Key Takeaways
- If you’re purchasing a car for the first time, make sure you’re factoring in the cost of auto insurance.
- There are five main factors that influence the cost of your auto insurance.
- Some of the factors are things you can control, whereas others are not.
If you’re looking into buying or leasing a car for the first time, you’ve likely compared sticker prices and considered how much you’re able and willing to spend each month on a car payment. However, if you haven’t also researched the cost of auto insurance, you may be overestimating what your budget can handle.
This is a common mistake made by people who are new to car ownership, so it’s good to be prepared and understand how your insurance rates are calculated. A recent article from Yahoo Finance, “What are the Main Factors That Influence Car Insurance Rates” sheds some light on how your rates are affected by things that are both in and out of your control.
First is the type of car itself. If it’s a sports car or another car that’s considered less safe than, say, a minivan or a sedan, the cost to insure it is going to be higher.
Second is your driving experience. Younger drivers with little driving experience will pay higher premiums.
Third is policy limits and add-ons. There are a number of options available on coverage limits and extra services, so it’s best to research them and talk with your insurance agent about what they entail. The higher your coverage and the more add-ons, the more you’ll pay.
Fourth is your credit score. The better your credit score, the less you’ll pay. And if you don’t have much of a credit history, it’ll count against you here, in the form of higher insurance premiums.
Fifth is deductibles. If you choose a really low deductible, the insurance company will charge you more in premiums. By agreeing to a higher deductible, you’re agreeing to pay more out of pocket if you do have a claim, but your insurance premiums will be lower.
So if you’re new to car insurance, make sure to keep these factors in mind and know what your true costs will be for that new car. Until next time, enjoy.