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Buying a used car? Read on to see how it might save you money on insurance.
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For some people, there’s nothing like the feeling of driving off in a brand-new car. And to be fair, it can be a nice thing to have a new car in pristine condition.
The problem? A new car is likely to cost you. As of March, new car prices were up 6.1% on an annual basis, according to that month’s Consumer Price Index. Used car prices, meanwhile, were down 11.2%.
Generally speaking, buying a used car means having to put less money down on a vehicle purchase and taking on smaller auto loan payments. But these days, you might especially save on the latter by going with a used vehicle. Loan rates are up following a series of interest rate hikes on the part of the Federal Reserve. So the less money you have to borrow to buy a car, the better.
But auto loan payments aside, there’s another good reason to buy a used car over a new one, and it’s that you might save yourself a nice amount of money on auto insurance.
A less expensive car could mean less expensive insurance
One myth you’ll often hear about auto insurance is that it costs more to insure a used car. The logic there is that there are more unknowns with a used car, so your auto insurance company is taking on more risk by writing a policy for one.
But actually, the reason you might pay less for auto insurance with a used car, not more, is that used cars, by nature, are less expensive. When your auto insurance company sets premium rates, it considers how much money it might need to pay out in the event of an accident or damage to your car. And the less your car is worth, the less it might have to pay to fix or replace it.
Remember, part of the reason new cars cost more money than used ones is that they’re loaded with newer parts that are more expensive to procure. So if you’re willing to drive a used car, you might save yourself a lot of money all in.
How to decide which car to buy
There are different factors that should go into your car-buying decision, such as how much space you need and how important it is to get good gas mileage. You should also consider your budget and how much you actually expect to use your car.
If you don’t tend to do a lot of driving, then it’s easier to make the argument for a used car — because why pay up for a vehicle that might only leave your garage once or twice a week? Similarly, if you’re not sure whether you want a larger vehicle or a smaller one, and so you’re taking a chance on the model you get, you might as well buy a used car, drive it for a year, and see how it works for you.
It’s also a good idea to buy a used car if you’re purchasing your first vehicle and aren’t really sure which features are most important to you. Plus, paying for a car can take some getting used to. So if you’re able to keep your costs down as you adjust to that expense, that’s a good thing.
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