Thinking about buying an expensive car? Consider insurance rates
Posted on Wednesday, March 1, 2017 at 10:55:38 AM
There are a number of factors that affect how much you pay to insure a motor vehicle. However, with insurers sometimes being less than transparent about what information they factor into their calculations, it can sometimes be difficult to know how different elements can drive the cost of insurance up or down.
Outside of your driving record, one of the biggest factors that consistently impacts auto insurance rates is the overall value of your car. Simply put, the more expensive your car is, the more pricy it will be to insure. Insurance providers are generally looking for ways to mitigate the costs associated with paying out a policy on an expensive car. There are a few reasons why this is the case:
- It's worth more. If an expensive car is damaged or stolen, the replacement value - thus the burden on the insurer - is higher
- It may attract thieves. A fancy new sports car with all the latest gadgetry and features is a more attractive target for thieves than older, more basic model cars.
- The cost of repair is higher. A unique, high-value car often requires custom parts from the manufacturer. If your car is damaged, repair costs are often higher. This may even factor in to whether or not an accident "totals" a car, since if the replacement parts are rare or prohibitively expensive, your insurance may be more inclined to call an accident a loss.
The good news about the way that car value impacts insurance rates is that, as the value of your vehicle depreciates, your insurance rates are likely to go down as well - assuming you've proven a safe driver. This can however, become a bit complicated if you need to use your insurance or have some form of "replacement" policy.
An example might be if your purchased a car for $30,000 and over the time you've owned it, the value depreciates to $20,000. If you get in an accident that totals your car, your insurance company - if you've opted for a replacement policy - pay out the current value of the car: $20,000. This means that, if you wanted to replace the car with a newer model, you might have to make up the extra value. In this respect, it may make sense to contact your insurance provider regularly and renegotiate as your car ages.
Keep all this in mind if you are on the hunt for a new car - it may ultimately save you a significant amount of money in the long run to opt for something a bit less expensive for your vehicle. If you are considering purchasing a car soon, regardless of value, it may help to talk to a local lender about financing and loan options.