Does insurance cost more for a newer car?

Buying a new car comes with more than just the upfront cost of the vehicle; you also need to factor in ongoing expenses, like car insurance. A common misconception Canadians have when it comes to buying a new car is that they are always more expensive to insure than used cars. While this is often true in a lot of cases, the reality is a lot more complex.

Depending on the vehicle, driver, location, and available discounts, a new car may not always lead to higher insurance premiums. There are several factors that go into determining your insurance rate, and your car's age is only a partial influence. For example, a brand-new SUV that has high safety features may qualify for discounts, which could offset its higher vehicle repair costs. In contrast, an older vehicle with minimal anti-theft devices may make it a prime target for theft, making the car a higher risk in the eyes of an insurance company.

In this guide, we'll go over how insurance costs are calculated, how new and used vehicles compare in terms of insurance rates, and more. Whether you're shopping for a new car or weighing the pros and cons of buying a used vehicle instead, this guide will help you make a smarter, more cost-effective decision moving forward. Stick around for more info.

Other factors that affect car insurance premiums beyond age and make and model

As you may know, insurance companies look at numerous factors that determine a driver's risk profile. The higher your risk profile is, the more expensive your car insurance costs will be. Beyond the age of your car, insurance providers will typically look at the following:

Driving record

Your driving record is perhaps the most important factor when it comes to car insurance premiums. A person’s driving history is their experience coupled with their driving record. Having more driving experience is usually a good thing; however, only if you have a clean driving record to go with it. A clean driving record is free from accidents, traffic tickets, and other incidents. A clean record indicates that you are a safe and responsible driver who is less likely to get into an accident.

If you maintain a clean record for a certain number of years, your insurance company may lower your premium accordingly. Alternatively, if you have a poor driving record, your insurance company may have grounds to cancel your policy, which could leave you with no other option than purchasing high-risk insurance.

Age

Age is another factor that has a significant impact on your auto insurance rate. From an insurance company’s perspective, there is a direct correlation between age and risk level. They believe that the younger a driver is, the less driving experience they have, and the greater their chances of getting into a collision. This is why drivers below the age of 25 typically have the highest car insurance rates in Canada. Conversely, another age group impacted is seniors over the age of 70, who may have a higher premium, given their reduced vision and reaction time.

Where you live

Location is another factor that can majorly affect your auto insurance premium in Canada. When calculating your car insurance rate, an insurance company will ask for your address. They may also ask for the addresses or regions in which you typically drive your car, such as the address of your office if you commute to work. This is because where you drive your car also indicates your risk level.

Drivers who live in populous urban areas with more traffic are more likely to get into accidents, and their insurance may be higher accordingly. In contrast, drivers who live in rural parts of the province with less traffic are considered less likely to get into accidents and may receive a reduced rate.

Furthermore, if you live or work in a part of the country prone to climate-related incidents, such as floods or wildfires, or in an area with a high crime rate or high rate of claims, your insurance premium can also be impacted.

How frequently you drive

How often you drive your vehicle is another factor insurance companies consider. Spending an above-average amount of time on the road (e.g. if you drive for your job) usually translates to higher premiums than if you spend a below-average amount of time behind the wheel (e.g. if you only drive a few days each week). Additionally, if you frequently drive your car at night or on major highways (which can put you at a higher risk of an accident), your insurance rate can also be impacted.

Insurance history

Insurance history also matters. The more insurance claims you have, the more likely you are to file another in the future. Having little to no claims on your insurance history can work in your favour when it comes to securing affordable car insurance, while numerous claims and at-fault accidents can work against you.

Repair costs and replacement costs

According to the Insurance Bureau of Canada, the cost of new passenger vehicles increased by 12.1% over the past three years, while the price of vehicle parts and replacements rose by 18%. These higher market values and repair costs directly contribute to higher car insurance costs.

Theft risk and model popularity

Most new cars come equipped with advanced anti-theft devices like alarm systems, immobilizers, and GPS tracking, which can directly lower insurance costs, given that it's harder to steal these types of vehicles. That said, statistics from Équité Association state that some of the most commonly stolen vehicles, such as the Toyota Highlander and Ford F-150, are all models built in 2020 and after. So, as you can see, it does go both ways.

Depreciation and resale value

According to the Driver's Note, new cars tend to depreciate at a rate of 20% to 30% within the first year, which is something insurance companies take into account. Still, while depreciation in the first year is high, it doesn't compare to the depreciation of a vehicle aged over 5 to 10 years.

For example, if your car is written off after an accident, your insurer generally pays the actual cash value, meaning a new car's payout would have a higher actual cash value than that of an older one, leading to higher car insurance costs. Some new cars, like the Toyota Tacoma and Honda Civic, tend to have lower rates of depreciation, which means even as they get older, they may still experience higher car insurance rates compared to cars like a Maserati or BMW sports cars.

Safety ratings and crash-test data

Many newer vehicles get higher crash safety test scores due to their modern designs and durable materials. Cars with strong Insurance Institute for Highway Safety (IIHS) or National Highway Traffic Safety Administration (NHTSA) safety ratings are typically cheaper to insure because they feature advanced safety features that help minimize bodily injuries in a collision, lowering your premiums for auto insurance.

How safety features & advanced technology in newer cars can lower insurance

One of the benefits of driving a new car versus an older vehicle type is that they are usually equipped with the latest safety features and advanced technology that can help prevent accidents and make your driving experience more enjoyable. More importantly, the presence of these features can also lead to lower rates for our insurance policies by 5% to 15%:

Collision Avoidance Systems

Collision warning and blind spot tracking are safety features that function together. The purpose of these technologies is to prevent accidents by alerting the driver to incoming vehicles, particularly those that may be hidden in the car's blind spot. With collision warning and blind spot tracking, the vehicle alerts the motorist when a moving vehicle is close by.

Adaptive Cruise Control

This safety system works alongside your car's anti-lock brakes, which are another typical feature in modern vehicles. Adaptive cruise control means your car has sensors that identify when traffic has slowed or when you have moved lanes to pass another vehicle. When the sensors identify either of these conditions, the motor vehicle will accelerate or reduce speed by engaging the gas or brake pedals, without the motorist having to change or turn off the cruise control feature.

Lane Keep Assist

Lane keep assist differs from lane departure warning in the sense that if your vehicle crosses into another lane without your signal switched on, the car will take action to pull you back into your lane. This is a type of steering assist that helps drivers avoid mistakenly driving out of their lane.

Rearview cameras and parking sensors

Backup cameras and parking sensors help reduce the number of collisions that occur in parking lots. These devices notify you when objects are close to your vehicle and provide a view of what's behind you as you're in reverse.

Comparing auto insurance rates for a new vehicle vs. used cars

While keeping in mind that insurance coverage costs are influenced by more than the age of your vehicle, let's compare new and used cars using side-by-side scenarios below:

Example 1: 2023 Honda Civic vs. 2013 Honda Civic

• 2013 Honda Civic insurance rates: $3,827

• 2023 Honda Civic insurance rates: $4,626

As you can see, the newer model is more expensive than the older used model. The latest versions are often more expensive to replace and repair than previous ones, which is why the new car has a higher rate. Note that these rates are for a 19-year-old male driver.

Example 2: 2021 Toyota Corolla vs. 2017 Toyota Corolla

• 2021 Toyota Corolla insurance coverage rate: $1,997

• 2017 Toyota Corolla insurance coverage rate: $2,028

The demographic for these rates is a 35-year-old male driver living in downtown Toronto who has a clean driving record. In this case, the used vehicle has lower vehicle insurance rates than the older model.

Example 3: 2021 Ford Escape vs. 2018 Ford Escape

• 2021 Ford Escape car insurance costs: $1,782

• 2018 Ford Escape car insurance costs: $1,789

Again, these rates are based on a 35-year-old driver living in Toronto, Ontario, who has a clean driving record. As you'll notice, the auto insurance rates for each are only off by $7.

Ultimately, a low-mileage used car in excellent condition may cost less to insure than a new car, but a vehicle with a history of claims may result in higher premiums than expected. Mileage, accident history, and how well the vehicle was maintained are all important factors that will play into how your car insurance rates are calculated in the end.

How to lower insurance costs for your new vehicle

Regardless of whether you drive a new or used car, getting comprehensive car insurance should not have to come at the expense of your bank account. To lower your insurance rates with your provider, here's what you need to do:

Shop around and compare quotes

One of the most beneficial things you can do is shop around and compare quotes. The majority of insurance providers have various underwriting techniques; therefore, your insurance may be priced differently by each company. You can do this by working with an insurance broker like BrokerLink or using a single quote comparison website.

Increase your deductible amount

The deductible is a certain amount of money you choose to pay to your insurer when making a claim before the insurance coverage kicks in to cover the rest of the expenses. Deductibles range between $300 and $1000. Choosing a larger deductible may result in a slight decrease in your premiums.

Ask about available discounts

Most insurers provide discounts that can dramatically reduce your auto insurance premiums. While savings may differ between providers, a few of the most common offers available include:

• Winter tire discount: Installing winter tires on your vehicle can save you up to 15% on your insurance premiums

• Completing a driving course: If you're a new driver, taking an official driving course can help you save money on auto insurance.

• Multi-car insurance: If you have more than one car in your family, consider opting for a multi-car insurance policy to save up to 15%.

• Loyal customer: Being with the same insurance company for a number of years often pays off. You may qualify for a loyalty discount.

• Theft prevention devices: Fitting anti-theft devices on your vehicle, such as dash cameras and steering column locks, can reduce the cost of your insurance by up to 15%.

• Safe driver: Remaining a safe driver with no accidents or insurance claims can lead to significant savings on your insurance costs.

• Bundle your policies: Bundle your home, auto, and other insurance plans with the same provider to save on costs.

Pay for your insurance policy upfront

To avoid monthly service charges from your provider, consider paying for your coverage upfront to save money.

Get in touch with BrokerLink for more information

As you can see, whether or not insuring a new vehicle costs more than a used car is more complex than it may seem, and ultimately, it depends on numerous factors like location, driver profile, driving record, and more. Ultimately, the smartest move is to compare quotes before you buy a new or used car to determine what's best for your finances when saving for a car. At BrokerLink, we help Canadians find affordable car insurance, including policies like:

• Third-party liability coverage

• Collision coverage

• Comprehensive coverage

• Uninsured motorist insurance

• Direct compensation - property damage

• Accident forgiveness

• Young drivers insurance

• And more

Whether you have questions about whether your insurance carries over to a new car, what the best time to buy a vehicle is, whether you need to buy insurance before or after buying a car, or other inquiries, give BrokerLink a call over the phone today! You can also get a free insurance quote using our online quote tool!

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FAQs about first time car insurance

How long does it take to buy first time car insurance?

The reality is that purchasing car insurance can be a relatively quick process, especially if you have all of your documents in order. To purchase auto insurance in Canada, you should come prepared with a copy of your driver’s licence, your driver’s abstract or claims experience letter, if applicable, and the details of your vehicle, e.g. vehicle identification number, vehicle make and model, etc. Once you have everything in order, which should only take you 10 or 15 minutes, you can start shopping around for coverage. Nowadays, you can buy car insurance coverage online, which has streamlined the entire process and made it even quicker. Depending on how long you spend comparing policies and weighing your options, you could purchase an insurance policy in as little as half an hour.

How do I renew my first car insurance policy?

Renewing car insurance is actually relatively simple. If you have a first time car insurance policy, it may automatically renew on the last date of the term. However, if this isn’t the case, all you have to do is contact your provider and let them know that you wish to renew your policy. You might be able to do this over the phone, online, or in person. Just be careful to notify them before your policy expires, as renewing expired car insurance renewal can be trickier and more expensive.

Will my first time car insurance rates go up if I get into an accident?

If you caused the accident, then your rates are likely to go up - unless your policy includes accident forgiveness coverage. With accident forgiveness coverage, your insurer may not be able to raise your rates after your first at-fault accident, though it depends on the specific circumstances of the accident. Further, if you were not liable for the accident, then the accident is unlikely to raise your rates.

Does first time car insurance cover personal belongings stolen from a car?

No. First time car insurance, even those policies that feature comprehensive coverage, do not generally cover the cost of stolen personal belongings. While comprehensive insurance will cover the cost of replacing a stolen vehicle or replacing permanent fixtures in a vehicle, like a steering wheel or catalytic converter, it will not cover you for belongings like a wallet or laptop being stolen from your car. There is a chance your home insurance policy would cover these belongings under contents coverage, but you will need to review the terms and conditions of your property insurance plan to find out.

Do I need to have a driver’s licence before I can buy first time car insurance?

Yes. You will not be able to purchase a car insurance policy anywhere in Canada until you obtain a valid driver’s licence in the province where you live.

How can I make first time car insurance more affordable?

You can make first time car insurance more affordable by enrolling in a driver’s education program, purchasing multiple auto insurance policies at once, bundling different insurance policies together, driving safely, minimizing how much you drive, or by qualifying for a winter tire discount, a group insurance discount, a telematics discounts, or another type of auto insurance discount.

If you have any questions, contact one of our local branches.