New Car Insurance: Quotes, Coverages, & More

You’ve found the new car of your dreams, but if you don’t have proof of insurance, the dealer may not let you complete the purchase and take your new car home. While you can technically own a vehicle without insurance, most dealerships won’t let you leave the lot unless you have coverage in place.

Nearly every state requires coverage on any vehicle you drive, and most also won’t let you register the car without an active policy. But if you have insurance on your old car, your existing coverage will transfer to your new one for up to a month, depending on your insurance company and where you live.

Let’s explore when, how, and what kind of insurance you should get for a new vehicle purchase.

Key Takeaways:

• In most states, you can’t drive your new car home without adequate car insurance coverage.
• Your old policy coverage will transfer to your new car, but only for a short period.
• Failing to update your insurance could lead to a policy lapse that could cost you thousands in the long run.

Insurance Requirements for Your New Car

The first thing you need to know about insuring a new car is your state’s minimum insurance laws. Most states require a specific level of liability coverage, such as bodily injury liability and property damage liability.

Some coverages aren’t required by law, and depending on whether you finance your vehicle, your dealership may require you to purchase certain insurance products. It’s a good idea to ask your insurance agent for more information on the types of coverage that would best protect your new vehicle.

Let’s go over some of the most common requirements for different types of new car purchases.

Financed vehicles

Partially or fully financing a car means you need to meet your state’s minimum insurance requirements. Depending on the lender, it may require gap insurance until you’ve paid off a substantial portion of the loan. Gap insurance is often cheap and can protect your investment. Keep in mind that not all insurance companies offer gap insurance.

Most lenders also require financed vehicles to have full coverage, which includes comprehensive and collision coverage in addition to state-mandated liability insurance.

Leased vehicles

When you lease a car, you’re essentially borrowing the dealership’s vehicle for a predetermined period of time. You must retain the minimum insurance required by your state, and the leasing company may require you to buy more coverage.

Just as when you finance your vehicle, it’s common for a lender to require a full-coverage policy to protect the vehicle if it’s damaged in an accident. Your lender may also require gap insurance or instead charge you a gap waiver. For more expensive cars, the dealership may require a high limit for all coverages, including liability.

Cash purchases

If you purchase your car outright, you’ll need to at least meet the minimum state insurance requirements. But since a brand-new car is a substantial investment, you should consider maximizing your protection by adding new car replacement coverage, which can provide money for a replacement vehicle of the same model year if your new car is totaled.

You may also want to increase comprehensive and collision coverage if you have a high-value car or an uncommon vehicle that requires specialized replacement parts or that only the manufacturer can repair. Whether your car is new or used, a full-coverage policy with comprehensive and collision insurance is generally worth it if you can’t afford to replace your car if it’s totaled.

Cost of New Car Insurance

The average cost of car insurance for a brand-new vehicle is $226 per month, according to Compare.com data. That’s nearly $1,000 more expensive per year compared to an older, used vehicle’s average monthly rate of $146.

Still, average rates can vary dramatically from one model to the next, so it’s a good idea to understand what you’ll likely pay to insure your new car before you complete the purchase.

The table below shows the average monthly premiums for the most popular vehicles sold in 2023, sorted by the highest-selling models.

Popular SUVs — such as the Toyota RAV4, Honda CR-V, and Jeep Grand Cherokee — are typically some of the cheapest new cars to insure, according to our research. But not all SUVs are created equal when it comes to car insurance costs.

For example, the Nissan Rogue — another compact crossover that competes directly against the RAV4 and CR-V — is among the most expensive vehicles on the list. That could be because Rogues are more likely to get into accidents or have less advanced safety features than some competitors. Either way, it highlights the need to compare insurance rates before you buy your car.

How to Get Insurance for Your New Car

Getting car insurance for a brand-new car isn’t difficult, but you should take responsible steps to ensure that you have the level of coverage you need.

Here’s how to insure your new car in five simple steps.

1. Decide how much coverage you need

You need to meet state-minimum insurance requirements to legally drive, but you may also need to purchase a full-coverage policy if you’re leasing or financing a vehicle. Full-coverage car insurance typically includes comprehensive insurance and collision insurance, which pay for damages to your vehicle that you cause in a car accident or when an object or unexpected event damages your car.

You may also want to consider gap insurance for your new ride. Gap coverage pays for the difference between the vehicle’s worth and the amount you owe on your loan or lease if it’s totaled in an accident.

2. Compare car insurance quotes

You can get a free car insurance quote in minutes from a variety of insurance companies, and because the industry is highly saturated, many companies offer competitive rates. Get an auto insurance quote from at least three insurance companies for the make and model of the car you want to purchase.

Make sure you compare similar insurance policy terms and car insurance coverage limits. You may discover that a policy with additional optional coverages — such as uninsured motorist coverage and medical bills coverage — is cheaper than one with fewer coverages.

3. Research discounts

Finding the cheapest insurance premiums sometimes involves choosing an initially higher premium from an insurance company that offers more potential savings. For example, insurance companies like Liberty Mutual and Lemonade offer common discounts that can lower your insurance costs, including:

• Early shopper: A discount for getting a quote or policy renewal before your current policy expires
• Claims-free discounts: Savings to reward you for remaining accident-free for a set period of time
• Paperless discounts: Cut-rate premiums for using a mobile app or email for all policy correspondence

Discounts could range from as low as 3% or less to 20% or more, depending on the company. Some, like good student discounts, have age limits, while others, like bundling discounts, are typically eligible for all policyholders.

4. Take out a new insurance policy and provide proof of insurance

When you find the car insurance quote that’s best for you, begin the application process before purchasing a car. It’s a good idea to ask the dealer if there are any types of coverage it requires for leased or financed vehicles, such as comprehensive or collision coverage.

This allows you to secure the coverage you need and provide proof of insurance to the car dealership on the day of your purchase.

5. Cancel your old policy

Don’t cancel your old policy until you confirm that your new policy is active. Not only does canceling your old policy prematurely risk you driving without the state-required insurance minimums, but it also leaves you uninsured. Insurers use policy lapses as one of the rating factors on whether to approve a driver for a new policy, and a lapse of even one day can lead to substantially higher costs moving forward.

When to Buy Insurance for Your New Car

You’ll need to show proof of insurance when registering your vehicle, which means that a dealership may not release the tag and title to you without confirmation of an active auto insurance policy. That’s why it’s a good idea to have at least an active liability insurance policy before purchasing a new car.

If you don’t have an insurance policy when you meet with your dealer, ask if the dealership works with any insurers. The dealership may be able to help you secure a policy during the sales process so that you meet all state insurance laws and any leasing requirements.

How a New Car Grace Period Works

If you’re trading in a used car to a dealer or selling your old car to a private buyer, you’ll need to update your car insurance policy. Fortunately, your insurer likely has a new car insurance grace period that can bridge the gap between vehicles. This grace period is a set range of time in which you retain your existing insurance coverage despite no longer driving the vehicle it covers.

Your car insurance company may offer a grace period as long as a month, which means you’ll have 30 days to update to a new car insurance policy for the new vehicle. But some insurance companies offer shorter grace periods that last only a week, so it’s important to update your policy with the right coverage the same day you purchase a new car.

Factors That Affect Insurance Rates for New Cars

Many of the factors that affect insurance for new cars are the same ones that affect all cars, though rates may be higher proportionally because of the new car’s value.

Let’s take a closer look at each.

• Make and model of the vehicle: The make and model of a vehicle can correlate with its replacement value, cost of repairs, and the likelihood of someone stealing it. Generally, more expensive vehicles cost more to insure.
• Driver experience and age: Teen drivers tend to have more risky driving behaviors and accidents than more experienced adult drivers, so they usually pay more for coverage.
• Claims history of drivers on the policy: Previous claims, including for accidents and non-accident tickets, like DUIs and speeding, typically cause your rates to go up.
• Where and how often you drive: Your annual mileage and where you park your car both affect your rates. Driving in an area with more drivers on the road usually means you’ll pay more for car insurance.
• How you store the car: Where you store your vehicle — in a shared parking lot, streetside, uncovered driveway, or garage — can influence rates. Your ZIP code plays a key role, too.

New Car Insurance FAQs

Buying a new car is one of the largest financial decisions you’ll make. Before you buy, make sure you have an insurance policy that meets state requirements. But if you still have questions, check out these answers to some of the most common questions about insuring a new car.

Is a new car more expensive to insure?

Yes, it usually costs more to insure a new car than an older vehicle. The higher value of a new car and the higher cost of replacement parts are two factors that increase the cost of car insurance.

Are you covered by insurance from the dealership?

When you test-drive a vehicle, dealership insurance should cover you. When you leave with your purchased vehicle, most states require that you be listed on an insurance policy that meets the minimum requirements of the state. Most dealerships can help you secure a new policy if you need it.

When should new car insurance start?

You need an active insurance policy on the day of a new car purchase, so it’s a good idea to secure an insurance policy before buying the car. If you already have an active policy for your old car, you can adjust your policy within a month after you buy, depending on your insurer.

Can you buy a new car without insurance?

Technically, yes. You may be able to purchase a new car from a dealer without insurance. But most states won’t let you drive the vehicle or register it without meeting its minimum car insurance requirements. It’s best to secure car insurance before you purchase a new car.

Data Methodology:

Data scientists at Compare.com analyzed more than 50 million real-time auto insurance quotes from more than 75 partner insurers in order to compile the rates and statistics seen in this article. Compare.com’s auto insurance data includes coverage analysis and details on drivers’ vehicles, driving records, insurance histories, and demographic information.

All the rates listed in this article have been collected from a combination of real Compare.com quotes and external insurance rate data gathered in collaboration with Quadrant Information Services. Compare.com uses these observations to provide readers with insights into how auto insurance companies determine their premiums.

Sources:

1. Insurance Information Institute, “Buying a New Car or Truck? Consider Auto Insurance Costs and Protect Your Loan When Trading Up,” accessed April 4, 2024.
2. Insurance Information Institute, “Insuring a leased car,” accessed April 4, 2024.
3. Insurance Information Institute, “What is covered by a basic auto insurance policy?,” accessed April 4, 2024.
4. Insurance Information Institute, “What is gap insurance?,” accessed April 4, 2024.
5. Insurance Information Institute, “What if I can’t find auto coverage,” accessed April 4, 2024.
6. Texas Department of Insurance, “How are your auto and homeowners insurance costs calculated?,” accessed April 4, 2024.
7. Office of the Insurance Commissioner Washington State, “Why does auto insurance cost so much?,” accessed April 4, 2024.
8. Florida Department of Highway Safety and Motor Vehicles, “Buying from a licensed dealer,” accessed April 4, 2024.