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Why Is An Older Car More Expensive To Insure

Why Is An Older Car More Expensive To Insure

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Things To Avoid When Buying A Used Car

Used car and truck dealers have been buying models for more than their original sticker price. Jim Watson/AFP via Getty Images

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If you’re looking for a great deal on a used car to take advantage of the warm summer weather, it’s not going to happen.

The market for secondhand cars is absurdly and unprecedentedly hot now. Used vehicles were 40% more expensive in June than before the pandemic in February 2020, according to data from JPMorgan.

Does Buying A Used Car Save You Money In The Long Run?

The average nine-year-old car changed hands for $13,250 in June, according to automotive research site Edmunds. That’s a 30% increase over the same month in 2020, while a five-year-old vehicle will set you back $24,000 — up $6,000 from a year ago.

The madness all comes down to simple economics: the demand for used cars far outstrips the supply, pushing prices higher and higher. But the reason for scant inventories and such high interest in used cars gets a bit more complicated.

The market for used cars is deeply intertwined with the market for new ones, says Kayla Reynolds, an analyst at Cox Automotive. The latter will go through a rough patch, and those problems are in the used market.

Why Is An Older Car More Expensive To Insure

A devastating shortage of microchips – which are needed for various critical electrical components – is slowing car production worldwide, suffocating the supply of new models and sending prices skyrocketing. High dealer markups and a lack of options are forcing more buyers to shop used, sending up used car inventory, Reynolds said.

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To put the magnitude of this shortage into perspective, new car inventories in the US fell 54% in June compared to the same month in 2019, according to Cox. Dealer incentives have declined and transaction prices for new cars have risen all the time as a result.

It brings a whole new set of customers to the usual market, people who are ready to spend serious money on a new set of wheels and, in turn, increase the price of used cars, says Ivan Drury, senior manager of insight. in Edmunds.

Read more: Meet the 9 former Tesla executives who left Elon Musk to become power players at rivals like Apple and Rivian

The drop in new cars rolling off the assembly line has increased the flow of vehicles to and from rental agencies, which are typically the main source of used inventory. Rental companies, which sell cars en masse during the pandemic, typically buy 2 million new cars each year and get them every 1-2 years, Drury said.

Are Cars Getting More Expensive?

With the trip back, they’ve already stocked up on used cars – and they’re not giving up.

Moreover, with the price of new cars through the roof, people are holding onto their older vehicles longer than trading them in, cutting off the flow of cars into the used market. For the same reason, they choose to buy leased vehicles at the end of the term, rather than exchange them for new leases.

Between May and June, wholesale car prices declined for the first time since December, suggesting that demand and supply are on a path toward some kind of equilibrium, Cox’s Reynolds said.

Why Is An Older Car More Expensive To Insure

He expects that retail prices will soon follow suit, and buyers will begin to notice the prices of cars gradually falling by the fall. The car-buying frenzy caused by the pandemic partly explains the shift, he said.

How Car Make And Model Impact Auto Insurance

But the supply crisis caused by the chip shortage isn’t going away anytime soon, meaning it could be a while before buyers see the car prices they’re used to. Even if new models are back in stock, the used market won’t return to normal overnight, Drury said.

His advice to car buyers: “I would say give it at least six months. And in all honesty, if you can hold out for a whole year, you better come out with it.”

Are you a car dealer, buyer or private seller with a story to share about how to buy and sell cars in this red hot market? Contact this reporter at tlevin@insider.comFILE – In this Nov. 30, 2007 file photo, mechanic Ed Wuerth of Wuerth Automotive in Brownstown Township, Mich., works on a Volvo in his shop. While new car owners may worry about making monthly payments in the event of job loss, those who have owned their car for several years may face the problem of paying for hefty repairs, especially as the vehicle approaches the end of its original warranty period. . (AP Photo/Carlos Osorio, file)

According to the Department of Labor, the price of vehicle maintenance and repair has seen the largest increase since 1974.

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“Generally today, there are more jobs than there are people filling those jobs. So it’s going to cost employers more because they have to find the right people and they have to train more often,” said Brian Moody with Kelley Blue Book.

“If you have the skills you want and there are multiple people with those skills, you can command more for your services,” Moody said.

From rear view cameras to blind-spot monitoring systems, today’s vehicles are also packed with features that keep us safe on the road. But they can add to the repair bill.

Why Is An Older Car More Expensive To Insure

Moody said that even though maintaining a vehicle is more expensive, drivers should not skip routine maintenance as a way to cut corners.

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“If you can’t afford to fix everything that’s wrong with your car at once, ask the mechanic… ‘Hey, can you help me prioritize these things? Which things are going to fail and which things are just niceties?'” said Moody. “And if you have that relationship, they’ll work with you and say, ‘Hey, let’s do this first, then bring it back in a month and then we’ll do these things.'”

Moody says it’s better to hang on to old vehicles and pay for repairs. He says buying new now is more expensive in the long run because of higher interest rates and insurance costs.

The Morning Headlines, a curated mix of what you need to know to start your day in Colorado, handpicked for you. by Tess OwenTess is a graduate of Seattle University, a longtime PNW resident, and a believer in the Oxford comma. He writes about anything and everything. and authored by Nick VinZant Nick VinZant is a Senior Research analyst and Insurance Expert at.

Different cars have different insurance costs. Find out how the make and model of your car affects your car insurance rates.

Classic Vs. Antique Vs. Vintage Cars: What Is The Difference?

A standard car model won’t cost much to insure compared to an expensive luxury car, for example. In fact, we found that the safe and economical Jeep Wrangler costs an average of $1,777 per year to insure, while the expensive and high-end Jaguar XJR costs $5,478 per year to insure, on average.

There’s more to how a car’s make and model affects insurance rates than the cost of the vehicle, as you’ll learn in this article.

The manufacturer of your vehicle is the brand that built it. The model is a specific version of your vehicle. Using the Honda Accord as an example, Honda is the manufacturer and Accord is the model.

Why Is An Older Car More Expensive To Insure

Your car’s make, model, trim, year and body type all play a role in how much you pay for car insurance. Expensive car models with extra features and large engines will cost more to insure than standard car models with high safety ratings. That’s why you should compare car insurance quotes from multiple companies when shopping for a new car. It will show you how different trims and body types can affect your premium.

What’s A Classic Car? In Ct, 20 Year Old Vehicles Make The Cut

Even if your car is the same model as others, you can customize it with trim. Honda Accord 2018 has five trim levels, including LX, Sport, EX, EX-L and Touring. Trim level options often include:

Another thing you should consider when buying a car is the body type. Examples of vehicle body types include:

New cars cost more to insure than old cars, in general. That’s because new cars usually cost more than old cars.

If you’re in an accident in an old car, the resulting repairs are often cheaper than if you were in a new car. Depending on how old your car is, though, the cost may be greater than the true cash value of the repair. If you’re in the market

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