One important financial factor many drivers don’t consider when buying a car is insurance rates. We think it’s important to think about car insurance rates before making your purchase, as they can sometimes be as high as your vehicle’s monthly payment, especially if you buy a pricy sports car or SUV. That’s because every car’s insurance rates are different, which means you might be in for a huge shock when you call your insurance company if you haven’t adequately budgeted for insurance on your new vehicle. We’re taking a look at some of the factors that affect your car insurance rate so you aren’t so surprised when it comes time to insure your latest car or truck.
Value
Your vehicle’s value is a major determining factor in setting its insurance rates. The reason for this is obvious: More expensive cars are comprised of more expensive parts, which means a greater expense for an insurance company if you’re involved in an accident. A general rule of thumb: If you want to keep your car’s insurance rates low, go for a cheaper vehicle. After all, a Ford costs a lot less to fix than a Ferrari.
Performance
Your vehicle’s performance is another major component that determines its insurance rates. No, simply buying a sports car with back seats won’t drive down your rates. Instead, insurance companies base their rates on a car’s horsepower and performance numbers, the insurance claim rate of other drivers with the same car, and your intended use. If you use your Mustang to commute every day, for instance, the rate will be higher than if you have it insured on a low-mileage policy because you only bring it out on the weekends.
If you want to lower your insurance rates, be sure to select a car that isn’t a high performer. If you choose a high-performance sports car, don’t be surprised when the insurance rates end up being shockingly high.
Other Factors
Although a car’s value and its performance potential are the primary vehicle-related factors that determine car insurance rates, other factors can help decrease or increase your rates, too. For instance, your age, location and driving record play a part in determining your insurance rates, but while these things aren’t easy to change, the type of car you buy is. That’s why we suggest considering value and performance when buying a car so you aren’t stunned when it comes time to apply for insurance.
