Buying a new car is exciting. Whether it’s your first car, or you’re trading in an old one, there’s something exhilarating about getting behind the wheel of a new vehicle and calling it your own. But before you sign the paperwork, make sure you’re taking all factors into consideration – including insurance.
Buying a Car With Insurance in Mind
The cost of a car is a significant factor when buying a vehicle. In fact, it’s arguably the most significant part of the process. Most buyers begin by identifying a maximum amount they’re wiling to spend and then work on finding a vehicle that falls within these parameters.
The irony of only thinking about the purchase price of a vehicle is that this is just one cost-related factor. You also need to be thinking about the cost of ownership – which includes things like fuel efficiency, maintenance costs, and insurance rates.
If one vehicle costs you $20 more per month in insurance, that’s an additional $1,440 coming out of your pocket over a six-year period of ownership. If another vehicle costs $50 more per month, you’re going to spend an extra $3,600 over that same period.
Work with a dealer who will give you the time and space you need to figure out the financials well before signing the dotted line. While some dealers will try to pressure you into making a purchase decision before you can calculate the true cost of ownership, others will help you figure it out. Bill Currie Ford in Tampa, Florida is a good example of a dealer that works with customers to help them fully understand every detail prior to purchase. They’re committed to generating long-term clients, rather than quick sales.
Whether you’re working with Bill Currie Ford or another dealer across the country, you need to understand which vehicle-related factors make insurance rates go up and down, prior to purchasing. Here are a few specific things to think about:
- Used vs. New
Purchasing a used car versus a new car can have an effect on insurance prices, but it isn’t always the one buyers expect. While used vehicles do tend to be cheaper – something that can lower rates – they often lack in other areas. Newer models tend to have more advanced safety features, which lowers insurance prices. Keep this in mind.
- Price Point
Generally speaking, your insurance rate will be directly tied to the cost of the vehicle. This is because the insurance company is on the hook for the car’s market value if it is stolen or totaled. Because a $40,000 car costs more to replace than a $20,000 car, the insurance on the former will have a higher monthly premium cost than the latter.
Insurance companies have a lot of information on different car makes and models. They collect important data on crashes, safety, and reliability. Thus, they know which cars are safe and which ones pose significant risks to drivers.
Fewer injuries (as it relates to a specific vehicle) mean fewer payouts. The result is lower insurance. More accident-related injuries mean greater payouts. This obviously results in higher insurance.
- Gap Coverage
“New cars start to depreciate in value as soon as you drive them off the lot. The problem is that if your new car is totaled, insurance will pay for the value of the car at the time of the accident — not what you owe on your car loan,” insurance expert Amy Danise explains. “This could leave you underwater, meaning you don’t have enough money to pay off the loan balance on the totaled car.”
In order to ensure you don’t find yourself in a situation like this, you may want to consider purchasing gap coverage. The cost of gap coverage will depend on the cost of the car and how fast it depreciates.
Be Smart When Buying a Car
It’s easy to get emotional when buying a car. You fall in love with a specific interior color or navigation feature and suddenly you’re hooked. But in order to make a smart purchase decision, you need to take emotions out of the equation and instead focus on the financials – insurance included. In doing so, you’ll make a cost-effective selection that’s easy on your wallet for years to come.
Author: Oliver Curtis
Hi there. I’m Oliver. I’m just a young boy from the outskirts of… Okay, that’s a lie, I’m not a young boy anymore, although I certainly feel that way at heart.