Cheaper Used-Car Insurance: How to Save

Although there are a few exceptions, a used car is nearly always cheaper to insure than a new car. You will also save yourself a lot of money choosing used over new, making this the best option for most drivers. 

Find your best rate on Car Insurance!

Attention: Still Open During the Financial Crisis...

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation's top providers.

Currently insured?
Do you own multiple vehicles?
Own your home?

In this guide, we’ll look at the ways you can save when purchasing used cars and used car insurance, helping you to save the most money and get the best car insurance rates.

Benefits of Buying a Used Car

Still not convinced that buying used is the best option? 

The new car buying process may not be everyone’s cup of tea, but most will agree that it’s better than buying a used car. When you buy new, you have complete control over how the car looks and what features it offers. You don’t have to make many compromises and you also have many options with regards to financing.

But that (and the irresistible new car smell) is where the benefits end. A used car just offers so many more advantages:

1.  You Will Save a Lot of Money

A new car depreciates very quickly. On average, a new car will lose 20% of its value in the first year. If you drop $30,000 on a brand-new vehicle, that means your shimmering, bank-busting asset will lose $6,000 from its value after just 12 months.

And it’s all downhill from there, with between 10% more lost for every additional year.

A used car will also depreciate, but if you’re buying it after the first couple of years, the amount of value it loses will be infinitesimal by comparison.

As an example, let’s imagine that you have your eye on a brand-new SUV with a $40,000 sticker price. If you buy that new, it could be worth $32,000 at the beginning of the second year and $29,000 in the third. That’s a loss of $12,000, which is akin to over $500 a year.

It begins to look like an extortionate sum when you consider you’ll still be paying for fuel and maintenance (not to mention interest charges on auto loans) throughout that time.

If you buy the same car in the third year, you can haggle the price down to $26,000 or less. It will lose an average of 10% for the third and fourth years, but that accounts for just under $5,000 total, which means you’ll have lost the equivalent of $208 per month and saved $14,000 off the sticker price, all for a car that is more or less the same.

2. You Can Avoid Fees

Many new cars charge additional fees that can increase the cost of the vehicle. 

For instance, you may be charged for shipping, preparation, and even advertising. With a new car, you’re also more likely to purchase optional extras that are simply not worth the money you’re paying. Of course, you don’t have to pay for these, but the temptation leads many buyers astray. 

If they’re being charged $500 extra for a seemingly insignificant service, they don’t think twice about agreeing, because while it’s a lot of money, it’s insignificant when added to a purchase of $30,000 or $40,000.

When you buy used, you’re less willing to throw your money away.

3. You Still Have a Warranty

It’s often said that one of the biggest benefits of new cars is the fact they have warranties. Supplied by the manufacturer, these last for several years and ensure you’re not out of pocket if the car suffers any mechanical faults.

But you can get the same cover with a used car. If the car is only a few years old, it should have some of the original warranty intact. If not, you can purchase extra. 

Or not, because the older the car, the less you need these services. If a $30,000 vehicle breaks down, you’ll be desperate to have some kind of warranty cover, as the alternatives are to pay for the repairs yourself or write off a massive asset. If a $1,000 vehicle breaks down, just get a repair quote and scrap it if it’s too high.

4. Doing Your Bit for the Environment

A lot of fuss is often made about hybrid vehicles, with drivers spending tens of thousands of dollars to get the latest ones in the belief they’re saving the environment. 

In actual fact, one of the best things you can do for Mother Earth is to buy a used vehicle. Sure, a new hybrid will use much less fuel and create far fewer emissions, but it’s unlikely that the difference will be enough to offset the masses of carbon dioxide released during the production of that vehicle.

Around 25% of a car’s total emissions occur during production. Furthermore, hybrid vehicles use environmentally damaging batteries.

Tips for Buying a Used Car

Now that we have established the benefits of buying used, we need to look at the actual buying process. Used cars may be a cheaper and better option, but you can still pay over the odds and end up with a vehicle that is practically uninsurable.

1. Pay Attention to Safety Features

A used car needs to be pretty old and decrepit not to have seatbelts, but it’s not that uncommon to find cars without front-and-side airbags, as well as ones that don’t have anti-lock brakes.

All these features are essential if you want to secure car insurance discounts. They could save you up to 40% when compared to a car that doesn’t have any of these features.

In addition, it should also have some basic anti-theft devices, including alarms and trackers. You don’t need to go all-out with parking assist and other high-tech devices designed to make your life easier. By all means, look for them if you want them, but don’t get them just for the sake of saving a few more bucks on your premiums as discounts for high-tech features like this are rare.

The safety rating of your chosen vehicle is also important, as is the likelihood of your car being involved in an accident or a theft. If, for some reason, thieves are targeting that specific model, auto insurance companies will deem you to be a slightly higher risk and punish you with higher rates.

2. Cast Your Net Wide

Look on forums, browse through classifieds, check with local dealerships, ask friends and family, go to auctions—cast your net far and wide.

You have multiple options when looking for a used car and the more of these you try, the more likely you are to find the perfect car for you.

Research is also key and needs to be just as broad. Rather than sticking with a car that got a good review in a popular magazine, expand your search to include all the best cars in your price range.

Understanding more about the cars you can afford and are likely to encounter will allow you to make fast, smart decisions when the time comes.

3. Prioritize and Sacrifice

With used cars, you have to make a few sacrifices as you won’t find all the features you want. It’s like buying a house. You have an image in your head of what you want, from the right bedrooms and location, to a room big enough for a pool table, a garage big enough for your car, etc., But when you eventually start shopping, you realize your budget won’t allow for any of that and so you start prioritizing.

It’s a similar story here. 

By all means, draw up a list of features that you want in a car but include a few allowances. For instance, rather than saying you want a 2-year-old Black Toyota with less than 20,000 miles, you can settle on a Black or Grey Honda/Toyota that is less than 4 years old and has fewer than 40,000 miles.

Simply broadening the parameters in this way will ensure you find more cars within your budget.

4. Be Prepared to Barter

It doesn’t matter what the dealer tries to tell you, used car prices can always be reduced. And if they refuse to budge, you can just take your business elsewhere.

Always be prepared to walk, always begin with an offer so low that it borders on the unreasonable and try to play the used car dealers at their own games. You can adopt the same attitude with individual sellers. In this case, you may have more success, but not always. 

Many individual sellers overvalue their cars and refuse to budge on the price. It’s an attitude of, “I paid $30,000 just 4 years ago, it should be worth at least $25,000 now!” and it can be very frustrating as a seller. If you encounter buyers like this, give them your lowest price, leave them your number, and when they come to their senses and realize that their car won’t sell, they might give you a call.

5. Study the Car’s History

You can use the National Motor Vehicle Title Information System (NMVTIS) to get details on a car using just the Vehicle Identification Number (VIN).

It will tell you the information of previous owners, loss history, salvage history, and odometer readings, and can help you understand the car’s history.

Services like CarFax and AutoCheck can also help you here, while VINCheck is essential to check if the vehicle has been stolen.

Buying Cheap Car Insurance Companies for Used Vehicle

You have your car, you’re ready to hit the road, but first, you need an auto insurance policy. By choosing your car carefully, you’ve completed the first step and one of the most important. But you still need to consider all the following if you want the cheapest possible car insurance premiums:

1. Choose Your Liability Coverage Carefully

Bodily injury liability and property damage liability make up the bulk of your insurance costs. Required by most states, these coverage options will protect you against physical damage and property damage claims resulting from an at-fault accident.

All states that require liability insurance insist on a minimum amount per accident and per person, but these minimums won’t be enough for most drivers. If you have substantial financial assets and cause a serious car accident, you may find yourself on the end of a very expensive lawsuit, one that goes above and beyond your liability coverage and costs you a lot of money.

If you don’t have a lot of assets, you can afford to stick with the bare minimums. 

Check with your state minimum requirements, get advice from insurance agents and brokers, and find the right balance of liability coverage for you.

2. Choose the Right Types of Coverage

In addition to liability insurance, many states will require you to purchase personal injury protection, medical payments, and/or underinsured/uninsured motorist coverage. If these coverage options are not required by your state, they are entirely optional and whether you need them or not will come down to your assets and whether you have health insurance.

If you have full coverage health and life insurance, you can afford to skip PIP and medical payments cover. If you reside in a state with very few uninsured drivers and have cover elsewhere, you can think twice about adding uninsured/underinsured motorist coverage.

You also have to think about collision coverage and comprehensive coverage, two options that are not mandatory but do have many uses. Although essential with new cars, these coverage options can be avoided if you have a relatively cheap used vehicle.

3. Work on Your Credit Score

Good credit drivers will generally get much lower rates than drivers with bad credit or no credit, and the difference can be substantial.

Improving your credit score will greatly increase your chances of getting low-interest loans and credit cards, while also bringing the cost of your insurance down. And the less you spend on premiums and interest, the more money you’ll have to continue improving your credit.

It’s a win-win, a self-rewarding cycle. To quickly improve your credit score, try the following options:

  • Increase credit limits where possible.
  • Stop applying for new loans and lines of credit.
  • Add yourself as an authorized user to a parent’s credit card.
  • Get a secured credit card or credit-builder loan.
  • Check your credit report for free and dispute any mistakes you find.
  • Pay down as much of your debt as you can.

4. Shop Around

You can get free car insurance quotes online, over the phone, and from local insurance agents. You really have no excuse not to compare as many providers as you can and to make sure you’re getting the very best rates.

Get quotes from all of the big providers first (GEICO, Nationwide, Progressive, State Farm, Allstate) and then look into local auto insurers and insurers tied to specific clubs, including USAA, SafeCo, and Plymouth Rock. If you’re struggling to get the cheapest rates because of a poor driving history, try providers like The General.

5. Look into Car Insurance Discounts

Car insurance discounts are your ticket to cheaper insurance, but only if you use them properly.

Car insurance companies look at multiple personal factors to determine how much of a risk you are. If you tick certain “low-risk” boxes, or do something that benefits them, they will reward you with a discount.

For instance, many auto insurance companies will look at your marital status and gender, because they know that married women are less likely to make a claim than unmarried men. By ticking as many boxes as possible, you can shave hundreds of dollars off your insurance coverage without sacrificing certain coverage options.

Here are just a few of the discounts available:

  • Clean Driving Record Discount: Offered to good drivers with a clean record.
  • Good Student Discount: Provided to students who achieve and maintain a B average.
  • Defensive Driving Discount: Complete a defensive driving course to be awarded this discount.
  • Senior Discount: A great way to reduce the cost of insurance for older drivers.
  • Bundling: Reduce the average cost of homeowners insurance and car insurance by combining these two insurance products with the same provider.

6. Drop Unnecessary Coverage Options

In addition to the insurance options outlined above, you may also be offered additional coverage options like roadside assistance, pet injury protection, lost key coverage, and more. Some of these are great, if you need them, but shouldn’t be added just for the sake of it.

Roadside assistance is a great example of this. If you have a premium credit card or are a member of a club like the AAA, there’s a good chance you already have it and don’t need to add it to your car insurance policy.

7. Check Low-Mileage and Usage-Based Insurance

Drivers who spend very little time behind the wheel and are very safe and careful on the roads, should look into low-mileage and usage-based car insurance.

These options are available for new cars and older cars; young drivers and experienced drivers. Most insurance companies will install a telematics device in your car that tracks everything from the miles you do to the amount of time you spend looking at your smartphone. This data can then be used to assess risk and adjust your premiums accordingly.

Many insurers will offer you a discount of up to 10|% just for signing up to these programs and also promise that your auto insurance rates will not increase, so there’s really no harm in signing up.

8. Maintain a Good Driving Record

You can’t turn back the clock and undo any damage from the past. But by focusing on safe and responsible driving from this point on, you can make life much easier for yourself in the future.

Just because you’re driving an older, less valuable car doesn’t mean you can afford to tear-up the streets and disobey the rules of the road. Every time you get a ticket for speeding, reckless driving or another moving violation, your car insurance rates may increase.

The same thing will happen if you are ever involved in an accident, even if you were not at fault for that accident. A safe driver is always a richer driver in this sense, so regardless of what has happened in the past, make sure you’re safe and responsible from this day forward.

Bottom Line: Cheapest Cars to Insure

Many budget level cars offered by Honda, Toyota, Ford, and Dodge are some of the cheapest cars to insure, including the Dodge Caravan SE, Honda Odyssey LX, and Ford Escape, while cars offered by luxury car manufacturers like BMW and Mercedes are at the very top of the list.

You don’t need to choose one of these cheap cars just because you’ll save a few bucks on your car insurance, but you should try to stay within the cheap range. In our research, we found that the difference between the cheapest cars to insure and the most expensive was close to 200% to 300%. In other words, it’s the difference between auto insurance quotes of $1,000 and ones of more than $3,000!

It’s important to balance practicality over style; head over heart. Choose a car that ticks the boxes for practical reasons, such as fuel economy and family/passenger considerations, as opposed to one that looks the most expensive and drives the fastest. 

It can be a hard sacrifice to make, especially if this is your first car and you’ve always dreamed of having something flash and stylish but making a wrong decision now could cost you severely in the future.