That new car smell beckons. For some drivers, it may be just a rebate away! But, whether you qualified for a CARS payment, sometimes called "Cash for Clunkers," or simply decided it was time to trade up, the road to a new car can be filled with potholes. New cars cost more to insure, lose value as soon as you drive away, and may be more costly to repair than you expect.
Here's Insurance.com's step-by-step guide for making a smart decision about your old car.
Remember, it will cost more to insure a new car. Few drivers get an auto insurance quote before they shop for a new car, but why risk making a $1,000 mistake?
For example, if you have a 1999 Ford Explorer 4WD to trade on a new car – and you're ready to give up driving an SUV – there are plenty of popular, fuel-efficient models to consider. With an average annual insurance bill of $1,390, based on Insurance.com RateWatch data, you'll want to carefully consider your choices.
The 2009 Hyundai Sonata has an average auto insurance rate of $1,770, an increase of $380 year. At the other extreme, the 2009 Scion tC adds $1,460 a year to your insurance costs, and it's unlikely you can make that up in what you save on gas.
|Car Model||Annual Insurance Rate*||Coverage Increase|
|2009 Toyota Corolla/LE/XLE||$1,997||+ $607 year|
|2009 Kia Spectra||$2,120||+ $730 year|
|2009 Honda Civic EX||$2,215||+ $825 year|
|2009 Ford Focus||$2,248||+ $858 year|
|2009 Chevy Cobalt||$2,285||+ $895 year|
|2009 Scion tC||$2,850||+ $1,460 year|
Car insurance rates are based partly on how well your car protects you in an accident and how much your car will cost to repair. Crash test data and loss studies by the Highway Loss Data Institute provide clear comparisons by model, using a rating scale that tells you which cars are better or worse than average. Cars with higher numbers will generally cost more to insure – and will be more risky for you as an owner.
As part of the CARS program, the government offered this MPG calculator for old and new cars. You can almost double the fuel efficiency rating of the 1999 Ford Explorer (15 MPG) by choosing the Honda Civic EX, which is rated at 29 MPG combined. At the low end, the Sonata gets 22 MPG, while the Cobalt, Focus and Spectra each are rated at 27 MPG.
That sinking feeling when you drive off the lot in a new car might be linked to the drop in its value. Sadly, cars depreciate quickly – often much faster than the outstanding balance on your car loan. So, it's a good idea to protect the value of your car, if it should be damaged early in the first few years you own it. While some insurance policies offer "new car replacement" coverage, if yours doesn't, ask about Gap Insurance. It can pay the difference between the actual cash value of your car and the loan balance.
So, before you start negotiating to replace your clunker, take time to assess the total cost of ownership. Fuel efficiency can offset higher auto insurance rates, if you shop and compare before you drive to the dealership.
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