FinanceBuzz.