Are new cars cheaper to insure?

By Chad Lückhoff

In a market saturated with a near immeasurable number of used cars, you will still find people opting for a new vehicle instead. The allure of a shiny new set of wheels is hard to ignore. The smell, the feeling, the sense of pride attached to the fact that you know that you are the first owner of a vehicle is something special, we will admit, but there is often more to it that just the feel-good factor.

New cars offer a peace-of-mind that sometimes is difficult to find in a used car. Knowing that a car will be reliable and most likely without fault puts us at ease. Knowing that it is covered by the manufacturer’s warranty, and that service plans will cater for some of the upkeep, helps you sleep at night. But what about protecting your investment?

Comprehensive insurance is a legal requirement for a vehicle that is financed through a bank or an institution, and this can be an significant monthly cost which many fail to really consider. This also raises the question of whether a new vehicle would be cheaper to insure than its used counterpart.

Unfortunately, this answer is not as straightforward as a simple yes or no. Your insurance premiums are calculated based on a variety of factors such as age, make and model of car. Various other factors, such as night-time parking location, frequency of use, mileage covered, as well as where you live, are all considered and used to calculate the premium that will best look after your car, as well as the insurance company's profitability and longevity.

Most of the calculated premium is based on risk. The more desirable you vehicle is on the illegal/black market, the more risk there is attached to it. Thus, cars that are popular amongst thieves will command a higher premium, as the insurance company is more likely to have to pay out due to theft or hijacking, than they would be for a less popular model.

You have a risk profile attached to your person as well. Should you be an individual who claims more often, due to accidents or theft, your risk profile will be elevated. In order for the insurance company to stay in business and be able to cater for all the claims they receive, they need to charge you accordingly.

Owners who claim more often present a higher risk, and should they also drive a high-risk vehicle, they can expect to pay a hefty premium for their car insurance. The inverse applies for the owner who drives carefully, ensures their vehicle is fitted with anti-theft systems and is locked up at night, and owns an unpopular car, because these factors will logically have them pay less for insurance.

So it is entirely possible for a new car to cost less to insure than a used car, and vice versa. It is always a good idea to check with an insurance company, or use a finance aggregator, to check what your possible premiums will be before purchasing a car, to avoid any unpleasant surprises.

Your insurance may be calculated using some of the following information:

• Car make and model
• Year of manufacture
• Vehicle replacement value
• Vehicle location and access during the day
• Vehicle location and access at night
• Security systems installed in vehicle
• Intended use (work / private)
• Average annual mileage
• Residential location
• Personal risk profile / claim history

Check out the insurance aggregator on AutoTrader.co.za here.