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Why is auto insurance for new cars so expensive?

Things to Remember...

  • Auto insurance is more expensive for a new car because the repairs are more costly
  • Collision and comprehensive coverage is the most expensive part of auto insurance because it will pay for damages
  • Liability is not just the minimum amount required by law; it is also the least expensive
  • Comprehensive will pay if your car has damage, but you may still have financial obligations

Is the age of your car one of the factors that affect auto insurance rates? The short answer is yes. So why is auto insurance for new cars so expensive? This is for a variety of reasons. One is because the repairs are more costly. When an auto insurance company prepares a quote for your auto insurance premiums, they consider the make and model of the vehicle. They also consider the year.

Auto insurance rate calculations depend on many factors. Most consumers are more than familiar with the list. They also expect to pay more when they purchase a new vehicle. However, the reasons for the extra costs have always been speculative.

You may be one of the many who assumes the cost of the car is the reason. This is certainly true. There are other issues to take into account, too.

The price of your car insurance is not only dependent on the price on the sticker of your new car. The design of the vehicle, for instance, and the number of options you select all play a role.

New cars have a multitude of safety features, many of which are optional. They only serve as a way to decrease your quote to keep the rates comparable. The bottom line is simple—new car owners should always expect to pay more than the average car insurance costs.

Start comparing auto insurance quotes for new cars to get affordable rates now by using your ZIP code in our free online tool.

Table of Contents

Why does my new car auto insurance cost so much?

Why is my car insurance so high? Why do I have such expensive car insurance? The make, model, and year of your car may be why car insurance is so expensive. Many factors can affect your auto insurance rates, regardless of your vehicle’s age, but we’ll focus on several specific to newer vehicles. Keep reading for more.

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How does the value of a car affect comprehensive and collision auto insurance coverage?

According to a nine-year study performed by the Insurance Information Institute, the auto insurance industry spent an average of $53,460,108 in 2001 on collision and comprehensive claims.

The number soared to $62,589,229 by 2010. The reason for the increase has a direct correlation to the cost of repairs.

Collision and comprehensive coverage is the most expensive part of auto insurance as you can see in the table below. When an average consumer receives a quote, the sum is greater with these two levels. That is because collision and comprehensive will pay for the damage.

Average Annual Auto Insurance Rates for Liability, Collision, Comprehensive, and Full Coverage
StatesAverage Annual Liability Insurance RatesAverage Annual Collision Insurance RatesAverage Annual Comprehensive Insurance RatesAverage Annual Full Coverage Insurance Rates
District of Columbia$628.09$468.67$233.24$1,330.73
New Hampshire$393.24$381.86$131.35$1,382.79
New Jersey$865.55$276.98$172.57$937.59
New Mexico$462.21$385.02$171.12$1,360.66
New York$784.98$293.59$136.08$789.09
North Carolina$357.59$244.09$231.04$773.30
North Dakota$282.55$269.84$121.61$788.56
Rhode Island$720.06$265.07$180.94$973.10
South Carolina$497.50$208.58$258.11$766.91
South Dakota$289.04$282.96$116.53$1,257.13
West Virginia$501.44$329.67$204.28$1,025.78

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What is the difference between collision and comprehensive auto insurance? Collision protects against impact like car accidents. Comprehensive coverage protects against weather-related issues, like fire or floods, as well as vandalism and theft.

New cars are more expensive to repair, and they are costly to replace. If someone steals your car, and no one finds it, your comprehensive coverage takes care of the problem. The combination of new car prices and repairs equals higher car insurance prices.

Liability is not just the minimum amount required by law; it is also the least expensive.

Unfortunately, most people will purchase only the minimum liability coverage. Even with the highest limits, liability will not fulfill your expectations because it covers the property damage and the bodily injury of other drivers and their car, not you or your car.

However, if you finance your new vehicle purchase, you most likely won’t be able to choose liability only. Most lenders require you to carry both comprehensive and collision coverage under the terms of your car loan.

When you purchase a new vehicle, you need to complete a bit of research. You need to find out which cars cost the least to repair. You should also think about theft and how much a new vehicle costs.

Your auto insurance provider will certainly consider these factors. Keep reading for more on what affects rates and ways you may be able to find affordable auto insurance for a new car.

How Do a Vehicle’s Safety Record and Safety Features Affect Auto Insurance Rates?

Just because a vehicle has a high retail value does not always mean the rates will be higher than one that does not. In actuality, most new cars cost more to fix than old cars. Some models will just cost more than others do.

The type of vehicle you purchase will play into your auto insurance rates for a new car. For example, the Insurance Institute for Highway Safety (IIHS) shows some vehicles are riskier than others because of how they are built.

According to their data, many newer vehicles have less capacity to withstand low-impact collisions. The designs of the bumpers do not match universally. Passenger vehicles have federal regulations they must meet.

One example of a crash test conducted by the IIHS is an SUV and a passenger vehicle colliding. The resulting damage is quite severe, even at low speeds of 10 miles per hour. During the crash testing, the IIHS used several examples, including the Honda CR-V versus a Honda Civic and the Ford Escape versus the Ford Focus.

When assessing the front bumper damage post-crash test, the repair costs were huge. The low bumper on the Honda Civic did not align with the higher bumper of the Honda CR-V. The damage to the SUV was $1,721, while the Civic received $1,274 in damages.

This testing proved the need for the automotive industry to comply with all current federal regulations.

Ironically, not all new cars fit into this category, and each year manufacturers make subtle changes. Unfortunately, the auto insurance industry tends to combine makes and models, placing them in specific risk groups and rarely making updates.

The National Highway Traffic and Safety Administration (NHTSA) discusses the Federal Motor Vehicle Safety Standards and Regulations regarding bumpers.

The NHTSA understands the importance of parts like bumpers, as they are the first line of defense against serious injuries.

Unfortunately, until the regulations spread to SUVs, car insurance rates will continue to increase, and new cars will see higher rates, meaning consumers will continue to pay more.

Why is the Cost to Repair or Replace a Damaged Vehicle So High?

Newer cars have expensive parts, which increases the estimate by body and repair shops. Since most states have laws regarding aftermarket parts, they often must purchase original manufacturer parts, increasing costs.

When a customer submits a damage claim, the insurance company pays close attention. Except for the deductible, the insurer is responsible for the costs. This means the company monitors every step to ensure quality and performance.

Insurance companies also measure safety to ensure the vehicle receives proper repair.

Replacement parts damaged in a collision must be up to par. Aftermarket parts are often of lower quality. They may not fit correctly or corrode too quickly. This compromises the integrity of the vehicle and can place the insured at risk for future accidents.

Since the auto insurance industry is in the business of risk assessment, they consider this unacceptable. If they discover inferior products, they have the right to refuse payment to the body shop. As they often make a direct payment, they can control the outcome.

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What is a New Car’s Risk of Being Stolen?

When shopping for a new vehicle, it’s a good idea to look into its value to thieves, particularly if you don’t park in a garage. One way to decrease theft is to make sure your vehicle has anti-theft technology. You also want to make sure you have all of the protection you need from the insurance perspective. 

While comprehensive will pay if your car is stolen (and damaged as a result), you may still have financial obligations. Consider a theft, for example. The finance company will expect your monthly payment regardless of the status of your vehicle.

To make sure you’re prepared for situations like this, GAP insurance (which covers the difference between what your new car is currently worth and the amount you still owe the lender if the vehicle is seriously damaged or totaled) and new car replacement coverage are both an excellent type of insurance option to add to your policy (on top of your comprehensive coverage).

It is also a good idea to add rental car reimbursement. While your car is in the body shop, your life continues. This means you either pay out-of-pocket for a rental or utilize your benefits. Rental cars can get rather expensive.

Although your rates will be slightly higher, these add-ons can provide you with peace of mind.

What are Other Ways a New Car Affects Auto Insurance Rates?

Consumers with new cars often purchase extra options. This includes GAP coverage and rental car reimbursement, which we already discussed. Optional auto insurance coverage is another way that your rates may increase.

However, it only makes sense to choose certain little extras when you have a new car. This is especially true when you’re still paying off the vehicle.

When is Auto Insurance Cheaper for New Cars?

New cars can be substantially cheaper to insure than old cars when the old car is a classic. For example, a 1952 Thunderbird may cost three or four times as much to insure as your new car. While it is true that most cars depreciate, it does not apply to all vehicles.

Classic vehicles are more expensive because they are specialty vehicles.

Their parts are rare, which makes them difficult to locate, repair, and restore. They often require regular maintenance, and this gets costly. There are not too many mechanics trained to work on classic cars.

They also have high visibility. Car thieves know the value and take more risks. Consider two cars in the same parking lot.

One is classic, and the other is a brand new Ford Mustang. Each looks appealing to a thief, but one is worth more. The odds of the Mustang remaining parked safely are much higher than for the classic car.

When you add all of these into the equation, it is easy to see why the rates are higher.

The car insurance companies absolutely understand. This is why most classic car owners have specialty insurance. They seldom use a standard agency or policy.

Should you buy a brand new car?

You will need to face reality. If you buy a new car, your rates will be higher than a used car. Only you can decide if the extra insurance cost associated with a new car is worth it. However, a new car doesn’t mean you won’t have the opportunity to save money. So how do you save on insurance for a new car? The first step is to shop around.

Many car insurance companies want your business. The odds are still in your favor. All you need to do is take your time and find the one that works for you. You can also ask about discounts. Most companies offer a variety, and chances are you’ll qualify for at least a few.

There is always good news when it comes to auto insurance. Even if you have a high premium, it will not remain high. After the first term, your rates should start decreasing.

Review your renewal carefully. Do all you can to ensure you receive a fair price. Remember, if you do not see changes soon, you can always switch companies.

How Do you Purchase Auto Insurance For a New Car?

To drive a new vehicle off the lot, you’ll need an insurance policy. So how do you get started? It’s a good idea to shop around before making your purchase, using the make and model. This way, you can make all the car insurance coverage decisions (like coverage amount, insurer, etc.) before you actually sign on the dotted line.

If you’ve done all the prep work for purchasing an insurance policy, all you have to do once you get your new vehicle is call the insurer, provide them with the VIN, and make your first payment. As soon as you receive proof of your coverage (which you can typically get on your phone), you’ll be ready for the road.

Why is Auto Insurance for New Cars So Expensive? What’s The Bottom Line?

You can choose to purchase liability-only coverage to keep your costs down (though this isn’t recommended), as long as you meet the minimum requirement set by your state. However, if you financed the vehicle, you might be required to purchase collision and comprehensive coverage under the terms of your loan. If so, you’ll find that these two coverage types are often the most expensive part of auto insurance because they pay for damages.

Frequently Asked Questions: Why is auto insurance for new cars so expensive?

Do you still have questions about new car auto insurance? Read these frequently asked questions for more.

#1 – What is an insurance grace period?

If you already have an insured vehicle when you decide to purchase a new car, you may be able to use your insurance policy’s grace period to drive off the lot.

This means your current coverage will protect your new vehicle for a short time, so you don’t have to purchase new coverage before you can drive your vehicle home. Usually, you only have a couple of weeks (sometimes up to 30 days) after the purchase of your vehicle to obtain the necessary coverage, however.

#2 – How do you transfer auto insurance to a new car?

Transferring your existing auto insurance policy from one car to another is fairly simple. You can call your insurance agent, who should be able to complete this over the phone. However, depending on your insurer, you may even be able to transfer coverage through an app or online. Check with your insurer to find out more.

#3 – How do you get auto insurance on a second vehicle?

If you already have a policy when you purchase a second vehicle, initially, your insurance company’s grace period will probably apply. When it’s time to add the new vehicle to your policy, you’ll likely be able to either call your insurance agent or use a web portal to update your coverage.

#4 – What do you need to know about insuring your first car?

As we’ve already discussed, to purchase your vehicle and drive it off the dealership lot, you’ll need to show proof of insurance. The best way to do this is to do your research ahead of time and already have an insurance company and coverage mix in mind based on the make and model of the vehicle you place to purchase. That way, all you need to do is provide specific vehicle information to purchase your policy.

If you are ready to buy auto insurance for your new car, find the most affordable auto insurance rate based on the make, model, and year of your car by entering your ZIP code into our free tool today.


  1. http://www.iii.org/facts_statistics/auto-insurance.html
  2. http://www.nhtsa.gov/cars/rules/import/fmvss/index.html#P581

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