The cost of purchasing, insuring, and operating a car can be daunting. The primary determinant in the overall price is the cost of insurance. Some people choose to drive used cars in huntsville al instead of new ones due to lower insurance prices. Why would a used car be less expensive to insure? In other words, why would a used car be cheaper to insure?
The standard auto insurance policy quotes a base rate of thousands of dollars. The difference in the base rates for a new car and a used car can be significant. The base rates for a new vehicle typically consist of liability coverage, collision, and comprehensive coverage. The base rate for a used car consists only of liability.
The reason for this difference is that the new car has a higher value than the used one. The higher value means it is more expensive to fix. The cost of fixing a new car is higher than the cost of repairing a used car. Therefore, insuring a new car might cost more because the chances of getting into an accident are greater.
This brings us to our next point. The likelihood of you having an accident is dependent on how much you drive. A new car is likely to be driven more than a used car. People who buy new vehicles may have better jobs or at least more disposable income than those that purchase used cars. This means that they will have more opportunities to get into accidents.
Used cars are driven less than new ones. Thus, insurance rates for used cars are usually lower. However, there is a strict limit to how low the rates can go. Insurance companies can offer lower rates on used cars, but not to the point of weakness.
The reason for this is risk and probability. If insurance companies under-charge policyholders, then they will lose money. However, the losses will be offset by rising rates in the future. Because of this, insurance companies offer discounts for drivers who have clean records. Driving a used car doesn’t mean you will get these discounts, but it can help.
Liability insurance covers the driver after an accident has occurred
This is the type of insurance most used car buyers’ purchase. Liability insurance covers damages caused by you and your possessions. It is the type of coverage that covers the cost of medical bills, lost wages, and other expenses. Liability insurance protects you after an accident has occurred. It doesn’t protect your car, and that’s why it’s cheaper.
Most times lower premiums are offered for this type of coverage
How does the insurance company know if I will be in an accident? Insurance companies consider three things when deciding what to charge you: past driving record, credit score, and individual risk.
Your credit score indicates your reliability as a driver. People with poor credit scores tend to be bad drivers. Because insurance companies know this, they charge those with low credit scores more for coverage. The average cost of a policy is higher if your score is worse.
The likelihood of a driver with a poor credit score is likely to be lower. This means that the cause for a car accident is more likely to be someone else’s fault. The insurance company doesn’t want to pay out money after an accident. Liability coverage reduces the amount of money it has to payout.
