This year, more than ten million U.S. households will buy a new vehicle. But while consumers may spend a lot of time researching which automobile they want to buy, few consider how much it will cost them to insure — which could be a lot more than they realize.
"If you can't afford the insurance, then you can't afford the car," says Loretta Worters of the Insurance Information Institute.
In fact, the make and model you choose have a tremendous effect on how much you will pay for your insurance premiums, says Tom H. Hollyer, agency product development manager of Mayfield Village, Ohio-based Progressive. "Rates are determined not only by driver characteristics such as age and gender, but also by vehicle characteristics," he says. "The best thing to do is research the cost of insurance before you purchase a vehicle."
Insurance premiums are based in part on the vehicle's sticker price, the cost to repair it, its overall safety record and the likelihood of theft. Cars that are favorite targets for thieves tend to cost more to insure. "High-value vehicles tend to be more expensive to insure," says Hollyer. "If there is so much damage to the car that it can't be repaired or if it is stolen, then the insurance company will have to replace it." Many insurers offer discounts for features that reduce the risk of injuries or theft. These include air bags, anti-lock brakes, daytime running lights and anti-theft devices.
Rates are also effected by where you live as well as your age, gender and driving record. Other criteria considered include the car's model year, weight, horsepower, body type, wheelbase, and vehicle type (passenger car, van, pickup, SUV, etc.) "Vehicles with more horsepower can result in higher premiums," says Hollyer. "On the other hand, larger, heavier vehicles provide more protection to passengers which could lower your first party medical coverage cost."
Progressive rates the 2004 Dodge Viper SRT-10, a high-performance sports car with a base price of $80,000, as the most expensive vehicle to insure. In the past, the Viper has had the highest overall vehicle damage, or collision losses of all passenger vehicles, according to the Highway Loss Data Institute (HLDI). Of course, exotic vehicles, such as Rolls-Royces, Ferraris and Lamborghinis are not on this list, which only includes mass-market vehicles. According to Progressive, the least expensive vehicle to insure is the 2004 Oldsmobile Silhouette, which is a minivan in the $30,000 range, followed by the Chrysler PT Cruiser and the Pontiac Montana.
Sports cars and luxury cars have the highest (and worst) insurance losses for vehicle damage, according to a recent study conducted by HLDI. Passenger vans and station wagons have the lowest insurance losses for vehicle damage. Two important characteristics influencing crash outcome are vehicle size and weight, which are strongly related. The smaller, lighter vehicles in each class generally have higher death rates. So when it comes to safety, bigger and heavier vehicles are better.
The vehicle that is a top target for thieves is the Cadillac Escalade SUV. The Escalade has the most frequent theft claims among 2000-02 model passenger vehicles with a theft claim frequency that is about four times the average for all vehicles, according to HLDI. "The Escalade also has the worst overall theft losses — ten times the average for all vehicles," says Kim Hazelbaker, HLDI senior vice president. "The Escalade's theft losses are the highest even though it's equipped with a standard antitheft ignition immobilizer. These immobilizers have reduced thefts of other vehicles, but we don't know why they don't seem to be effective for the Escalade."
Unfortunately, rising costs of medical care, vehicle repair, jury awards, automobile theft and fraud are expected to drive up auto insurance rates by 6 percent in 2004, according to the Insurance Information Institute. Higher repair costs are rising two to three times the overall rate of inflation in a number of states. The suspension of the use of generic parts in the repair of damaged vehicles is a factor that could ultimately add four to five billion dollars annually to the cost of auto insurance. Name brand parts often cost 30% to 70% more than their generic equivalent, even though generic parts are of like kind and quality, according to the Insurance Information Institute.
Before you buy, shop around to compare rates. "Rates can vary widely from company to company," says Hollyer. "So it really pays to shop."
Next, calculate what your insurance costs might be, because it just may change your mind about what you want to drive in the future. You can lower your insurance premium by raising your deductibles, which could save you as much as 30%.
You may consider buying both your home and auto policies from the same insurer, such as Allstate, American International Group, Farmers Group, Geico — a unit of Berkshire Hathaway, Progressive, State Farm or USAA among others. Some companies that sell homeowners, auto and liability coverage will give a multiple policy discount of 5 percent to 15 percent.