Car Shoppers Should Consider Safety and Insurance

According to one survey, 21% of Americans put off purchasing a car in 2022 due to the state of the economy, but anyone who really needs a car won’t be able to avoid buying one forever.1 Unfortunately, the average price of a new vehicle rose to a record high above $49,500 in December of 2022.2

If you’re in the market for a new car, you may be looking for a safe model that meets your family’s needs and seems like a good value. However, there are also important insurance issues to consider.

Safety First

Safety is often a priority of car buyers, but it is also important to the government and insurers. In fact, the National Highway Traffic Safety Administration (NHTSA) and the Insurance Institute for Highway Safety (IIHS) both perform regular tests to evaluate the crashworthiness of new vehicles. The NHTSA has a 5-Star Safety Ratings Program, and the IIHS categorizes scores as Good, Acceptable, Marginal, or Poor, and selects “Top Safety Picks.”3

Car manufacturers continue to develop safety features — rearview cameras, forward collision warning, blind-spot monitoring, lane-departure warnings, high-beam assist, adaptive cruise control, automatic emergency braking — and more.

Prepare for the Premium

An individual’s driving history has a large effect on the cost of auto insurance. Additional factors include the value of the automobile, the level of coverage you choose, how well a particular model withstands various types of crashes, and the typical repair costs. Optional safety features may help prevent accidents, so having certain features may earn you a discount on your insurance, but others can make car repairs more expensive, which might result in a higher premium. For similar reasons, it typically costs more to insure an electric vehicle.4

People who have been driving older cars often settle for bare-bones liability protection. If you are financing a new vehicle, keep in mind that your lender will require full collision and comprehensive coverage. If you are deciding between two or more types of vehicles, you might ask your insurer for an insurance rate comparison.

Bridge the Gap

Automobiles can depreciate quickly — by almost 20 percent in the first months of ownership — and your insurance company might repay you only for your auto’s current market value.5 Guaranteed Auto Protection (GAP) insurance covers the difference between the insured value of your automobile and what you owe on a loan or lease. It could help you be fully covered if your relatively new vehicle were to end up being totaled or stolen.

Imagine if you were to pay $40,000 for a new car and it was totaled several months later. The insurance company could determine that the current book value is only $32,000, and you might owe the lender the $8,000 difference for a car you can no longer drive.

You are more likely to need gap insurance if your vehicle is less than three years old, you financed your car for more than four years, or did not make a large down payment. If you decide to lease a vehicle, ask whether the contract includes a gap waiver.

Though it may be possible to purchase gap insurance through the car dealer, it’s often less expensive to buy it directly from your own auto insurer. For any gap insurance to take effect, a vehicle must first be covered under your comprehensive and collision coverage and must also be declared a total loss.

Car dealers might ask for proof of insurance before they let you drive a new car off the lot. If you have an existing auto policy, it may provide temporary coverage that is identical to what you had on the older car, which may not be nearly enough.

To maintain proper coverage, consider contacting your insurance agent before you head out to strike a deal.