The ultimate guide to used car insurance: What you need to know

Learn everything you need to know about buying and insuring a used car. How to find the best insurance rates and how to choose the right coverage with you.

Used car insurance: Smart way to save costs

Utilizing used car insurance is a smart way to save costs and protect your assets. This article will help you gain a better understanding of the benefits and mechanics of auto insurance for used cars, providing essential information on selecting, saving, and optimizing insurance costs for your beloved vehicle. Let’s explore the proper use of auto insurance to ensure the safety of your investment and your budget.

How much does used car insurance cost?

The cost of used car insurance depends on many factors, such as the type, age, and condition of the car, your driving record, your location, and the level of coverage you choose.

According to ValuePenguin, the average cost of full coverage car insurance for a 10-year-old car was $1,614 per year in 2021, which is only 3% cheaper than the average cost of full coverage for a new car. However, the average cost of minimum coverage car insurance for a 10-year-old car was $441 per year, which is 55% cheaper than the average cost of minimum coverage for a new car.

Why more people choose older cars

The reason why older cars are not necessarily cheaper to insure is that the age of the car is not the only factor that affects the insurance rates. Other factors, such as the safety features, repair costs, theft risk, and crash test ratings of the car, also play a role.

For example, a newer car may have more advanced safety features, such as airbags, anti-lock brakes, and blind spot detection, that can lower the risk of accidents and injuries, and therefore lower the insurance rates. On the other hand, an older car may have higher repair costs, higher theft risk, or lower crash test ratings, which can increase insurance rates.

Another reason why older cars are cheaper to insure is that many owners of older cars choose to drop comprehensive and collision coverage from their policies, and only keep the liability coverage that is required by law. Comprehensive and collision coverage are optional types of coverage that pay for the damage to your own car in case of theft, vandalism, fire, flood, hail, or collision with another object. Liability coverage, on the other hand, is mandatory in most states and pays for the damage you cause to other people or their property in case of an accident.

What things make the value of your car

The decision to drop comprehensive and collision coverage depends on the value of your car and the amount of deductible you are willing to pay. The deductible is the amount of money you have to pay out of pocket before the insurance company pays for the claim. For example, if you have a $500 deductible and your car is damaged by $2,000, you have to pay $500 and the insurance company will pay $1,500. The higher the deductible, the lower the premium, but the more you have to pay in case of a claim.

A general rule of thumb is that if the annual cost of comprehensive and collision coverage is more than 10% of the value of your car, you may consider dropping them. For example, if your car is worth $5,000 and the annual cost of comprehensive and collision coverage is $600, you may be better off saving that money and paying for the repairs yourself in case of an accident. However, this also means that if your car is totaled or stolen, you will not receive any compensation from the insurance company and you will have to buy a new car with your own money.

Used car insurance - a profitable insurance

Why are older cars not always cheaper to insure?

As we mentioned before, the age of the car is not the only factor that affects the insurance rates. Some older cars may be more expensive to insure than some newer cars, depending on the model, make, and features of the car. Here are some examples of why some older cars may be more expensive to insure than some newer cars:

Sports cars

Sports cars are usually more expensive to insure than regular cars, regardless of their age, because they have higher performance, higher speed, and higher risk of accidents. For example, according to Insure.com, the most expensive used car to insure in 2021 was the 2015 Maserati Ghibli GranSport, with an annual premium of $4,191, while the cheapest used car to insure was the 2020 Chrysler Voyager L, with an annual premium of $1,267.

Luxury cars

Luxury cars are usually more expensive to insure than regular cars, regardless of their age, because they have higher value, higher repair costs, and higher theft risk. For example, according to Insure.com, the second most expensive used car to insure in 2021 was the 2019 Tesla Model S Performance, with an annual premium of $4,025, while the second cheapest used car to insure was the 2019 Fiat 500X Trekking, with an annual premium of $1,284.

Used car insurance - a profitable insurance for a luxury car

Classic cars

Classic cars are usually more expensive to insure than regular cars, regardless of their age, because they have higher value, higher repair costs, and higher theft risk. The cars are cars that are at least 25 years old and have historical or collectible value. For example, according to Hagerty, a leading provider of classic car insurance, the average annual premium for a 1965 Ford Mustang is $276, while the average annual premium for a 2020 Ford Mustang is $1,134.

How to find the best insurance for used cars?

The best insurance for used cars depends on your personal needs, preferences, and budget. However, there are some general tips that can help you find the best insurance for used cars:

Shop around

The most important tip is to shop around and compare quotes from different insurance companies. Different insurance companies may have different rates, discounts, and coverage options for the same car and driver. You can use online tools, such as ValuePenguin1, Insure.com, or NerdWallet, to compare quotes from multiple insurance companies and find the best deal for your used car.

Choose the right coverage

The second tip is to choose the right coverage for your used car. As we explained before, you may consider dropping comprehensive and collision coverage if your car is old and has low value, and only keep the liability coverage that is required by law. However, you should also consider your financial situation and your risk tolerance.

If you cannot afford to pay for the repairs or replacement of your car in case of an accident, you may want to keep comprehensive and collision coverage, even if they cost more. You should also check the minimum liability coverage requirements in your state and make sure you have enough coverage to pay for the damage you may cause to others in case of an accident. You may also want to add some optional coverage, such as uninsured/underinsured motorist coverage, medical payments coverage, or roadside assistance coverage, depending on your needs and preferences.

Look for discounts

The third tip is to look for discounts that can lower your insurance rates. Many insurance companies offer discounts for various reasons, such as having a good driving record, having a good credit score, having multiple policies with the same company, having a low mileage, having a safe car, having anti-theft devices, taking a defensive driving course, or being a student, a senior, or a member of certain groups or organizations. You should ask your insurance agent or company about the discounts they offer and see if you qualify for any of them.

How to get insurance for a used car?

Securing insurance for a used car follows a similar process to insuring a new one. Here are the necessary steps:

How to get insurance for a used car?

Obtain quotes

Before committing to purchasing a used car, it’s crucial to obtain insurance quotes from various providers to assess the cost of insuring the vehicle. Utilize the car’s Vehicle Identification Number (VIN) to obtain more accurate quotes. Additionally, compare these quotes against the car’s value to determine if the investment in both the vehicle and insurance is worthwhile.

Complete the car purchase

Once you’ve made the decision to purchase the used car, you’ll need to complete the necessary paperwork. This includes transferring the vehicle’s title and registration into your name. It’s also important to be prepared to cover sales tax and any associated fees linked to the car’s purchase.

Secure insurance

Following the acquisition of the car, it’s time to obtain insurance coverage for it. You should reach out to the insurance company that provided the most favorable quote. Provide them with comprehensive details regarding the car and the primary driver. Additionally, make choices regarding coverage levels, deductible amounts, and your preferred payment method for the policy. You’ll receive a proof of insurance card or document that you must keep within your car at all times.

Cancel previous insurance

If you’re replacing your old vehicle with the new one, it’s essential to cancel the insurance policy for the previous car. Get in touch with your former insurance provider and inform them about the sale or trade-in of your old vehicle, indicating your intent to cancel the policy. Be sure to provide specific details, including the date and time of the sale or trade-in, as well as the name and address of the buyer or dealer. Depending on the circumstances, you may be eligible for a refund or a credit for any unused portion of your premium.

Conclusion

Buying and insuring a used car can be a great way to save money and get a reliable vehicle. However, you need to do your research and compare quotes from different insurance companies to find the best insurance for your used car. You also need to choose the right coverage for your used car and look for discounts that can lower your insurance rates. By following these tips, you can get the best insurance for your used.

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