This article will help answer all these questions, helping you understand all the factors that impact an old car insurance premium.
Before we address the elephant in the room, it is important to understand that a car’s age is not the sole deciding factor to estimate the insurance amount. There are various other factors including:
Before we move on to the next point of discussion, please note that it is very important to also see other factors that affect a car insurance amount, to better understand the reason behind varied insurance prices for old or new cars.
For many people, a car is not merely a mode of transport, it is a part of their family. For some, it is their first car and for some, it is a special gift. We all have our reasons. This sense of emotional attachment brings in the intent to hold on to it even after its lifetime is nearing its end. Have you ever seen someone referring to their car as ‘her or ‘she’ or ‘baby’? A lot of times, right? Well, it certainly sounds weird to some, but for many – cars are a part of their life. Hence, a lot of people still tend to hold onto their first car or even inherited family cars.
However, this is not something that is considered good when it comes to the auto insurance domain. Though they lead to cheaper insurances, cars which are likely to be considered as an asset, heavily depreciate over time, increasing the insurance risk.
Car insurance is usually calculated on IDVs or the Insured Declared Value. As the age of your vehicle increases, its market value decreases, hence leading to cheaper insurances. On the other hand, a new car has greater value leading to expensive insurance.
Moreover, new vehicles with features like backup cameras, automatic brakes, and other safety assists make them more likely to protect you from accidents, whereas an old car would be unable to offer you this luxury. Apart from this, in case your car is manufactured abroad, the huge cost of shipment of parts massively drives the insurance prices.
As your car gets older you also get some added benefits other than the cheaper insurance prices like claim-free driving and sizable No Claim Bonus, which in turn give you a lower price for insurance every year.
Besides this, with old cars and claim-free driving, a lot of no claim bonus gets accrued in one’s account. This leads to decreased premium amounts every consecutive year when renewing your old car’s insurance.
Hence, all of these factors make insurance for old cars a relatively cheap financial affair than that of a new car. This makes it an extremely lucrative affair for those who are buying a used car as they get a depreciable asset at a cheaper rate than the original market value as well as get comprehensive coverage at low premium amounts.
Though the insurance amount for older cars is dependent on a lot of factors, it is still cheaper. Keep in mind that although new or old - if uninsured, you are leaving your vehicle heavily prone to damage and in the case of an unfortunate accident, the price you would end up paying would be much higher than the price you would have paid to buy insurance earlier.
Another factor that cannot be ignored is safe driving. It ultimately boils down to how safe you are driving than which car you have, a new or an old one. Safe and responsible driving habits will keep the probability of accidents occurring at bay and will also help you save a lot of money in the future.
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