Table of Contents
You might have noticed that the price of second-hand cars has surged dramatically in recent months.
According to a recent report from AutoTrader, the average price of used cars listed on their site has jumped by an astonishing 31%. This increase comes at a challenging time for drivers, with fuel prices also climbing sharply.
Despite this, buying a second-hand car generally remains more affordable than purchasing a brand-new vehicle. Here’s a comprehensive guide covering everything you need to know.
Second hand cars vs New cars
The age of your car doesn’t usually have a direct impact on the price of your car insurance. Many people assume that older or used cars have cheaper insurance because they are worth less, but this is not always the case. However, several other factors related to your vehicle do influence the cost, such as the expense of replacing parts and the number of safety features it includes.
These factors often correlate with the car’s age. For instance, newer vehicles tend to be equipped with more advanced safety features, which can help lower insurance costs. On the flip side, they often have more powerful engines, which might increase premiums.
As with many aspects of insurance, the situation can be complex. When deciding between a new or old car, it’s important to consider not just the age, but also factors like fuel efficiency, environmental charges, and tax implications. Identifying the cheapest cars to insure depends on a combination of these factors, not just whether the car is new or used. Here’s what you need to know.
(To clarify, this discussion excludes classic cars, which have their own distinct insurance considerations. We’re focusing on the comparison between older and newer cars in general.)
Why older or newer cars can seem cheaper to insure
Several major factors influence car insurance prices, many of which are generally linked to the vehicle’s age:
Safety features
Insurance companies consider the safety features of a car when determining its insurance cost. Generally, the more safety features a vehicle has, the lower the insurance price—though it’s not always a straightforward calculation.
There are several reasons for this:
Cars lacking advanced safety features are statistically more prone to accidents, which increases the likelihood of drivers filing claims.
Accidents involving such vehicles often result in more severe injuries.
Modern cars are equipped with a wide array of safety technologies, including:
Adaptive headlights
Lane assist systems (which help keep the car within its lane on highways)
Autonomous Emergency Braking
Collision detection technology
And many other features commonly highlighted in car advertisements.
Most older vehicles, however, do not have these advanced systems, which can make insuring certain older cars more expensive.
Cost of replacing or repairing parts
The higher the cost to replace or repair a car’s parts, the more expensive it will be to insure.
If parts are costly or need to be imported from abroad, the insurer faces higher repair expenses. This is because insurance companies are required to restore your vehicle to its pre-accident condition.
As a result, newer cars often carry higher insurance costs compared to older models.
Cost of writing off the car
Insurance companies also consider the potential cost of writing off a vehicle when setting premiums. New cars usually have a higher market value, so if they are involved in a severe collision, the insurance company may face a substantial payout if the vehicle is declared a total loss. This increased financial risk can translate into higher premiums.
Older cars, however, tend to have a lower market value, making it more economical for insurers to write them off rather than pay for costly repairs. This can result in lower premiums for older vehicles, as the insurer’s potential payout is less.
Power of the car
Newer cars tend to have more powerful engines compared to older models. For instance, a brand-new car with a 1.0-liter engine might outperform an older vehicle equipped with a 1.6-liter engine.
Vehicles with higher engine power are statistically more likely to be involved in accidents, which often result in costlier insurance claims.
However, many older cars feature larger and more powerful engines than some newer models. Ultimately, the insurance cost depends on the specific car and the individual driver’s profile.
Other considerations
Beyond these primary factors, there are other elements that can influence whether an older or newer car is cheaper to insure. For example, the likelihood of a car being stolen affects premiums; newer cars with advanced security features may be less attractive to thieves, potentially lowering insurance costs. Conversely, some high-end or classic older cars may be more valuable and collectible, leading to higher premiums despite their age.
The car insurance group assigned to a vehicle, which considers repair costs, safety, and theft risk, is a key determinant in pricing. Finally, the driver’s personal claims history, location, and usage patterns also heavily influence insurance premiums regardless of the car’s age.
Car insurance cost has a lot to do with insurance groups
All of this data is used to determine the insurance group a car belongs to. Car insurers and British insurers, such as the Association of British Insurers, play a key role in assigning vehicles to these groups and determining car insurance premiums based on risk factors, repair costs, and vehicle categorisation. Insurance companies then rely on these groups to decide whether a car will be cheap or expensive to insure.
In the UK, every car is assigned an insurance group number ranging from 0 to 50. Generally, the higher the number, the more costly it is to insure the vehicle. The age of the car itself doesn’t heavily influence its insurance group. Both old and new cars can fall into either high or low groups.
So, instead of focusing solely on whether your car is old or new, it’s more useful to consider its insurance group.
All these factors can influence your excess, too
The same elements that impact the cost of your car insurance can also affect your excess, which is the amount you’re required to pay when making a claim.
There are two types of excess: compulsory and voluntary. Compulsory excess is determined by your insurer and can vary significantly depending on the car you’re insuring.
Voluntary excess is the amount you choose to pay yourself, giving you some control over your excess level. It is important to note that voluntary excess is in addition to compulsory excess.
Even if car insurance is more expensive, running a newer car can still be more cost-effective
Insurance is not the only expense involved in owning a car. Other costs associated with vehicles can vary depending on whether the car is older or newer.
For example, road tax is often higher for older cars since they tend to be less environmentally friendly. Older vehicles may require more frequent repairs and generally have higher fuel costs over time.
Transferring your car insurance to a new car
If you’re purchasing a new car, you can typically transfer your existing car insurance—just check with your insurer. When you do, your insurance premium may increase, decrease, or remain unchanged.
For instance, if the new vehicle has a more powerful engine than your current one, your premium might rise. Conversely, if you opt for a less expensive used car with lower replacement costs, your premium could decrease.
Once again, the vehicle’s age usually doesn’t directly impact this. However, some insurers impose limits on the minimum or maximum age of the car, so it’s important to confirm this with your insurance provider before making a purchase.
Classic car insurance works differently
Older cars can sometimes be classified as classic cars. These are vehicles that, despite their age, retain significant value.
While there’s no strict definition, classic cars are typically those over 15 years old with a market value exceeding £15,000.
Insurance for classic cars operates quite differently from standard policies. This is because these vehicles are valued more as collectibles or antiques rather than everyday transportation. Consequently, their value often appreciates over time, unlike most other cars which usually depreciate.
There are many specialised insurance policies designed specifically for classic cars.
Get a car insurance quote
If you’re ready to explore your car insurance options get covered today with Budget insurance.