Tips for Buying a New Car That Will Keep Insurance Down
Older cars are cheaper than new ones to insure for the simple reason that older vehicles often require less car insurance coverage.
But what if you want a new car with almost zero mileage that you can plan on having for years without any major repairs or maintenance needed? Or you want the newest model that has the latest technology and safety features?
Is a new car smell worth the monthly payment on a new car loan, let alone the high auto insurance premiums that many new car owners pay?
There’s more to setting car insurance rates than whether a car is used or new. But you don’t have to buy a used car to keep the cost of car insurance down. We review some of the best ways to buy a new car while still keeping insurance rates relatively low.
Factors you can’t change
First, it’s worth knowing some of the factors that go into determining car insurance rates that you can’t change much, if at all. They include your:
- Age
- Address
- Gender
- Marital status
- Driving record
- Claims history
Factors you can change
Your car’s cost is a major factor in the cost to insure it, according to the Insurance Information Institute or III. Other variables involved in owning a new car include the likelihood of theft, repair costs, engine size, and overall safety record of the car.
Along with how safe a particular vehicle is to drive and how well it protects occupants, insurers also look at how much potential damage it can inflict on another car.
All of these are under your control when you choose a new car to buy. The biggest factors that we’ll review below are:
- Vehicle you choose
- New vs old
- Insurance coverage
- Deductible
- Vehicle usage
- Loan length
- Buying too much car
- Safety rating and fewer claims
- Car with a high rate of being stolen
- Vehicle size
The vehicle you choose
If you’ve got your mindset on buying a large luxury car or a large sports car, then chances are your insurance costs will be high. They’re expensive to repair and have some of the highest insurance losses, according to 2017-19 data from the Insurance Institute for Highway Safety, Highway Loss Data Institute.
The agency collects data on claims payments, crash data, safety ratings, driving habits, and other things that affect car insurance rates. It also looks at the frequency of car insurance claims and payouts for car parts or damages on different cars.
The Rolls-Royce Dawn convertible, a large luxury car that has an MSRP of $356,500 for the 2020 model, has the highest insurance losses in its size and class, according to the IIHS. The Dawn has the highest comprehensive losses, at 2,055% higher than the average car, and 448% higher collision losses. All while getting 14 miles per gallon.
The Ford F-250 4WD pickup truck had the lowest comprehensive losses, at 63% less than the average car, and its collision losses were 50% lower than the average car.
Sports cars also have higher insurance rates, in part because having more horsepower increases the liability risks. More expensive cars also cost more to replace.
New vs used
New cars cost $11,000 more, on average than used cars, according to data from Experian. Just by itself, a new car’s higher cost can make replacing it if it’s totaled a lot higher for a car insurance company.
The average new loan costs $29,880 for 68 months, totaling almost $34,000 during the loan. The average loan amount on a used car is $19,100 for 63 months, totaling about $23,000 in the cost of the loan. That’s a difference of $11,000.
The least expensive cars are usually used cars. Buying a used car should generally save you money on insurance, though you should compare models with your car insurer to see if the new technology of a new car will save you money over an older car that doesn’t have the same features.
Features such as lane assistance and back-up braking for cross-traffic can add to a new car’s price and won’t make it the cheapest car available, but they can prevent accidents, and thus, insurance claims. An older car without such safety features could be more expensive to insure.
Insurance coverage
Insurers may require new cars to have a minimum amount of coverage, at least until the car is paid off and you own it. If you have a car loan, the lender will likely require every type of coverage. The lender or your insurer may also require a deductible of $500 or lower.
Liability insurance is required by law in almost every state. It protects you if you injure someone or damage their property with your car.
Comprehensive and collision coverage cover damage to a car, whether from a car accident or another way. Comprehensive coverage also includes vehicle theft and damage from fire. These types of auto insurance coverage are optional unless you lease or bought your car with a car loan. If you own your car outright, meaning you don’t have a loan or lease, then you should be able to drop them.
These can also be dropped for older cars, such as if a car’s low value doesn’t make it worth repairing, or if a totaled car is worth less than what the insurer would pay.
Not having collision or comprehensive insurance means you’ll have to pay out of your own pocket for any repairs. The lower insurance premiums could be saved for future repairs, or to buy another car if you can’t afford to fix a damaged older car.
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Deductible
A deductible is what you pay before collecting an insurance claim. If your covered car repair costs $3,000 and you have a $500 deductible, then the insurer will pay $2,500 of the repair and you pay the remaining $500.
A higher deductible reduces your insurance company’s cost if you file a claim, so it will charge you a lower annual premium on the policy in exchange for a higher deductible.
Deductibles range from nothing to around $2,500. Some insurers automatically lower deductibles for not having accidents every year.
If you have an emergency fund to pay a big deductible, or you have a good driving record, then setting a high deductible can be a smart way to lower your auto insurance. You won’t have full coverage, but you’ll save money and won’t have to cover repair costs if you don’t get in an accident.
Vehicle usage
The more miles you put on a car, the higher the annual premium will be. This is simple math. Driving more miles increases the chance of accidents. Driving your car for work, or commuting long distances, will push insurance rates up more than driving occasionally for “pleasure use.”
You may be inclined to drive a new car more than an older one, simply because it’s fun to drive and reliable. You’ve got a $400 monthly payment on the loan, why not drive it often? Check with your insurance company how much your rate will go up if you drive more than you drive now.
You can also put a lot of miles on a used car, though insurance rates may not go up as much as they would on a new car that you’re driving a lot.
Loan length
A long car loan can mean paying for comprehensive and collision car insurance much longer than you need to. Lenders require these types of insurance because your car is still an asset that they own, at least partly, and they want that asset to be fully covered by insurance in case something happens to it.
A third of new car loans are longer than six years, according to an NPR story. A seven-year loan has lower monthly payments than a five-year loan, but a longer loan also means paying more in interest. Longer loans also often have higher interest rates than shorter loans.
Most loans are front-loaded, meaning you’re paying more in interest than principal in the first years of the loan. That gives you less equity in the car.
A car loan for 84 months, which is seven years, can leave you upside down in the loan. That means you owe more than what the car is worth since most cars depreciate in value as they age. That could cause you to stop paying a car loan if your car is totaled, though you’d still be liable for the loan balance.
Buying too much car
When shopping for a new car, it can be tempting to get one with all of the options. Leather seats, an upgraded stereo system, extra safety features and other add-ons cannot only add to the cost of a car but can raise your insurance costs.
Those extras are insured, as is the higher cost of the car compared to the lower cost of a car with fewer extras or only the base model of the type of car you want.
Some new car safety features, however, can help you save money by helping prevent accidents. Ask your car insurance company if the features help make up for the annual premium on insuring a new car.
Safety rating and fewer claims
Some cars are safer than others, meaning they’re less likely to get into accidents that can lead to high repair bills. Other cars may be cheaper to repair when they do get into accidents.
Among midsize sports cars, the Nissan GT-R, two-door, 4WD has 329% higher collision losses than the average car in that class. Sports cars are generally expensive to insure. A cheaper option is a two-door, 4WD Jeep Wrangler, a midsize SUV that has 57% fewer collision losses than similar vehicles.
Some cars have higher losses in comprehensive coverage than others. Comprehensive insurance helps pay to replace or repair your vehicle if it’s stolen or damaged in an accident that’s not a collision. This can include damage from fire, vandalism, or falling objects like a tree or hail.
Expensive luxury cars often have high comprehensive losses. The best vehicle to get with low comprehensive losses is the Ford F-250. The Chevrolet Corvette convertible is the best midsize sports car in this area, with 52% fewer comprehensive losses than similar cars. Among small pickups, the Nissan Frontier crew cab rates the best, with 48% fewer losses.
Stolen often
Comprehensive insurance also covers theft. Some cars are more popular among thieves than others, which can make them more expensive to insure.
Ford pickup trucks and Honda Civics are regularly among the most stolen cars in America. The most stolen vehicles in 2019, which is the latest data available, according to the National Insurance Crime Bureau’s “Hot Wheels” report, are:
| Vehicle | Model Year | Annual Reported Thefts |
|---|---|---|
| Ford Pickup (full size) | 2006 | 38,938 |
| Honda Civic | 2000 | 33,220 |
| Chevrolet Pickup (full size) | 2004 | 32,583 |
| Honda Accord | 1997 | 30,745 |
| Toyota Camry | 2007 | 15,656 |
| Nissan Altima | 2015 | 13,355 |
| Toyota Corolla | 2018 | 12,137 |
| Dodge Pickup (full size) | 2001 | 11,292 |
| GMC Pickup (full size) | 2018 | 11,164 |
| Honda CR-V | 2001 | 10,094 |
Vehicle size
Larger and heavier vehicles are safer than lighter and smaller ones, according to the III. Small cars have twice as many occupant deaths as large ones, it says.
Still, some big cars are prone to rollovers and other issues, so review all of the factors when choosing a big car. A mid-size sedan with a high safety rating may be the safest car you can choose.
Liability coverage considerations
As we mentioned earlier, how much a car protects its occupants can cause insurers to adjust rates. But they also look at the damage the car can inflict on another car, which may lead to higher liability insurance rates.
Liability coverage helps pay for the costs of another driver’s property and medical injuries if you’re “at fault” in an accident. Your insurer will pay for property damage and injuries up to the covered limit.
Some design characteristics can influence injury risk on the road, the III points out. Some small utility vehicles and pickups are prone to rolling over. “High performance” cars typically have higher-than-average death rates, the group says, because drivers are tempted to speed.
Safety features
It bears repeating that a vehicle’s safety record and safety features can make a new car worth the hefty price. The life of anyone in the car is at stake when you drive, along with other drivers and pedestrians, and that cost pales to higher insurance rates.
The Insurance Institute for Highway Safety, or IIHS, rates vehicles for safety by vehicle type. Some can lead to lower auto insurance rates. Here are some of the vehicles that the IIHS listed as its top safety picks for 2020-21, listed by vehicle type:
Small cars
- Honda Civic 4-door hatchback
- Honda Civic 4-door sedan
- Honda Insight 4-door sedan
- Mazda 3 4-door hatchback
- Mazda 3 4-door sedan
- Nissan Sentra 4-door sedan
Midsize cars
- Honda Accord 4-door sedan
- Mazda 6 4-door sedan
- Subaru Legacy 4-door sedan
- Toyota Camry 4-door sedan
Midsize luxury cars
- Audi A4 4-door sedan
- Audi A5 Sportback 4-door hatchback
- BMW 3 series 4-door sedan
- Lexus ES 350 4-door sedan
Large luxury cars
- Audi A6 4-door sedan
- Audi A6 allroad 4-door wagon
- Genesis G70 4-door sedan
- Genesis G90 4-door sedan
Small SUVs
- Chevrolet Equinox 4-door SUV
- Ford Escape 4-door SUV
- Hyundai Kona 4-door SUV
- Lexus UX 4-door SUV
- Lincoln Corsair 4-door SUV
- Mazda CX-3 4-door SUV
Midsize SUVs
- Ford Edge 4-door SUV
- Ford Explorer 4-door SUV
- Hyundai Palisade 4-door SUV
- Kia Telluride 4-door SUV
- Mazda CX-9 4-door SUV
- Volkswagen Tiguan 4-door SUV
Safety features to look for
Walk into any new car dealer, and a salesperson will likely be happy to show you the safety features its cars offer. Some you may want more than others, and some may be optional and only come with higher trim-level vehicles.
Here are some safety features that the III recommends looking for:
Crashworthiness
Are the car front, sides, roof and head restraints and seats designed to reduce the risk of death or serious injury from a crash?
The IIHS provides ratings for crashworthiness and crash avoidance and mitigation features, and has an online tool to look up a car to see its safety rating.
Vehicle structural design
Known as the safety cage, the areas where occupants sit should have a strong structural design, the III says. The front and rear ends of the vehicle should be designed to buckle and bend in a crash to absorb the force of the crash and keep damage away from the safety cage.
Crash avoidance technologies
The NHTSA says that 94% of fatal crashes are because a human-made an error or a poor choice. New technologies can help by sensing what’s going on around the car and either act for you or send an alert. Such options include:
- Forward collision warning
- Automatic emergency braking
- Pedestrian automatic emergency braking
- Adaptive lighting
- Lane departure warning
- Lane-keeping support
- Backup camera
- Blindspot detection
- 911 notification
Common features
Some safety features have been around for years, if not decades, though they can be improved annually. These include:
- Restraint systems such as lap and shoulder belt crash tensioners.
- Airbags with a “comfortably distanced” steering column so the driver isn’t sitting too close to a deploying airbag. Choose a car that you can reach the pedals comfortably without sitting too close to the steering wheel, and has a telescoping steering column.
- Side airbags
- Head restraints that can be locked in place.
- Anti-lock brakes
- Daytime running lights
Pros and cons
Pros
The best side to buying a new car, of course, is that you own something new and don’t have to even think about what a previous owner did with it. Did they drive it too hard and hurt the engine in ways that could affect you months or years later? That isn’t a worry with a new car.
A new car can also have the latest safety features, which can lower its insurance costs when compared to a new car without them.
By using the tips we’ve suggested, you should be able to find a new car that fits your needs and still has lower insurance costs than you might find with another car.
Also remember that you can change your driving habits, such as not speeding, to reduce your chances of getting in an accident. Some insurance companies give automatic discounts on annual premiums for not having accidents for a year.
Cons
A big downside to buying a new car is that it’s almost always more expensive to insure than a used car. This is for the basic reason that they cost more than older cars, and thus cost more for the insurer to replace if they’re totaled or stolen.
Car payments also are a low point of buying a new car. Not just because you’re making monthly payments, but because lenders will require full insurance coverage for as long as you’re making payments. Once you’ve paid the car off in full, then you can choose if comprehensive and collision coverage are necessary and worth paying for.
The bottom line
One of the most important things you can do to find a new car with the lowest insurance rates possible is to compare insurance costs before you buy a car. Doing all of this work after you buy won’t do you much good. Compare rates with at least three insurance companies, or use an auto insurance comparison shopping website such as Gabi to check a few insurance quotes.
Auto insurance premiums are based on many other factors, some of which you can’t change. But some you can, including picking a new car with a low risk of theft, a great overall safety record, and one that isn’t too expensive.
From there you should be able to find a new car that’s exactly what you want to drive, and one that won’t drain your bank account to insure it.
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