Buying a new (or new to you) vehicle can be exciting, but sometimes the excitement can make you forget there are still insurance costs to consider. Numerous costs are associated with purchasing a vehicle, from registration, taxes and monthly payments, to maintenance and fuel. With so many costs involved, it is easy to see how insurance premiums may not be a major consideration when choosing a vehicle.


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However, for most drivers, insurance is a major expense, even if it is the “forgotten” one. The average cost of insurance now averages $1,771 per year for full coverage or $148 monthly. Minimum coverage insurance now averages $545 per year. Multiple factors influence the cost of your premiums, and one of them is the age of the vehicle insured. A vehicle’s age can affect discount opportunities, coverage costs based on the vehicle’s safety features, coverage needs and more.

What’s the difference between insuring a new car vs a used car?

When insuring a new vehicle versus a used one, there is no policy for “new” versus “used” vehicles. However, coverage requirements may differ if the vehicle is financed or leased, and you may also have additional coverage options to consider, such as gap coverage.

Various makes and models will drastically influence your car insurance premium. Some vehicles, like the Subaru Outback and Honda CR-V, are surprisingly less expensive to insure than other popular vehicles. But even if their makes and models are the same, and just the years they were manufactured are different, rates may fluctuate due to new vehicle discounts, different safety features or the cost of replacement parts.

Coverage types

If you lease or finance your vehicle, the lender will likely have requirements for coverage types, whether the vehicle is new or used. A finance company typically requires comprehensive and collision coverage, in addition to the state-mandated requirements depending on where you live. These additional coverage types pay to help repair or replace the vehicle due to an accident where you are at fault or damage was caused by something out of your control, like hail damage. If you own a vehicle outright, you are not required to add comprehensive or collision coverage to your policy.

Additionally, gap insurance may be an option for new vehicles that are financed or leased. This coverage pays the difference between the amount you owe on a vehicle versus its depreciated value determined at the time of its total loss. Sometimes this difference is worth thousands of dollars, so gap insurance keeps you from getting further upside down on your loan.

Takeaway: Coverage selections impact your premium. If your new vehicle is financed or leased, many of which are, you will probably have to carry full coverage, which is more expensive. Older vehicles owned outright are not required to carry comprehensive and collision; it’s up to the policyholder to determine if these coverage types are needed.

Coverage costs

Another factor influencing the cost of premiums is how much certain coverage types cost. Newer vehicles may have extra safety features, reducing the severity of injuries or vehicle damage. This could mean that costs of certain coverage types, like personal injury protection and collision, may be affected due to the reduced risk.

However, if parts are more expensive for a newer vehicle than a used one, collision and comprehensive coverage may be cheaper for the used car. These variables are all considered by insurance companies based on the vehicle’s VIN to help determine total insurance costs for the vehicle.

Takeaway: Vehicle characteristics, like additional safety features offered on a newer vehicle, may make certain coverage types less expensive due to reducing the risk of an accident. However, having parts more easily available or cheaper to purchase can make used vehicles cheaper to insure.

Discount options

Almost every insurance provider offers discounts and often rewards policyholders for driving vehicles with advanced safety features or new vehicles. Discounts such as anti-theft, airbags and anti-lock brakes are examples of features that could earn a safety discount. Many providers also offer a new car discount, but the discount is usually for vehicles less than three years old. Plus, keep in mind the discount may decrease slightly each year that passes, and after three years, the discount usually is no longer available. Discounts on safety features and the age of the car may be significant enough to offset the higher price of insurance for a new vehicle.

Takeaway: There are a variety of discounts offered by providers, and a newer vehicle may qualify for more discounts because of less likelihood of needing a repair.

How do I find the right car insurance?

To determine the right kind of car insurance for you, consider your needs. Not every driver needs the same type of coverage. For example, some drivers may want insurance that includes roadside assistance, while others may be more concerned about finding the cheapest car insurance policy possible.

To find the right kind of car insurance for you, you may want consider the following as you search:

  • Customer satisfaction: If customer service is important to you, there are organizations that measure customer satisfaction. J.D. Power is a trusted source in the insurance industry.
  • Financial strength: Companies with strong financial strength scores have historically been reliable for paying covered claims. Consider referring to AM Best to find a car insurance company’s financial strength.
  • Coverage options: Look for car insurance companies that offer the coverage types you want or need for your situation. Some companies offer more endorsement options, while others offer more slimmed-down policy options.
  • Cost: Even if cost is not your number one concern, there is no reason to overpay for car insurance. Once you have decided what type of coverage you want, consider comparing quotes for the same coverage from multiple companies to find the best rates for you. Ask about each insurer’s available discounts to save even more.

Frequently asked questions

    • The best car insurance company for you may be different for someone else. Consider shopping around to get quotes from multiple companies to determine which company offers the coverage you are looking for at the price that fits your budget.
    • When you pay off the auto loan for your vehicle, the cost of insurance premiums does not automatically decrease. Depending on the age of their vehicle, some drivers may choose to remove comprehensive and collision coverage when their car is paid off (since the lender almost always requires it). However, it may make more financial sense to continue carrying these coverage types under certain circumstances, like if your vehicle is relatively new.
    • Just like the ‘best’ car insurance companies, the cheapest car insurance companies will be different for everyone. If you have a poor driving history, you may find better rates with a company that specializes in high-risk drivers and offers lots of discounts. If you are a very safe driver but own a more expensive car and live in a congested area, you might benefit from looking at companies that offer usage-based, or telematics, programs to help you save.