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Car insurance when buying a new car

How your new ride can affect your rates.

Updated

Fact checked

Buying a new car can be exciting, as you plan to hit the road in your fresh set of wheels. It can also come with financial challenges. Seasoned car owners and first-time buyers alike can benefit from understanding how insurance premiums might change and how to get the right coverage before stepping foot in a car dealership.

How does car insurance change when buying a new car?

Several variables can affect the cost of your insurance. One of the biggest factors is the type of car you choose. It can vary the cost of insurance by hundreds of dollars per year — even for the same driver.

Other factors like buying a new car for a teen driver can also come into play, and can hike up your premium even more because drivers under 21 are considered high risk.

Here are the most common reasons people buy new vehicles and how that could impact your rates.

  • Starting a family. If you’re welcoming a third member into your family or your young children are starting to grow, you’ll likely want a bigger and safer vehicle. If you’re buying a crossover SUV with good safety ratings, you could see some savings. But if you’re looking for more room and style by trading in your old car for a luxury one, your rates might increase.
  • Teen drivers. New teen drivers will increase your insurance no matter what type of vehicle they’re driving. But you can minimize the increase by having them drive a car with top safety ratings that isn’t brand new.
  • Relocating. If you’re moving to a big city, you might be downsizing your vehicle. Buying a compact car could result in significant savings, especially if you’re getting rid of a pickup truck. Keep in mind that location can also affect your rates, especially if it’s an area with a high claims rate.
  • Mid-life upgrade. Mid-life success often brings new vehicles, which could include luxury or electric vehicles. Both tend to be pricier to insure, so you’ll want to account for the extra expense.
  • Retirement. Retirees could be relocating, upgrading or downsizing — any of which can come with rate increases or decreases. But a safe driving record can help offset any hikes in rates.

Compare car insurance rates after buying a new car

Name Product Roadside assistance New car protection Accident forgiveness Safe driver discount Available states
Progressive
Optional
30%
All 50 states
Discover coverage that’s broader than competitors, valuable discounts up to 30% off and perks like shrinking deductibles that reward no claims.
Clearcover
Optional
Yes
AZ, CA, IL, LA, OH, TX, UT and WI
Get instant online support and score a low rate thanks to online data that sets premiums automatically.
The AARP Auto Insurance Program from The Hartford
Optional
Yes
All 50 states & DC
Drivers over age 50 can enjoy low rates and perks designed for mature drivers, plus freebies and AARP member perks like free replacement cost coverage.
Allstate
13%
All 50 states
Your dedicated agent can help you find the best savings with multiple discounts and rewards programs.
EverQuote
EverQuote
Optional
Yes
All 50 states
Roll in a variety of car insurance quotes from top insurers despite a high-risk driving profile, and view possible discounts while you’re at it.
Esurance
40%
All states except AK, DE, HI, MT, NH, VT, WY
Take advantage of this online company's low base rates and mobile tools like app-based telematics and teen safe driver programs.
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Compare up to 4 providers

How much does buying a new car affect car insurance rates?

Insurance companies charge varying premiums for different car models. Here’s what factors to consider when buying a new car:

  • Car loan. If you’re trading an older car for a new one, your financing lender typically requires collision and comprehensive with your car loan, which is more expensive than a liability-only policy.
  • Retail price. Usually, the more expensive the car, the higher the insurance. Ultimately, the amount of protection you choose helps to determine the cost. Comprehensive and collision coverage covers the cost of the car if it’s stolen or totaled.
  • Cost of repairs. High-performance models like sports cars and SUVs typically cost more to repair because of more expensive parts and labor. This hikes up the cost of physical damage claims.
  • Safety. Safe drivers and more reliable vehicles — think minivans and sedans — mean fewer claims for medical payments and property damage, helping drive down insurance costs.
  • Theft rate. Popular cars like the Nissan Altima and Honda Accord have high rates of theft, and cost more to insure because of it.

Get cheap car insurance when buying a new car

Purchasing a new car offers its fair share of financial challenges, and finding the cheapest insurance can help with cutting costs. Here’s how to get the best deal:

  • Trade in for a cheaper car. Maybe you’re looking for a brand new car, or perhaps you’ll settle for a new-ish car. Consider a safer or cheaper car for lower insurance rates. A car that’s just a few years old could save you big in the long run.
  • Only pay for the coverage you need. Don’t pay for extra coverage you won’t use. For example, new cars come standard with roadside assistance as part of the warranty, so you can skip this coverage on your car insurance policy.
  • Shop around. Consider switching insurance instead of renewing, especially if you’ve undergone any big life changes like marriage or a new baby. Use comparison quotes and ask for a price match from your current insurer.
  • Reduce mileage. Low mileage discounts are available if you drive less than 35 miles per day or 13,000 per year.
  • Consider a higher deductible. The deductible is the amount you have to pay on a claim before getting reimbursed. A higher deductible means a lower premium. Just make sure you’re willing to cover the cost of repairs up to it.
  • Keep a clean driving record. A squeaky clean record can keep you premium down. If you’ve had accidents or tickets in the past, enrolling in a defensive driving course could help your premium.

How do I update my car insurance when buying a new car?

If you already have a car insurance policy, most insurance companies give you seven to 30 days to update policy coverage. If not, you’ll need to have a policy in place before you can drive off the lot with your new car.

  1. Determine your new coverage needs.
  2. Update your current policy within a week.
  3. Review your new rate from your current insurer.
  4. Take your new rate and compare it with other insurers to find the best deal.

Bottom line

Expect your car insurance rate to change when you purchase a new car, especially if it’s close to another big life event. Make sure you’re getting the best rate by figuring out the discounts you can qualify for and shopping around for the best policy.

Common questions about car insurance when buying a new car

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