Buying Used or New

When shopping for your next vehicle, beyond analyzing horse power, safety features, and cruise control, you also have to consider how the purchase will affect your insurance policy. While you may not realize it, the decision to buy a used or new vehicle will have a profound effect on the auto insurance decisions you make afterward. Consider the following:

– Lower Premiums for Used Vehicles

Used vehicles have lower values than their newer equivalents. These lower values mean that you can get away with a more affordable insurance premium, since the insurance company isn’t forced to insure the value of a brand new automobile.

– Less Difference between Value and Loan

When you drive a new car off the lot, it experiences a great decrease in value. Your insurance will cover you up to the value of the car, but your loan amount is likely to exceed this number. If your car is totaled, you must make up the difference between your auto insurance and your loan amount. A used car, however, may have a value closer to the loan amount as you drive it off the lot, thus reducing out-of-pocket exposure.

– Deductibles and Car Value

Deductibles are often used to reduce premiums because they represent the amount you are willing to self-insure should you have an insurable incident. When you buy used, your car will probably have a lower value than a new car would. That means you could choose to have lower limits for certain coverages. Since the limit represents the maximum an insurer can expect to pay for a claim, the lower your limit is the less risk they take on and the less your premium will be. With the low limit reducing your overall cost of insurance, you may be able to afford a lower deductible. Since auto insurance deductibles are per-incident rather than per-year, this can create substantial savings.

– Safety Features Equal Discounts

New cars will generally have more safety features than older cars. This could result in significant discounts from the car insurance company that used cars don’t receive.

– Attractiveness to Thieves

New cars may be more targeted for vehicle thefts than older cars. Check out the makes and models you are considering purchasing to see where they rank in terms of theft.

– Out-of-Pocket

A used car purchased, without the help of a loan, will reduce the amount of insurance that you are required to carry since you will be dealing with state minimums rather than lender requirements. That said, while it may be tempting to just get the state-required minimums, you could be exposing yourself to great financial risks by doing so.

Going shopping for a new or used vehicle is three parts exciting, one part annoying, and two parts scary. Forking over so much money on a one-shot purchase is not everyone’s idea of fun, but driving off the lot with the car of your dreams can soften the blow. It also helps when your vehicle doesn’t adversely affect your auto insurance policy options either.

When you are ready to start shopping for a new or used vehicle, give us a call at (866) 674-2537. We can meet with you before you get serious about buying in order to help you understand what kind of role insurance should play in your car-buying decisions.

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