This One Mistake Can Cost You When Buying a New Car

2011 Ford Focus

STAN HONDA/AFP/Getty Images

Is that authentic new-car smell detouring your good judgement? The average price of a new car is $34,000, with the average monthly payment accelerating toward $500. Buying a new car isn’t merely a transportation preference, it’s a decision to spend more than half of the American median household income. Even if you keep your new purchase to under $20,000, you may be forgetting about an important expense.

Committing to several years of car payments is only the beginning. A new car also brings new insurance costs, something many buyers fail to consider until they’re driving off the lot. Most drivers are legally required to carry some minimum level of insurance, but a lower-priced vehicle does not necessarily mean your insurance will be cheaper than a higher-priced vehicle.

A recent study commissioned by insuranceQuotes.com examines which vehicles give drivers the most insurance bang for their buck by looking at the most popular vehicles and dividing their average annual cost to insure by the manufacturer’s suggested retail price (MSRP). Surprisingly, the $18,045 Ford Focus costs more to insure than the $34,345 Ford Explorer – $1,391 vs $1,301, or a cost ratio of 7.71% vs 3.79%. That could be a rude awakening for someone believing their new purchase will be a bargain in all aspects.

“This is a really important factor to consider when it comes to buying a car, because you may buy a less expensive vehicle that will wind up costing you more in the long run because it’s relatively expensive to insure,” says Karl Brauer, senior analyst for Kelley Blue Book, to insuranceQuotes.com. “But it’s also something people often forget to consider. You may be able to afford the car, but can you afford to maintain and insure that car after it leaves the lot?”

In terms of insurance cost ratio, sport utility vehicles and trucks account for eight of the top nine best insurance values. Sedans account for the 11 worst insurance values, due to several factors like safety issues, buying personalities, and theft frequency. The five cars listed below are the worst insurance deals in the study, and all of them cost under $20,000.

1. Ford Focus

  • Average annual insurance cost: $1,391
  • MSRP: $18,045
  • Insurance cost ratio: 7.71%

2. Toyota Corolla

  • Average annual insurance cost: $1,400
  • MSRP: $18,665
  • Insurance cost ratio: 7.50%

3. Hyundai Elantra

  • Average annual insurance cost: $1,384
  • MSRP: $19,085
  • Insurance cost ratio: 7.25%

4. Honda Civic

  • Average annual insurance cost: $1,368
  • MSRP: $19,910
  • Insurance cost ratio: 6.87%

5. Chevrolet Cruze

  • Average annual insurance cost: $1,318
  • MSRP: $19,695
  • Insurance cost ratio: 6.69%

You certainly don’t want to buy a more expensive car simply because of its better insurance costs, and lower MSRP helps raise the insurance cost ratio of the five sedans listed above, but it’s important to note that insurance can be a large line item in your budget no matter how frugal you think you’re being with a new car. Do yourself a favor and call your insurance agent first and ask how much coverage will cost before you sign on the dotted line. You can also use insuranceQuotes.com’s shopping tool, which estimates how much your insurance rates may change when buying a different car.

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