More people are buying new cars as we continue to see the U.S. economy slowly improving. These new car buyers are replacing older cars that they’ve driven longer. Another factor that’s helped people move forward with new car purchases are the low interest rates we’ve enjoyed the past several years.
The combination of these two factors has resulted in a record year for auto and truck sales. One of the interesting notes in the flurry of buying activity for new cars and trucks is a rise in new vehicle pricing. The average price of a new vehicle is a little over $31,000 which is up about $1,000 over the same time in 2012. For example, a new fully loaded Ford Fusion with heated leather seats, premium stereo system, and aluminum wheels costs $31,000. Similarly, a Ford F-150 Platinum edition pickup can run about $47,000. Even the Ford F-150 STX pickup with a four door cab runs $34,240 which is $1,500 more than the base model.
With new vehicle prices rising, there are two car insurance implications that new buyers should consider as they shop for replacement cars and trucks:
- Insurance premiums
- Amount of coverage
Insurance companies assign a numeric ranking or symbol to each vehicle, new or used. This symbol corresponds to a value range for the vehicle. The larger the symbol number, the higher the value of the car. Insurance premiums usually increase a little for each jump in the symbol or vehicle value. A car priced at $31,000 usually costs more to insure than one that costs $25,000. With that in mind I recommend shopping for new or new-to-them vehicles. Compare insurance premium rates for the models being considered as total cost of ownership should include insurance cost in addition to maintenance and repairs.
The other consideration to review is the amount of insurance coverage you should carry. Texas state minimum limits are 30/60/25. The first two numbers, 30 and 60, are the amount of medical coverage. If you hit someone and you’re at fault, these limits will pay up to $30,000 in medical care for any one person injured in the vehicle you struck, $60,000 total if there’s more than one person in the vehicle, but no individual receives more than $30,000 in medical care. The 25 corresponds to the amount of coverage for property damage.
Most people carry the same amount of coverage on their uninsured motorist’s coverage. This is coverage that protects you if someone hits you, they are at fault, and they do not have car insurance or enough car insurance. The amount of coverage most people should carry if buying a new vehicle would be 50/100/50 since that has enough coverage on the property damage portion to cover most new vehicles. If you drive a car or truck that’s more expensive, then bump your coverage up to at least 100/300/100.
The cost difference between these different levels is pretty small, usually $10 to $20 a month. That’s a whole lot less painful than continuing to make payments on a vehicle that’s been totaled when you weren’t carrying high enough limits to cover it.
What do you think? Share your comments, questions, and experiences with me in the comments section of our blog or on our Google + and Facebook pages. I’d love to hear from you!