Older vs. Newer: How Your Car’s Age Affects Insurance Rates

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Written by Sarah Archambault Edited by Nick Versaw

Updated January 2, 2024

Whether you’re in the market for a used car or thinking about trading in your current vehicle for a new car, it’s important to understand how your car’s age affects car insurance rates. Premiums are generally lower for older models thanks to depreciation, but if you’re still paying off a loan, your lender may require you to purchase full coverage.

We’ll take a closer look at how your car’s age affects your insurance rates in the sections below.

Are Older Cars Cheaper to Insure Than New Cars?

If you drive an older car or are thinking about picking up a used vehicle, you can expect to pay less to insure it than you would a brand-new car. In fact, insurance costs drop around 10% after a vehicle is just one year old, according to Compare.com data.

Even classic cars — which can sometimes require specialized insurance — are typically still cheaper to insure than a new model. You may also be able to cut back on how much insurance you need if you drive an older car, which can lower your payment even more.

How Vehicle Age Affects Insurance Rates

Insurance companies use many factors to calculate your rate, but your vehicle’s age also plays an important role in determining how much you’ll pay for car insurance.

We’ve broken down the average auto insurance rates based on vehicle model year in the table below.

It’s probably no surprise that car insurance rates are the most expensive for new vehicles. After all, new cars are generally worth more, and state-of-the-art features tend to lead to more complex repairs that cost more. The average new car costs more than $200 per month to insure, according to our research, but rates tend to drop quickly after you’ve owned the car for a few months.

While rates drop after year one, the savings really start to kick in after the car is three to five years old — often about the time financing ends. Once you own your car outright, you can drop add-on coverages — such as comprehensive and collision coverages, gap insurance, and more — which can often help you save even more.

Why Insurance Rates Are Cheaper for Older Vehicles

Your car’s age is an important factor that affects your car insurance premiums, and we’ve already shown how insurance rates are often cheaper for older cars than new vehicles.

From deprecation to lower repair costs, many factors affect what you can expect to pay for car insurance. Let’s take a look at some of the most common factors.

Depreciation

Your car’s value is constantly depreciating — a process that begins as soon as you drive it off the lot. When you have an older car, the lowered value means that your car is cheaper for an insurance company to replace, which can lower your rates when you have full coverage.

Lower repair costs

Older cars are generally cheaper to repair than newer vehicles — especially when repairs don’t involve intricate computer systems or require a specialized technician. Used replacement parts for older cars may also be readily available, which can help you save even more.

Full coverage may not be necessary

If you’re still making payments on your older car, your lender will likely require you to maintain full coverage on your insurance policy. But once you own the vehicle outright — meaning you’ve paid it off and have the title in hand — you may only need to purchase your state’s minimum liability coverage.

Can older cars be more expensive to insure?

Generally, older cars are cheaper to insure than new vehicles. But with older cars, depending on the make, model, and year, rates could be affected by your car’s lack of safety features or how difficult it may be to obtain replacement parts after an accident. Classic or antique cars may also need a special kind of insurance, which can lead to higher rates.

Do Lower Insurance Costs Outweigh the Benefits of Owning a New Car?

For some people, the lower insurance costs of an older car can outweigh the benefits of owning a new car. But when comparing the two, it’s important to consider the entire cost of ownership. Hanging onto an older model that you own outright or paying cash for a used car can help you save on the cost of a monthly car payment.

But you may end up having to pay for more repairs than you would with a new vehicle. Parts are sometimes more expensive for older cars, and they generally need more maintenance to keep them in good shape. New cars, on the other hand, don’t typically need repairs as often and also come with warranties that help cover some repair costs.

Older cars generally aren’t as fuel-efficient as new cars as well, so you may spend more on fuel. And depending on the age of the vehicle, your current car may not come equipped with the safety features found in new cars.

What Kind of Car Insurance Do You Need for an Older Vehicle?

Regardless of your vehicle’s age, you’ll still need liability insurance. But depending on how old it is, you may not need as much coverage as you would for a newer car. Here’s a closer look at the types of coverage you may want to consider for your older car:

• Bodily injury liability coverage is required in nearly every state and helps pay for someone else’s expenses, like medical costs and income loss, if you injure them with your vehicle.
• Property damage liability coverage is mandatory in most states and helps pay for damage to someone else’s car or property like buildings, fences, and telephone poles if you cause an accident.
• Personal injury protection (PIP) is required in no-fault states to help cover your medical bills and other expenses, like lost wages and funeral costs, no matter who’s at fault.
• Medical payments coverage, or MedPay, isn’t available in every state and is an add-on that helps pay medical costs for both you and your passengers, regardless of fault.
• Uninsured or underinsured motorist coverage is required in some states and helps cover accidents where the at-fault driver is uninsured or has inadequate insurance coverage.

Do you need full coverage for an older car?

Older cars don’t typically need full-coverage policies that include comprehensive and collision insurance, especially if you own the car outright. But if you’re still making payments on your older car, your lender will likely require you to carry full coverage until the loan is paid off.

Generally, as your car ages, it loses its value. The Insurance Information Institute (Triple-I) suggests that if your car is worth less than 10 times the annual premium for collision and comprehensive combined, it may be time to consider dropping full coverage. Just keep in mind that if your car is damaged or stolen you’ll be on the hook to cover the cost of repairs or replacement since your insurer won’t pay.

Insuring classic cars vs. older cars

Most older cars are just previous models of everyday vehicles. But classic cars, on the other end, are typically vehicles that are at least 25 to 30 years old and have been restored or are well maintained. They may include muscle cars, hot rods, and classic trucks. Qualifying classic cars typically aren’t driven very often, but owners can get added protection with a classic car insurance policy.

Classic car insurance typically costs less than a regular policy, and it typically includes standard coverages like liability, collision, comprehensive, and uninsured motorist coverage. But it usually also includes specific coverage details, like agreed-value coverage, spare parts coverage, and specialized coverage for towing or repairs.

Older Car Insurance FAQs

If you drive an older car, you may have questions about what it’s like to insure your vehicle compared to a new model. Here are answers to some commonly asked questions about insurance premiums for older cars.

Is it cheaper to insure newer or older cars?

Older cars are typically cheaper to insure than new cars, thanks to their depreciating value and lower repair costs. But many other factors can affect insurance rates, including your age, location, driving record, credit, and the type of insurance you need.

Does auto insurance get cheaper as your car gets older?

In most cases, yes. The cost of auto insurance gets cheaper as your car gets older. Some older classic cars, like exotic vehicles, hotrods, modified vehicles, muscle cars, or classic trucks, may qualify for classic car insurance, but the cost to insure them is still generally less than a traditional car insurance policy.

When should you drop full coverage on an older car?

You can drop full coverage on an older car once the car is paid off and the title is in your name. Keep in mind, however, that if your car is damaged and you no longer have comprehensive or collision coverage, your insurance won’t cover the cost of repairs or vehicle replacement.

Why is car insurance more expensive for an older car?

Generally, car insurance is cheaper for an older car than a new car. But the rate you’ll pay to insure an older car is based on more than just the vehicle’s age, such as where it’s parked, your driving record, and the type of coverage you need.

Methodology

Data scientists at Compare.com analyzed more than 50 million real-time auto insurance rates from more than 75 partner insurance providers in order to compile the quotes and statistics seen in this article. Compare.com’s auto insurance data includes coverage analysis and details on drivers’ vehicles, driving records, insurance histories, and demographic information.

All the quotes listed in this article have been gathered from a combination of real Compare.com quotes and external insurance rate data gathered in collaboration with Quadrant Information Services. Compare.com uses these observations to provide drivers with insight into how auto insurance companies determine their premiums.

Sources

1. Insurance Information Institute, “Nine ways to lower your auto insurance costs,” Accessed December 12, 2023.
2. Insurance Information Institute, “What determines the price of an auto insurance policy?,” Accessed December 12, 2023.

Sarah Archambault Personal Finance Writer

Sarah Archambault enjoys helping people figure out smarter ways to use their money. She covers auto financing, banking, credit cards, credit health, insurance, and personal loans. She’s created and edited content for Credit Karma, Experian and Sound Dollar, along with banks, financial institutions, and insurance companies.