Buying a new car is exciting, but one of the first questions that often comes up is, “Will my insurance cost more?” The simple answer is yes, car insurance for new cars is generally more expensive than for older vehicles. The reason is that new cars have a higher market value, advanced technology, and expensive replacement parts, which increase repair and claim costs for insurance companies.
In the United States, new car owners typically pay 15% to 30% higher insurance premiums than owners of older vehicles of the same make and model. According to the Insurance Information Institute, the average cost of full coverage insurance for a new car is around $1,700 to $2,500 per year, depending on the vehicle’s value, safety rating, and state regulations.
Insurance companies determine premiums based on the risk and potential payout. Since a new vehicle costs more to repair or replace after an accident, the insurer takes on greater financial risk. However, not all new cars are expensive to insure. Models with strong safety features, anti-theft systems, and high safety ratings may qualify for lower rates or special discounts.
In this article, we’ll explain in detail why insurance is often higher for new cars, what factors affect those costs, and how you can lower your premium while keeping full coverage. Whether you just bought a car or plan to, this guide will help you understand exactly how insurance pricing works and what steps can help you save money on your new vehicle.
Why Insurance Costs Are Higher for New Cars
1. Higher Vehicle Value
New cars have a much higher market value than used ones. If your car is totaled, the insurer must pay its actual cash value (ACV) the cost to replace it. Since new cars depreciate from a higher starting point, payouts are higher, leading to increased premiums.
Example:
- 2024 Toyota Camry (new): Insurance cost around $1,800 per year
- 2017 Toyota Camry (used): Insurance cost around $1,300 per year
2. Cost of Repairs and Replacement Parts
New cars use advanced materials and high-tech systems that are costly to repair. Components like sensors, cameras, and airbags make repairs more expensive even for minor collisions.
3. Comprehensive and Collision Coverage Requirements
When you buy a new car, lenders often require comprehensive and collision coverage in addition to liability insurance. These optional coverages protect against theft, vandalism, and damage from accidents, but they significantly increase total premium costs.
4. Greater Risk for Insurers
Insurance companies consider potential payout risk. A new car means higher repair and replacement costs, which increases the insurer’s financial exposure in case of an accident or theft.
Average Cost of Insurance for New vs. Old Cars
| Vehicle Type | Average Annual Premium | Typical Coverage Type |
| Brand-New Vehicle | $1,700 – $2,500 | Full coverage (required by lenders) |
| 3-Year-Old Car | $1,300 – $1,700 | Full or liability only |
| 7-Year-Old Car | $900 – $1,300 | Liability or basic coverage |
| 10-Year-Old Car | $600 – $1,000 | Minimum liability |
These figures vary by state, driver’s record, and insurer, but newer cars almost always fall at the higher end of the scale.
Factors That Make New Car Insurance Expensive
Insurance companies evaluate multiple factors when determining your rate. For new cars, the following elements play a major role:
1. Purchase Price and Vehicle Value
Expensive vehicles cost more to repair and replace, which raises the premium. Luxury brands like BMW, Tesla, and Mercedes-Benz often have the highest rates.
2. Safety and Crash Test Ratings
Vehicles with top safety ratings may qualify for insurance discounts, but if they have expensive repair features (like advanced airbag systems), rates can still rise.
3. Anti-Theft and Security Features
Modern security systems help reduce the risk of theft. Cars equipped with GPS tracking or immobilizers may get 5–10% premium reductions under comprehensive coverage.
4. Claim Frequency and Repair Data
Insurers use historical data from models. If a new model shows higher claim rates, its insurance cost will likely increase for all owners of that make.
5. Type of Coverage
New car buyers often choose full coverage (liability, collision, and comprehensive), while older car owners may drop collision coverage once the car’s value declines.
Why Some New Cars Are Cheaper to Insure
Not all new cars come with high premiums. Some models have advanced safety technology that reduces accident risk and insurance costs.
According to data from the Insurance Institute for Highway Safety (IIHS), vehicles like the Subaru Forester, Honda CR-V, and Toyota RAV4 consistently earn top safety ratings, resulting in lower average premiums.
Insurers also look at:
- Low theft rates
- Affordable parts availability
- Simple repair processes
If you’re choosing a new car, research insurance quotes before buying. This can save you hundreds of dollars annually.
Examples of Average New Car Insurance Costs by Model
| Vehicle Model (2024) | Estimated Annual Premium | Notes |
| Toyota RAV4 | $1,650 | Good safety score |
| Honda Accord | $1,700 | Reliable and affordable to repair |
| Ford F-150 | $1,850 | Popular truck, moderate repair costs |
| Tesla Model 3 | $2,200 | High tech parts increase costs |
| BMW X5 | $2,500 | Luxury brand, expensive replacement |
| Subaru Forester | $1,600 | Excellent safety record |
Comprehensive and Collision: Why New Cars Need Them
Comprehensive Coverage
Pays for non-collision damage such as:
- Theft
- Fire
- Flood
- Hail or weather damage
- Vandalism
Collision Coverage
Covers damage from hitting another vehicle or object.
Without these coverages, you’d be responsible for the full repair cost on your new car, which could easily exceed $5,000 to $10,000 in moderate accidents.
Depreciation and Insurance Value
Depreciation impacts insurance because the payout is based on actual cash value, not replacement cost.
New cars lose an average of 20% of their value within the first year, according to Kelley Blue Book. Insurers calculate potential payouts considering this depreciation when setting your rate.
Adding gap insurance can help cover the difference between your car’s loan balance and its depreciated value after a total loss.
How to Lower Insurance Costs for New Cars
Even though new car insurance is more expensive, there are smart ways to reduce your premium without losing coverage.
1. Compare Quotes
Always compare quotes from at least three insurers. Prices for identical coverage can differ by hundreds of dollars.
2. Increase Your Deductible
Raising your deductible from $500 to $1,000 can lower your premium by up to 15%.
3. Bundle Policies
Combine auto and home insurance with the same provider to save 5% to 25%.
4. Maintain a Clean Driving Record
Avoiding accidents and tickets keeps your rates low over time.
5. Ask About Discounts
Look for:
- Multi-car discounts
- Safe driver rewards
- Anti-theft or new vehicle discounts
- Usage-based telematics programs
6. Choose Cars with High Safety Ratings
Before buying, review IIHS safety scores and check if your insurer offers a discount for top-rated models.
7. Install Anti-Theft Devices
GPS trackers, alarms, or immobilizers can cut your comprehensive premium by 5–10%.
8. Pay Annually
Paying in full often earns a discount of 3% to 5% compared to monthly payments.
State Variations in New Car Insurance Costs
Insurance rates for new cars also vary by state due to regional laws, population density, and accident statistics.
| State | Average Annual Premium for New Cars | Key Factors |
| California | $2,200 | High repair costs and strict regulations |
| Texas | $1,950 | Frequent hail and flood claims |
| Florida | $2,300 | High accident and theft rates |
| Illinois | $1,700 | Moderate costs |
| Ohio | $1,450 | Lower-than-average rates |
| New York | $2,350 | Dense traffic and high living costs |
Where you live plays a major role in how much you pay for your new car’s insurance.
Electric and Hybrid Vehicles: Are They More Expensive to Insure?
Yes, typically. Electric and hybrid vehicles have expensive batteries and specialized repair needs. For example, Tesla and other EV models often cost 25–40% more to insure than comparable gas-powered vehicles.
However, insurers sometimes offer eco-friendly discounts for hybrids or EVs, especially in states promoting clean energy.
When New Car Insurance Might Cost Less
In some cases, insuring a new car can be cheaper than an old one. Here’s why:
- Better safety features lower accident risk.
- Advanced theft prevention reduces comprehensive claims.
- Usage-based programs reward careful driving.
For example, a 2024 Honda CR-V may cost less to insure than a 2012 Dodge Charger due to differences in repair costs and safety performance.
Frequently Asked Questions (FAQs)
Because they have higher repair and replacement costs, advanced technology, and higher actual cash value.
Yes, features like automatic braking, lane assist, and anti-theft systems can earn discounts up to 10%.
Yes, in rare cases. Some older cars lack safety technology or have high theft rates, increasing premiums.
If your car’s value is low and premiums cost more than potential payouts, it may make sense to switch to liability-only coverage.
Generally yes, because parts and batteries are costly to replace, but discounts may offset the difference.
No, color does not affect your premium. Rates depend on value, safety, and repair data.
While base rates are fixed, you can lower costs by adjusting deductibles, coverage limits, or asking for discounts.
Conclusion
New cars bring comfort, safety, and pride, but they also come with higher insurance costs. The key is understanding why premiums are higher and how to manage them effectively. By comparing policies, taking advantage of discounts, and choosing cars with strong safety features, you can keep your insurance affordable.
If you’re planning to buy a new car and want to find competitive insurance rates, Alias Insurance helps you compare quotes from top U.S. providers and choose the coverage that fits your budget and vehicle type.
