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New cars cost more to insure than used cars. That is the short answer, and it holds true for most drivers. But the reasons are worth understanding, because there are situations where a used car costs more to insure than you would expect, and a few where the gap between new and used is smaller than people assume.
Why new cars cost more to insure
The biggest reason is value. Collision and comprehensive coverage pay based on what your car is worth, so a $35,000 new car costs more to insure than the same model worth $15,000 five years later. Repair costs play a role too. New cars carry the latest sensors, cameras, and driver-assistance systems, and even a minor fender bender can require expensive recalibration. Insurers price that in.
There is also a coverage requirement that hits new car buyers. If you finance or lease, your lender requires full coverage with specific deductibles. You cannot choose liability-only on a financed car, even if you wanted to. That alone makes the new car insurance bill higher than a comparable used car you own outright. For more on that decision, see whether gap insurance is worth it on a financed vehicle.
When used cars surprise you
Used cars are usually cheaper to insure, but not always. Older cars without modern safety features can cost more in liability coverage, because their drivers and passengers get hurt more badly in crashes. Some older models are theft magnets, which pushes up comprehensive rates. And parts for discontinued models can be hard to find, making repairs pricier than the car’s value suggests.
The sweet spot for cheap insurance is a used car that is a few years old: new enough to have modern safety features, old enough that its value has dropped and you own it outright. A five-year-old mainstream sedan with a good safety record is about as cheap as car insurance gets.
The real decision: when to drop full coverage on a used car
This is where used car owners save the most. Once your car is worth only a few thousand dollars, collision and comprehensive may cost more than they could ever pay out. A common rule of thumb: if the annual cost of collision and comprehensive is more than about ten percent of the car’s value, dropping them deserves a serious look. Just be honest about whether you could replace the car out of pocket if it were totaled tomorrow.
Remember that dropping collision and comprehensive does not touch liability, which you still need. Our guide on what full coverage includes explains the pieces, and when dropping full coverage saves money walks through the math in detail.
How to insure either one cheaply
Whether you buy new or used, shop at least three insurers before you sign. Choose a car with strong safety ratings and low theft rates, because insurers reward both. Raise your deductible on a car you can afford to repair, and keep your record clean. The car you choose matters, but the driver behind the wheel and the insurer you pick matter just as much.
