Is Car Insurance More Expensive For New Cars? And Cheaper For Used Cars?

Last Updated on August 26, 2019

Most people assume it is more expensive to insure a brand new automobile than it is to insure a used vehicle simply because most new cars are worth good money.  In most cases, this is true. However, the unique car in question, the level of auto insurance and a number of other factors ultimately contribute to the total cost of the insurance policy.  Let’s take a look at whether car insurance really is that much more expensive for new vehicles and the factors that dictate auto insurance cost.

Why New Cars are Typically More Expensive to Insure

cheaper to insure a new carNew automobiles are comparably expensive to insure as they are worth that much more than used vehicles.  If a new vehicle is stolen, it will be that much more expensive to replace as there is little wear and tear.  Therefore, the auto insurance premium is higher for new vehicles as well as vehicles of considerable value. Furthermore, repairing a new vehicle usually costs more than repairs for an older vehicle.

Some old classic automobiles are more expensive to insure than brand new cars simply because some classics are worth considerable amounts of money.  Some classic automobiles will prove nearly impossible to replace if stolen or damaged. It is challenging to find the proper replacement parts for these unique vehicles.  It is also difficult to pinpoint a savvy mechanic who can work on specialty vehicles with an array of nuances. Therefore, specialty vehicles will almost always be more expensive to insure.

New Vehicle Cost is Only one Reason for the High Insurance Rate

Auto insurance rates are dictated by more than the new vehicle’s cost.  Certain makes and models perform poorly in crash tests. The type of vehicle you select plays a major part in the insurance rate.  Some vehicles are built in a certain way that makes them that much less or more vulnerable in accidents. If you face a heightened risk for an accident or damage during an accident due to the make and model of your new vehicle, it makes sense that you pay a higher premium for auto insurance.  Between crash test results, the size of the vehicle, safety features, and subtleties such as misaligned bumpers, all sorts of variables play a part in determining the cost of auto insurance.

Consider the Cost of New Car Parts

Repairing a new vehicle has the potential to prove costly partially because the parts for new vehicles are almost always more expensive than those used in pre-owned vehicles.  The insurance company will insist that only the best new parts be used for the repair of your new or like-new vehicle to ensure it proves functional across posterity. The unfortunate truth for new car owners is these beautiful new automobiles have quite the expensive parts.  The high cost of parts jacks up new car auto insurance rates that much more.

The Issue of Replacement Value

Automobile insurance groups insure vehicles through an agreement in which they pay for repairs or replacement when insured cars are involved in qualifying accidents.  The insurer must be able to replace the insured vehicle if it is damaged beyond the point of repair. This means the company has to set aside enough funds to cover the vehicle’s actual value.  Those with comparably expensive vehicles will ultimately pay higher premiums to compensate for the cost. The same is true for vehicle repairs; if the vehicle can be repaired at a low cost, the premiums will prove more affordable than a car that relies on imported parts or a specialized mechanic.

As an example, consider a hybrid or electric vehicle that costs more than a regular gasoline-powered vehicle with the exact same make and model.  Hybrid vehicles and those that strictly rely on electricity mandate attention from highly specialized mechanics. These specialists repair electric and hybrid vehicles.  Even some vehicles that rely on computer technology must be tended to by a specialized mechanic. These specialists make more money than traditional auto mechanics, so specialized automobiles and those with an abundance of tech cost that much more to insure.

Alternatively, used vehicles have comparably simple technology.  These vehicles have depreciated in value, do not require the attention of a specialized mechanic and have fairly affordable replacement parts.  These are straightforward repairs most mechanics can complete without specialized equipment, techniques or other costly labor. Add in the fact that older vehicles have fewer safety features and less complicated tech than new vehicles and it is easy to understand why they are comparably cheap to insure.  The only advantage new vehicles have over older models in the context of auto insurance cost is the addition of the latest high-tech safeguards reduces the chances of an accident, helping keep monthly premiums within reason.

James Shaffer
James Shaffer James Shaffer is a writer for and a well-seasoned auto insurance industry veteran. He has a deep knowledge of insurance rules and regulations and is passionate about helping drivers save money on auto insurance. He is responsible for researching and writing about anything auto insurance-related. He holds a bachelor's degree from Bentley University and his work has been quoted by NBC News, CNN, and The Washington Post.
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