The cost of insuring a used luxury vehicle will depend on various factors unique to each individual’s situation, there is not a special type of insurance for used luxury vehicles but there are two important factors to consider; used vehicles are generally more expensive to insure and luxury vehicles are generally more expensive to insure but these two factors may be effected by the type of coverage and other variables that include;
Geographic Location
Age of Vehicle
Make and Model
Ownership Status
Amount of Daily Miles
Where the Vehicle is Parked
Age of Driver
Gender of Driver
Marital status
Education of Driver
Current Insurance Driving Record
Multi-Car Policy
Defensive Driver Class
Please use our insurance cost calculator by entering your particular information to find out the cost to insure your vehicle and compare the rates of different insurance companies in your area. TOOL
USED
Since a used vehicle has depreciated in price, this makes them a lot more affordable and accessible for the average person to buy. A vehicle that was once around $100k, after 10 years may now be less than 1/3 of the original price, the age of the vehicle will be reflected in the insurance cost. In this situation an older vehicle has more mileage, needs more maintenance and is statistically more likely to be involved in an accident, which leads to higher (liability) insurance cost.
The older the vehicle is, the cheaper the price is and the lower the comprehensive insurance cost becomes and the higher the liability and collision insurance cost becomes. There are several factors at play affecting the insurance costs, which include the repair cost. As the vehicle gets older it requires more maintenance and the chances of an accident increase but also the vehicles value decreases so it also becomes cheaper to replace.
The conflict in a used vehicle having a double effect on insurance cost is based on how old the vehicle is. A recently used vehicle (5 years old or younger) still has a high price and minor maintenance issues, so the insurance cost is based mainly on the value of the vehicle and what it will cost to replace it. While an older used vehicle (6 years or older) will be much cheaper but will also have more major maintenance cost, so the insurance cost is based mainly on potential of an accident. So it depends on how old the used vehicle is, whether it is a new used vehicle or an old used and what type of insurance is coverage applies.
There are 5 main types of vehicle insurance;
- Liability – which pays for damage that you cause to someone else’s vehicle and is typically required by the state
Government. - Collision – which pays for damage to your vehicle and is sometimes required by finance companies.
- Comprehensive – which includes non-driving damage from theft, vandalism, fire and weather damage and is sometimes required by finance companies.
- Personal Injury Protection – which covers your medical injuries.
- Uninsured Motorist Coverage – which covers you if you are hit by an uninsured driver.
While there are different factors that affect the cost of insurance for a used luxury vehicle, you can choose how much insurance coverage you want to protect your vehicle, which typically is less as the vehicle gets older and the value decrease because the average driver can afford to replace a vehicle in cash the cheaper it becomes but many do not have the cash to replace a newer 6-figure luxury vehicle so more coverage is needed.
The popular 10% rule suggest that if a driver pays more in insurance premiums (for collision and comprehensive coverage) than 10% of the value of their vehicle than that is a good place to consider dropping the additional comprehensive and collision coverage and only pay the minimum required liability. The thought process behind this financial equation is that if a driver can afford to pay the premium than they can simply afford the cost to replace the vehicle, and keep the money in their pocket in the event no accident occurs. And in the event of an accident then they can afford another used vehicle at a similar low price. This is all dependent on a person’s individual situation and what they are most comfortable with. You should use our insurance rate tool to enter your personal variables and compare the different rates available to you.
LUXURY
Luxury vehicles have a reputation for having high insurance costs based on not just the expense of replacing the vehicle but also how safely people drive these types of vehicles. A Toyota Camry might have a lower insurance rate because historically drivers of Camry’s are involved in fewer accidents than drivers of BMWs. This can be true for brand new luxury vehicles that have not experienced significant amounts of price depreciation. As mentioned above, as the vehicle gets older the collision and comprehensive coverage might increase but the older the vehicle gets the less of a need you will have for the additional coverage.
Insurance companies base the rates they charge on historic data derived from actuaries who analyze statistics for various categories to determine the chances of a driver of a specific vehicle being involved in an accident in a specific place. Some of the variables are explained below:
TYPE OF VEHICLE
Factors to consider when determining the cost to insure a used luxury vehicle, is the type of vehicle. You can generally assume that faster performance based vehicles will cost more to insure because statistically those vehicles have been involved in more accidents than other types of vehicles. A sedan or an SUV will generally be less expensive to insure than a sports car.
AGE
The age of the vehicle should be considered because age is correlated to price, in general the older a vehicle is the cheaper it becomes due to depreciation. Therefore, the cost to insure an older used vehicle for liability coverage becomes more expensive but for collision and comprehensive coverage the cost goes down because in the event of an accident the insurance company will be responsible the value of the vehicle, which at the time has significantly depreciated and are cheaper to replace.
SAFETY FEATURES
The safety features that a vehicle has are considered when determining insurance rates because statistically these features help reduce accidents and prevent theft. Insurance companies prefer to insure vehicles with these features because it will result in less accident claims that they have to settle. New luxury vehicles are always innovating new features with ever-changing advances in technology. It is easy for a used luxury vehicle to quickly become outdated even after only several years.
Because of this, new luxury vehicles get a reduction in their insurance cost if they include these features, which they commonly do, after the safety features are introduced to the market they usually become standard. Unfortunately used luxury vehicles do not come standard with some of these newer features included and they are not able to receive a reduction in their insurance cost.
Some of these safety features can be added to a used luxury vehicle by installing aftermarket products. This will not only modernize the vehicle and make it safer to drive and operate and less accident prone but also have the added benefit of reducing insurance cost. Products such as, back-up cameras, navigation systems, parking sensors, anti-theft systems and blind-spot assist. Please view our affiliate safety features products LINK.
OWNERSHIP
There are 3 types of vehicle ownership options that have an effect on insurance cost.
- Own
- Finance
- Lease
With financing and leasing, depending on the agreement terms, many times drivers are required to maintain full insurance coverage including comprehensive and collision so typically their insurance cost will be high because they have a used luxury vehicle and can’t drop the additional coverage. Drivers who own these vehicles have the option to drop the additional coverage and reduce their insurance costs if they choose. So if the 10% rule applies, as explained above, a vehicle owner can stop paying comprehensive and collision insurance while vehicle leasors and borrowers may be required to keep the additional insurance if their lease or finance company requires it. Please use our insurance rate tool compare insurance rate from different companies.
SUMMARY
As a vehicle gets older, price goes down and insurance costs go up.
At the time a vehicle has depreciated enough to reach the 10% rule; an owner can drop additional coverages, making insurance cost go down, depending on the type of ownership.
If you have a used luxury vehicle your insurance costs might be high (depending on your personal variables), in order to reduce your insurance cost you should apply the 10% rule and consider maintaining only liability coverage if you are financially comfortable with that option.
