Should I Prioritize Insurance Costs When Choosing Cars for My Teenagers?

What factors should you prioritize when considering a vehicle for your teenager? Price, perhaps. Safety comes to mind. Fuel efficiency? Maybe.

These days, the cost of insurance probably needs to make your list. The make and model of the vehicle isn’t the only factor when it comes to the cost of your insurance premiums. But it can make a difference of thousands of dollars per year.

How Important Is the Cost of Auto Insurance for a Teenage Driver?

Should I trade in almost-new cars just to save on the cost of insurance for my teenagers?

That’s what a Clark Howard listener recently asked.

Asked Brian in Florida: “We have two teen drivers, a third about to get her license and four vehicles [that] are one to two years old. I just received my Amica renewal. Two of the vehicles, which are the same make and model, are about $2,000 more per year to insure than the other two. All of them are comparable in size and cost, and all are highly rated by Consumer Reports.

I normally keep my vehicles 10 to 15 years. But if I’m able to save $4,000 per year in insurance, it seems the insurance cost savings might far outweigh the hit we would take on trading them in.”

If Brian’s family can save, say, $5,000 per year on insurance alone with all three drivers for, say, five years, that’s $25,000 saved.

To make Brian’s point a little more clear, new vehicles lose major value the second you drive them off the lot. Whether you pay for a new vehicle in cash or via a loan with an acceptable (read: not too long) term length, the key to making a new car worth it is to drive it for a long time.

You’ll get hit with that quick decline in value if you turn around and trade in those new vehicles within a year or two. But it seems unlikely that Brian will take, say, a $25,000 hit on those two identical newer vehicles.

He can look up the current value of those vehicles and do some math about what makes the most sense.

Why Does the Price of Auto Insurance Vary So Much By Make and Model?

Why do otherwise similar vehicles include such a broad difference in insurance premiums?

“Certain makes and models have a historical profile that the drivers are much more likely to be in accidents. Particularly accidents that cause injuries,” Clark says.

“So if you have a couple models that have this mark of shame from the insurance industry, what you’re thinking, Brian, makes sense. That you would potentially save quite a bit of money with two, soon to be three, teenage drivers if you think in terms of what vehicles are cheapest to insure.”

What You Can Do To Optimize for Insurance Costs

Brian is doing a good job of thinking through his current circumstances and determining whether he can save money.

If you’re able to, though, you should understand the cost of insurance before buying a vehicle. That way you aren’t hit with surprises. And you won’t have to trade in a vehicle soon after you bought it due to high insurance costs.

“You contact [your auto insurance provider] and say, ‘What does it cost to insure this kind of vehicle? Or that kind? Or the other kind?’ So you would know which ones to target that you would be comfortable owning that would be far cheaper to insure,” Clark says.

“There are certain models that have this kind of mark of shame.”

Clark’s wife once drove a Ford Probe. It’s a discontinued model. But for whatever reason, it was incredibly expensive to insure.

“For some reason, Probe drivers were always looking for a way to get into an accident,” Clark says. “And so the insurance for that was so expensive. And my wife, when she sold the Probe and bought something else, saved so much money on her insurance.”

Final Thoughts

The only bigger nightmare than “auto insurance premiums” these days is “teenage auto insurance premiums.”

Whether you’re insuring a vehicle for a teenager or yourself, it’s important to research the insurance cost before you buy. It can make a difference of thousands of dollars per year even on models that seem comparable in size and cost.