Adventures in car buying: Insurance

Okay, so New Car brings with it New Insurance Costs.

If you’re just tuning in, this wasn’t a case of lifestyle creep; it was a case of knowing when to let go of the last in a string of beaters, and upgrading in the hopes of getting something more reliable and efficient with a bigger initial outlay. (Also, you may recall that every single one of our other cars died before we got the chance to replace them. I figured we should try and beat that this time around.) I’d never call a car an investment, but the idea is we are investing in terms of, theoretically, coming out ahead by reducing the cost and headache of ongoing maintenance and repairs.  Our $1500 hatch was a steal (I’ve got a nostalgic post brewing) but the constant upkeep…ouch.

Nicer cars also mean higher insurance premiums. According to this Liz Pulliam article on MSN Money, 10 per cent is the most you should pay for full coverage.

Problem: That doesn’t work for us. Full cover is about $1200 annually – way more than 10 per cent.

Meanwhile, third party, fire and theft cover is  only $500 (it was $300 on our old car).

That’s a difference of $700, or just over double. And yet, is that really all that much extra for total peace of mind? I don’t mind a few dings and scratches, but what I am afraid of is a total wreck. After all, you can’t control the actions of others, and it’s not inconceivable that it could be totalled through no fault of our own. That would mean putting away $23 a week for insurance, as opposed to $6.

In the worst case, I could afford to replace it, even now…but that would put a massive dent in my savings.

So, it’s a gamble. Pay that $700 (our excess payable on claims is $500, by the way), or attempt to self-insure? It wasn’t even an option previously; none of our cars were ever worth the cost of full cover. Not even debatable.

But this is a car we want – need, even – to last years.

What would you do?

5 thoughts on “Adventures in car buying: Insurance

  • Reply Amanda November 30, 2010 at 11:41

    Pay the full insurance. You never know what’s going to happen, and it’s better to shell out the extra $700 a year now, than it is to shell out $5000 for a new car if you do get into that accident (fingers crossed you don’t). You never know what’s around the corner.

  • Reply karen December 1, 2010 at 17:04

    Don’t forget Liz Pullman is discussing American auto insurance. Our rates vary due to driver’s age (under 25 is more expensive), credit, number of citations, where you live etc. Not sure if this applies to NZ insurance. Personally, as someone (well) over 25, for my area (known for higher rates) and a multi-policy (housing + auto) discount, I do pay about 10% of value for full coverage.

    • Reply eemusings December 1, 2010 at 17:24

      Yes, we unfortunately are slapped with under-25 rates, but we do also get a multi-policy discount. Credit, no, to my knowledge. I’d assume most of the criteria which go into calculating a rate are fairly universal.

  • Reply Reverb 10: Make « Musings of an Abstract Aucklander December 7, 2010 at 13:29

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