New vs. Used Car Insurance: Everything You Need to Know

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Updated July 22nd, 2022

Used car insurance: sales person handing a car key to a man

If you’re thinking of buying a car, then you may wonder if new and used cars cost the same amount to insure. While insurance for a used car is usually cheaper, the difference between new vs. used car insurance isn’t always clear-cut.

Along with the model year, other factors, such as your vehicle’s sticker price and safety features, can make a difference to the total cost of auto insurance.

Let’s take a look at how new car vs. used auto insurance rates compare and what other factors insurance companies use to determine your insurance premiums.

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New vs. Used Car Insurance

Technically, there’s no such thing as “used car insurance.” When you buy a used vehicle, you’ll have the same insurance options as you would if you bought a new vehicle, such as collision and liability insurance, as well as comprehensive coverage

The primary difference is how your rates are calculated. Car insurance companies may charge less to insure a used car because it’s likely worth significantly less than a new car and would cost less to repair or replace if you get into an accident.

On the other hand, used cars aren’t always worth less than new cars. If your used car is a Tesla Model 3 or another car model that retains its resale value over time, it may cost more to insure than a brand new car with a lower purchase price.

Likewise, safety features like driver assist systems can bring down the cost of new car insurance, bringing it more in line with used car insurance costs.

And, of course, vintage and classic cars are a different story altogether. These typically require their own type of car insurance policy.

So the short answer is: The age of your car makes a difference, but other factors, like the type of insurance coverage you choose, are just as important.

Do You Need Used Car Insurance?

Paying for car insurance right after you’ve just made a big purchase can be daunting. It may be tempting to drive home from the dealership and buy insurance later. But is that a smart move? That depends on your situation and where you live.

In some states, you aren’t required to have car insurance. You’ll need to look up your state’s minimum coverage requirements to find out if that’s the case.

Even then, we don’t recommend driving home without insurance because you’ll still be financially responsible if you get into an accident.

In most states, you’ll need to show proof of insurance coverage to your dealer before you’re legally allowed to drive the car home.

The exception? If you already have insurance for another vehicle. Eventually, you’ll need to let your insurance provider know that you’ve bought another vehicle — which might increase your premiums — but you don’t have to let them know in advance.

Most auto insurance companies will give you a grace period of up to 30 days, during which your current auto insurance policy will cover the vehicle.

Types of Used Car Insurance Coverage

Worried man scratching his head

If new vs. used car insurance policies are more or less the same, are there any other points to consider during the car buying process? Yes: If you’re switching from a new car to a used car, then you may want to rethink your coverage level.

By removing collision coverage and comprehensive coverage from your policy, you may be able to lower your auto insurance rates.

Why would you want to have less coverage? Well, depending on how old your used car is and how much it’s worth, full coverage insurance might end up costing you more in car insurance premiums than the actual value of your vehicle.

If your used car is totaled in an accident or natural disaster, your payout will be much smaller for an older car than for a newer car.

A full coverage policy is a must for new cars and is typically required if you’re loaning or leasing a vehicle. But if you’re buying a used car, you’ll have the option to choose which auto insurance coverage makes the most sense for your vehicle.

In most states, you’ll need liability coverage for bodily injury and property damage if you get into an at-fault accident. In some states, you’ll need uninsured motorist coverage to cover the cost of repairs and medical bills if the other driver doesn’t have insurance or is underinsured.

But other types of insurance, such as gap insurance and comprehensive insurance, are optional, and you can reduce the cost of car insurance by doing without them.

Other Ways to Lower Your Car Insurance Rates

Insuring a used car is usually cheaper than insuring a new car — but what if you want to keep collision and comprehensive coverage on your policy? There may be other ways to lower your insurance costs without reducing coverage:

  • Improve your driving record: Car insurance companies take your driving record into account when determining your insurance premiums. You’ll get the best car insurance rates by avoiding speeding tickets and qualifying for a safe driver discount.
  • Ask for a discount: High school and college students may qualify for a discount, and customers who pay in full or have multiple insurance policies with the same company may be eligible for lower rates too.
  • Raise your deductible: A deductible is the amount you have to pay out of pocket when you make a claim before your insurance company covers the rest. A higher deductible means more out-of-pocket expenses — but lower monthly payments.
  • Maintain consistent coverage: You’ll get the best car insurance rates if you avoid gaps in coverage and pay your premiums on time. In some states, insurance companies can look at your credit score to determine your rates, so keep on top of other bills too.

How to Get Insurance on Your Used Car

If you already have car insurance, it may be as simple as adding an additional car to your policy. Call your insurance company or insurance agent as soon as you know the make and model year of your newly-purchased vehicle — or at least before the grace period ends, typically in 30 days.

If this is your first car or you don’t currently have car insurance, you’ll need to buy insurance before picking the car up from the dealership or private seller.

Whether or not you have insurance, it’s always a good idea to shop around when you purchase a vehicle because you may find better rates somewhere else.

Find the Best Used Car Insurance Rates for You

Used car insurance: sales person handing a car key to a woman

You might think that buying an older car is your ticket to cheap car insurance, but that isn’t always the case. The average cost of insurance may be lower for used cars, but it can still be pricey if you choose a full coverage policy with a low deductible.

In order to get an accurate quote, you’ll need to factor in other details like your location, driving record, and coverage level. Even then, average rates can vary from one insurer to the next, depending on the discounts they offer.

The easiest way to find cheap car insurance rates is to compare quotes from multiple providers. Simply enter your ZIP code here to compare rates side-by-side:

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