Older vehicles often come as hand-me-downs from immediate family members. Then again, some people purchase older vehicles in order to save money. Insuring an older vehicle is generally cheaper than insuring a new vehicle, but there are some downsides.
The Price Of Insurance Vs The Value Of The Car
The first major consideration is the cost. Car insurance in the United States costs an average of $1,548 a year. Car insurance is calculated based on a variety of factors, including:
- Age
- Gender
- Location
- Amount of coverage
- Vehicle make, model and value
- Driving record
- Credit history
States and even zip codes charge differently for car insurance. The average cost of car insurance in North Carolina, for example, is about $948 a year, which is substantially less than the national average. In other states such as Michigan, you may pay a large amount more (in Michigan $3,096 a year on average).
Knowing what affects your car insurance rates can help you determine how much you should be paying in car insurance. Now, compare that with the value of the vehicle. The value of a vehicle generally goes down over time, antiques not included. Within the first year of a vehicle's purchase, a car loses around 20 percent of its value and continues losing 10 percent in value each year for four years. The average cost of purchasing a new vehicle in 2019 was $36,718.
Calculate how much it would cost to repair your vehicle. Keep in mind that some older vehicles, especially those with unique parts, may be difficult to repair because of discontinuations and similar concerns. If the cost to repair or replace the vehicle is less than the cost to insure it, it may not be worth insuring the vehicle. However, if your engine and battery are still in great working condition, it's likely that it will be cheaper to repair other damages rather than to purchase a new vehicle.
This doesn't mean you can drive without insurance, of course. Every state has laws regarding car insurance limits.
In North Carolina, any vehicle on the road must carry at least:
- $30,000 in bodily injury liability per person
- $60,000 in bodily injury liability per two or more people
- $25,000 in property damage liability
Older vehicles may not require coverage more than liability, especially if the cost of replacing the vehicle is less than the price of keeping it insured. If you wish to insure your vehicle, there are ways to lower car insurance premiums by:
- Searching for discounts (Good Driver discounts, Good Student discounts, bundling home and auto, multi-car discount, etc.)
- Lowering coverage limits
- Building credit
- Driving defensively
- Raising your deductible*
*Raising your deductible can lower your monthly car insurance premiums, but this also means paying more out of pocket after an accident. Drivers can raise credit by paying off loans, credit cards and debt while paying bills in a timely manner. Driving defensively also matters. In general, insurance agencies look at driving records as proof of the likelihood that the policyholder will file a claim. Having a poor driving record will drive up car insurance premiums. When it comes to filing a claim, once again consider the cost—this time compared to your deductible. If the price of your deductible is higher than the cost of out of pocket repairs, it may be wiser not to file a claim. On the other hand, if the deductible is substantially less than repairs, you may want to file a claim.
Make sure to speak with a professional at All About Insurance before making a decision about filing a claim or purchasing car insurance.
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