The Surprising Reason a Lower-Priced Car Could Cost More to Insure

by Christy Bieber | Published on Aug. 5, 2021

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It all depends on the loss history.

Many factors affect the price of auto insurance, including the specific car being insured.

As a general rule, it costs more to purchase coverage for more expensive vehicles. That's because the car insurance company would have to pay out more money if the car was stolen -- and the chances of a theft may be higher.

More expensive cars typically also have expensive parts, which means that it could cost more to make repairs if something goes wrong. And if the car is a total loss, the market value of the costlier car would be higher, so the insurer would again be paying out more.

But there are exceptions to every rule. A lower price car is not always the cheapest car to insure. In some cases, it could actually cost less to buy insurance for a vehicle with a higher price tag.

It all depends on the car's loss history.

Insurance companies consider the risk when setting prices

Insurers look at a lot of data to assess both the likelihood of paying out a claim as well as the amount they might have to pay out if something goes wrong.

Some of this data relates to the claims history of each specific type of car on the market. In fact, individual insurance companies contribute data about vehicles they insure to a Comprehensive Loss Underwriting Exchange (C.L.U.E), which creates a record of insurance losses associated with each vehicle. Insurers then use this information when underwriting premiums, which is a fancy way of saying "assessing risk."

If insurers find that there are more claims -- or costlier claims -- they will raise premiums for motorists with that vehicle.

Drivers could end up paying more to insure a particular inexpensive car model if:

  • It is involved in more accidents than most vehicles
  • It is stolen more than most vehicles
  • People tend to sustain very serious injuries when they are in a crash -- perhaps because it lacks safety features

By comparison, a more expensive car that has excellent accident-avoidance features coupled with lots of safety gear that makes serious injuries less likely could end up costing much less to insure than the cheaper car with the history of problems.

It can pay to shop around for coverage before buying a car

Most motorists don't know the loss history of vehicles they are thinking of buying. After all, that's a pretty technical metric. And since drivers can't count on the fact that a lower priced car is always cheaper to insure, it's a good idea for drivers to actually get a few insurance quotes before buying a car.

See, insurance companies will allow people to get quotes even for vehicles they don't yet own -- it's just a matter of entering driver information along with the make, model, and year of the vehicle. So drivers who are deciding between a few different cars can go see whether any one particular vehicle would end up with much higher (or lower) premiums.

Since drivers will maintain car insurance coverage the whole time they have their car, taking the cost of insurance into account is just smart when deciding which vehicle to purchase. It takes just minutes to get quotes, and it could end up providing significant savings over time.

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