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Regardless of whether you are buying a new vehicle from a dealership or purchasing from a private seller, you’ll need car insurance.
Every state except New Hampshire requires a minimum amount of auto insurance to drive legally on public roads. If you are financing or leasing your vehicle, your lender will have additional insurance requirements.
Bundling policies, increasing your deductible and looking for discounts are all ways to save on insurance for your new car. But buying the right vehicle is another essential way to save.
“There are a ton of [pricing] factors with any carrier you use,” says Howard Goldberg, vice president of the customer solutions center for Plymouth Rock Assurance, which provides car and home insurance in six Eastern states. “[But] the vehicle itself can be a key factor.”
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What you drive makes a difference
Not surprisingly, you’ll spend more on insurance for high-end luxury or sports cars. The Maserati Quattroporte Trofeo – with an annual premium of $6,166 – is the most expensive car to insure, according to an analysis by Insure.com. On the other end of the spectrum is the Honda HR-V. It is the cheapest vehicle to insure with an annual premium of $1,673.
Even within the same model, there can be price differences depending on a vehicle’s features. For instance, Insure.com found that high-tech safety features – such as an anti-theft device – can drop the price of auto insurance by 9%.
Know what you need and what you don’t
Every state that requires drivers to have auto insurance dictates the minimum amount of liability insurance they must carry. Every state’s coverage requirements are different, but generally speaking the amounts are too low to protect you if you’re at fault for a major accident.
If you are financing or leasing a new car, your lender will require collision insurance, which covers damage to your vehicle in an at-fault collision, and comprehensive insurance, which protects your automobile from damage due to weather, fires, vandalism, theft and other non-collision events.
Your financing institution may also mandate gap insurance. This pays the difference between the value of your car and the remaining balance of your loan if your vehicle is totaled.
Neither comprehensive nor collision insurance is required by law, nor is gap insurance. But even if you own your newer vehicle outright, the additional coverages could be worth the cost to protect your investment.
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On the other hand, if you’ve just purchased an older vehicle, the cost of full coverage may not be worth it. In that case, you may find it financially smart to carry only liability insurance.
Here’s what you can expect to pay per year for car insurance in the U.S., based on Insure.com averages.
- State minimum liability: $502
- Full coverage (liability, collision and comprehensive): $1,897
- Gap insurance: 5% to 6% of your comprehensive and collision premium (usually less than $60)
Shop around before you decide
Once you know what level of coverage you need, you can begin shopping for car insurance. Even if the first offer looks good, don’t accept it until you’ve received at least three or four quotes from different insurers. You could save as much as $3,000 by comparing auto insurance quotes, according to Insure.com.
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Add the new car to your policy before you drive off
Adding a new vehicle to your insurance policy is typically a quick process that involves providing your carrier with the new car’s vehicle identification number (VIN). Insurers usually offer a grace period to do so.
“In most cases, you are given a few days to transfer (coverage) from one vehicle to another,” Goldberg says.
He says that a grace period could come in handy if you are in an accident on your way home from picking up the car, but it’s better to ensure you have insurance before driving away.
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Tips to save on car insurance
Before buying a new car, consider which vehicle will meet your needs and be affordable to insure. Then, decide what coverage you need and provide accurate information when requesting a quote. You can also use these tips to save money on new car insurance:
Related: Car insurance: See if one inexpensive option is right for you
- Bundle your policies. Buying home and auto insurance from the same company could save you up to 25%, depending on your carrier, according to Insure.com.
- Increase your deductible. Raising your deductible from $250 to $500 may reduce premiums by 8%, while increasing it from $500 to $1,000 could drop premiums by nearly 11%. However, raising your deductible means paying more out of pocket when making a claim.
- Look for discounts. In addition to bundling, every insurer offers a range of discounts to entice customers, including discounts for maintaining a clean driving record, taking a defensive driving course, paying your premium in advance, switching to paperless billing, discounts for military veterans and more. Savings can range from 5% to 25% or more, depending the carrier and discounts you qualify for.
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