In a tough economy, many people hold on to their old clunkers, believing a new car would bring higher car insurance premiums.
If the car is old enough, such logic probably is correct, Allstate spokesman Justin Herndon says.
For example, if Allstate writes policies on two cars of the same make and model, and the age spread between the two cars is more than five years, the insurance generally will be less on the older car, Herndon says.
Elizabeth Stelzer, a spokeswoman for Nationwide, also says rates tend to fall over time.
“As vehicles age, the cost to repair the vehicle typically declines,” she says. “Therefore, the rates associated with a vehicle’s age generally decline.”
However, Tully Lehman, a spokesman for the nonprofit Insurance Information Network of California, cautions that an older car isn’t automatically cheaper to insure.
Factors that drive up costs
Some older cars may have parts that are tough to find, Lehman says. That could affect your premium. “If the parts are readily available, then it could be less expensive,” he says. “If the parts are rare, it could be more expensive to insure.”
A lack of cutting-edge safety features also could add to the cost of insuring an older car. Newer cars often score discounts because of high-tech safety equipment built into them. “If the safety features are limited on a given make and model of a car, it could be somewhat more expensive” to insure, Lehman says.
One of the biggest factors in determining the premium is the car’s likelihood of being stolen. “If a car is a target vehicle for theft, that can drive the cost up,” Lehman says. “Many older cars fall into this category.”
That may be a surprise to many who assume car thieves would be more interested in the latest and greatest car makes and models. But in 2011, the most stolen car in the U.S. was the 1994 Honda Accord, followed by the 1998 Honda Civic, according to the National Insurance Crime Bureau. In fourth place was the 20-year-old Toyota Camry.
Lehman says these vehicles are popular targets because they often use the same components as other models from the same manufacturer, making it easy to swap parts.
In addition, he says, “these vehicles often are not equipped with anti-theft devices.”
Lehman says loss history is another factor that can affect the cost of insuring an older car. That is something to keep in mind if you’re insuring an older car that previously belonged to someone else.
“Check its loss history,” Lehman says. “A car that has had several claims filed on it may cost more to insure than one that hasn’t.”
Even if your car does become less expensive to insure over time, it does not necessarily guarantee a lower insurance bill, Stelzer says. When determining the cost of a policy, insurers look at several variables, including your age, the number of crashes on your record and the number of traffic tickets you’ve racked up.
Rolling the dice to save money
One way that many people save money on an older car is to drop collision and comprehensive coverage. Herndon says there are situations when such a move is wise.
One example is when the cash value of your car is hovering near the amount of your deductible. In this case, it’s foolish to keep comprehensive and collision, since you simply will end up writing a check for the full value of your when paying your deductible. Typically, it doesn’t make sense to carry comprehensive and collision if your car is worth less than $1,000, Lehman says.
In other situations, skipping collision and comprehensive coverage is a tougher call, Lehman says. “Dropping comprehensive and collision coverage is a gamble,” he says.
If you skip comprehensive and collision, remember that any damage to your car – whether from an accident, a falling tree, a break-in or any other mishap – won’t be covered by your insurer.
Randy Termeer, vice president of countrywide product management at The Hartford, urges all drivers to talk with an agent or company representative before deciding to give up coverage such as comprehensive and collision simply to cut costs.
“Those coverages can actually be fairly affordable,” Termeer says. “When a car ages, it’s important to get a quote, because you just don’t know what it costs.”