When Buying Your First Car Know a Little about Auto Insurance
Whether you're the one buying your first car or you're a parent helping your child, there are a few things you'll want to keep in mind before you sign on the dotted line.
Know Your Rate Before You Buy
First, shop around for insurance and get competitive quotes on your dream car before you buy. Insurance rates can vary dramatically from one make or model car to another, and for new or used cars, and may be higher than you can afford.
For example, a 17-year old with one ticket on his record may be able to make his monthly payments on the new Ford Mustang. But the monthly premiums could be another story. Or if you had your eye on a used 2004 BMW, you may find a better rate on a 2007 Saturn.
Companies also have factor ratings on cars with higher levels of theft, including Hondas, so you'll end up paying more on the comprehensive portion of your policy than you would on another make that is not as popular with car thieves.
Other cost factors come into play, including where you live and the type of driving you expect to be doing. If you live in an area that's prone to hail or has a higher rate of accidents on the road, you can expect to pay more.
If you plan to buy a new car, it's also a good idea to look into GAP insurance. Why? The minute you drive the car off the lot, it begins to depreciate, sometimes as much as 20% - 30%.
It's winter time and you spin out on black ice, totaling your car after owning it for just one week. You make your claim with the insurance company and find they'll only reimburse you for the actual market value of the car, which is $10,000. The problem is you still owe $12,000 on the car. Now you're out $2,000.
GAP insurance is relatively inexpensive for having that peace of mind. It's best to add this coverage to your insurance policy rather than buying it from the dealer, who often charges a premium for GAP. As your loan amount gets lower and your car ages a few years, you'll be able to drop this portion from your policy.
While younger drivers do pay a higher rate for car insurance, they can take advantage of good student discounts. If they live at home, they can be added to their parents' policy and receive multi-line discounts as well. Or, this may be an ideal time to get quotes from multiple insurance companies to see if it is possible to get a better rate.
Ready to buy a new car? Have a new student driver or a child leaving for college? Now is the right time to update your auto insurance.