key points
- The data shows that the average price of a new car today is 8.8% above MSRP.
- The more you spend on a car, the more your auto insurance can cost you.
- Consider your needs and financial goals when deciding whether to buy new or used.
Check out our picks for the best auto insurance companies
It’s no secret that buying a new car is an expensive prospect right now. Whenever a certain commodity becomes scarce, its price tends to rise. And that puts car buyers in a tough spot.
A new study by iSeeCars found that vehicles continue to be priced well above MSRP, even as supply increases slightly. In fact, the average new car price today is 8.8% above MSRP.
The more money you spend on a vehicle, the more expensive your car payments can be. And you should keep in mind that auto loan rates are up right now, so the payments you end up with may be too much for your budget.
But paying more for a car could also mean spending more on auto insurance. So, you’ll need to do some number crunching to make sure you can swing a new vehicle purchase after all.
An expense that can be difficult to maintain
Car insurance can be expensive no matter what. But a more expensive car may cost you more to insure.
Auto insurance companies consider different factors when setting premiums. They will evaluate your driving record as well as your credit score (believe it or not) and also consider the cost of your vehicle. The logic is that new cars usually come with more expensive components than used ones. And the more high-end your vehicle is, the more expensive it could be to fix or replace parts.
Learn more: Check out our picks for the best auto insurance companies
This is why you should be very careful when buying a new car. It’s not just that paying above MSRP can hurt you from an auto loan perspective. You can also get stuck paying more than you want for car insurance.
Should you stick with a used car?
Used car prices fell 11.2% in March, according to the consumer price index for that month. Buying a used car could mean having lower monthly auto loan payments and spending less on auto insurance.
But there are advantages to buying a new car. For one thing, new vehicles usually come with a warranty that protects you from having to pay money for expensive repairs right up front. Plus, you can enjoy the feeling of a new vehicle, and if it’s something you can afford, why not treat yourself?
But before you buy a new car, crunch the numbers to see what you can afford to spend. Also, consider the cost of higher auto insurance so that the expense doesn’t surprise you.
Finally, think about how you use your car. If you mostly work from home and only take a car out once or twice a week to run errands, it may not be worth looking at a new car at current prices. Rather, in this scenario, you may feel better with a used vehicle. And in this situation, it’s also worth informing your auto insurer that you don’t use your car to get around. You may be able to get a reduced rate for low usage.
Our best car insurance companies for 2022
Ready to buy car insurance? Whether your focus is on price, claims management or customer service, we’ve researched insurers from around the country to bring you our top picks for auto insurance coverage. Read our free expert review today to start
