Watch out for a rise in auto insurance premiums when trading in a "clunker"

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  • Watch out for a rise in auto insurance premiums when trading in a "clunker"

With the surge in car sales that many are hoping will continue following the Senate vote on Thursday to add $2 billion more to the popular cash for clunkers program, high car insurance premiums will undoubtedly remain a hot topic of discussion as consumers attempt to trade in their "clunker" and ultimately save money as well.

With the surge in car sales that many are hoping will continue following the Senate vote on Thursday to add $2 billion more to the popular cash for clunkers program, high auto insurance premiums will undoubtedly remain a hot topic of discussion as consumers attempt to trade in their "clunker" and ultimately save money as well.

Because insurance premiums are based on the condition, age and make of the vehicle among other variables, consumers trading in an older family-oriented vehicle for a new, fancy sports car will find that their insurance rates will likely skyrocket. However with that in mind, trading in a souped-up SUV for a smaller hatchback may save money.

According to The American Auto Association Carolinas AAA), predicting a rise in auto insurance can be very difficult because of the many factors it takes into account and even someone paying the minimums for their insurance may face an increase.

"As in many discount programs, consumer knowledge is key to getting the best possible deal," said David E. Parsons, the CEO and president of AAA Carolinas. "There are some reported practices buyers should be wary of and some financial analysis that needs to be done to ensure the buying decision is a good one."

AAA also suggests that those looking to save on auto insurance may be better served by looking to trade their car in for a used car instead of a new one, although such a decision may not achieve better gas mileage depending on the vehicle models involved.

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Posted: August 7, 2009

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