There are many benefits to buying a used car: the car's value has already depreciated, so you won't pay as much as a new model, and you may have more wiggle room to negotiate a sales price. Buying a used car can save you money on both the purchase and auto insurance, but it’s important to do your homework so you can find the right used car insurance protection for your situation.

There are some steps you can take when buying a used car to ensure that you get the car that you want and the right used car insurance coverage to protect it. Car insurance can be a major factor when buying a car, and you should always compare insurance quotes for any vehicle you are considering.

Keep reading to learn everything you need to know about buying and insuring a used vehicle.

Key Takeaways

  • Depreciation on used cars typically make used car insurance much more affordable than for new cars.
  • The most expensive used cars to insure include the Porsche 918 Spyder, Maserati Quattroporte and Maserati Gran Turismo.
  • Some of the cheapest used cars to insure include the Honda Odyssey, Chrysler Town & Country, and Dodge Caravan.
  • To ensure you get the cheapest car insurance rates for your used car, always shop multiple quotes from the best providers.

Used car prices are currently sky high

If you are currently in the market for a used car, you may find yourself shocked by the prices. Used cars have gone up dramatically in price since the pandemic wreaked havoc on the economy.

According to the consumer price index, used vehicle prices increased sharply for the third consecutive month. Used cars and trucks are up 10.5% month-over-month in June; the Bureau of Labor Statistics (BLS) found this to be the largest monthly increase ever reported for used cars since it started publishing the report in 1953. And year-over-year, used vehicles prices are up an astonishing 45.2%.

Several factors have contributed to the rise in prices. Here are the main culprits:

Pandemic

When the pandemic hit, automakers shut down factories or ran them with a much smaller workforce, limiting the number of vehicles produced. As the pandemic has started to recede, demand for vehicles has shot up, but dealers continue to have an inventory shortage. That hiked up prices for both new and used vehicles.

Chip Shortage

Semiconductor chips power a variety of safety and driving features in car, including backup cameras, emergency braking systems, airbags and power steering. Many chipmakers shut down factories when the pandemic hit, creating a lack of chips in the supply chain. Chipmakers have returned normal production, but the high demand for chips for not only vehicles but computers, TVs, cell phones and gaming consoles has led to a continuing shortage. Unfortunately, carmakers who cut back on chip orders last year are now at the back of the line.

Low inventory

Used car inventory depends on people buying new cars, turning in their leased vehicles, and rental car fleets being turned over, all of which have been impacted by the pandemic.

In the last year, new car inventory dropped dramatically due to supply chain issues and closed car factories. GM and other manufacturers have halted production on some car and smaller SUV models as they divert computer chips to pickup trucks and large SUVs.

In addition, as people stopped traveling, rental car companies’ business dried up, so there was no need to turn over their fleet. Also, without new cars available to buy, fewer people traded in their used cars, contributing to lower used car inventory, which sent prices soaring.

“A stronger-than-expected economic recovery has us seeing a strong demand for both new and used cars,” says Matt Degen, editor for Kelley Blue Book. “It’s a simple issue of supply and demand.”

High demand

As new car prices have headed up, it has pushed some buyers into the used car market because they can’t afford a new car. Combine high demand with a limited inventory, and you have a recipe for high used car prices.

Experts expect elevated prices through the rest of the year and into the beginning of 2022. If you can afford to wait, you may want to put off replacing your vehicle for a year or two. (But if you have a used car to sell, now may be the time to get top dollar.)

Degen’s advice for consumers in the market for a used car is to do your research. “Before even setting foot on a dealer lot, make sure you have researched vehicles that will work for your budget, family and needs. Also, don’t expect a deal.”

How to buy a used car

Buying a used car takes homework, researchand persistence -- whether it's your first car or next car and whether it's an older or more recent model year.

Here are a few tips on how to shop for a used car:

Set a budget

The first step in buying any car is determining what you can afford. Most experts recommend not spending more than 10% of your take-home pay on a vehicle. If your budget is tight already, you may want to lower that number to 8%.

Keep in mind that there are additional costs with any car. Maintenance, insurance, and any necessary repairs can add up, so be sure to take these costs into account.

Decide what kind of car you want

Buying a used car isn't always that easy and usually means searching databases, online forums and local car lots to find what you want.

Contact the dealership for help

You may need to cast a wider net to find the right vehicle, but this is where a dealership can help. You can usually list the features you want to the dealership, and the dealer can then search for the make, model, color, and features to find the right car for you.Once you find cars you're interested in, be sure to take it for a test drive.

Research vehicle history

A used car may look shiny on the outside and drive okay, but you may not know that it's been completely repaired after a major accident. Most states don't have the same "lemon law" consumer protections that apply to new cars, so you should take extra steps to review the vehicle's history. Obtain a vehicle's history report make sure there aren't any red flags. You can also read reviews from other drivers, learn about issues and see the car's safety ratings and recalls by looking around online.

Negotiate

Now that you are better informed, you have more wiggle room to negotiate the price. For example, a new car dealership may not be able to give you the price that you want on a new vehicle, but a used car dealer might be able to shave more money off.

Used Car Inspection Checklist

You don't know everything about a car's past by looking at it, but the good news is there is a way to explore its history.

Check the VIN

You can research a specific used car's history by running the vehicle identification number (VIN). The National Insurance Crime Bureau (NICB) maintains a database called VINCheck, allowing consumers to check for a stolen or salvage vehicle. The VinCheck is free to consumers, and you can do a maximum of five searches within a 24-hour period. If you're interested in a used car, you should run the VIN before starting any serious negotiations with the car dealer.

Purchase an NMVTIS report

You can use the VIN to check the National Motor Vehicle Title Information System (NMVTIS), which was created to stop the concealment of flood damage and other vehicle histories. It is meant to help protect you from unsafe vehicles being resold, as well as title fraud. This is the only national database that requires all insurance companies, salvage auctions, junkyards and auto recyclers to report loss and junk/salvage vehicles, according to federal law. An NMVTIS report must be purchased from an approved NMVTIS provider.

Check the vehicle history report

You can also purchase a comprehensive vehicle history report, which will tell you a vehicle's accident history, previous owners, correct odometer mileage, major repairs and warranties on the vehicle. This report also tells you the vehicle's "lemon" status. Federal lemon laws cover new cars, but they can also cover used cars if the vehicle is still under warranty. A few states, including Massachusetts, Connecticut, New Jersey, New Mexico, New York and Minnesota, have stricter lemon laws for used cars, requiring dealers to offer warranties and take back vehicles that have problems.

Talk to your dealer

If you are working with a major car dealership or car-selling site, most will provide you with a vehicle history for free. Otherwise, you could purchase vehicle history reports from companies like AutoCheck, CarFax, and VinAudit.

Inspect your vehicle

You don't need to be a car enthusiast to give the vehicle a close inspection. Look for things like dents, rust, wear and tear on tires, interior damage, and heat and air conditioning issues. You can also check the radio, power seats, power windows and other features for problems.

In addition to visually inspecting the car yourself, it’s recommended by experts that you take the time, and money, to get a trusted mechanic to give the car a full review before buying it.

How Much Does Used Car Insurance Cost?

Several factors determine used car insurance rates. Car insurance companies take into account certain insurance rating factors such as where you live, your driving record and credit score.

One of the most important factors to an insurance provider, however, is what car will be insured under your used car insurance policy.

A family-friendly vehicle loaded with safety features will nearly always have cheaper insurance rates than a sports car regardless of whether the vehicles are used or new.

When we ran the numbers for full coverage for popular used vehicles between 2006 and 2020, we found the 2006 Honda Odyssey LX is the cheapest used car to insure, costing $922 a year for coverage.

On the other side of the equation, the 2015 Porsche 918 Spyder is by far the most expensive used vehicle to insure with an annual premium of $5,239.

Including car insurance cost in your buying budget

Don’t forget to take into account the cost of car insurance when deciding on a new ride. Insurance costs will often add 15% or more to your monthly car amount.

For example, if your monthly car payment is $400, even the cheapest monthly premium on our list, the Honda Odyssey, would be $76 a month or almost 20 percent of your car payment.

Penny Gusner, Insure.com’s senior consumer analyst, recommends researching insurance costs on any vehicles that you are serious about to ensure that you can truly afford the vehicle.

Our used vehicle insurance rates tool gives you an average insurance cost for specific vehicles, so you don’t have to call or go online to get a quote for every car you are considering. Doing this as you decide what vehicle you want to buy will help you make sure the cost of insurance and the car are within your budget.

Expensive used cars to insure

Some cars are far more expensive than others to insure. These are the most expensive used cars to insure in 2021, based on full coverage of 100/300/50 liability coverage plus comprehensive and collision with a $500 deductible.

Expensive-used-cars-to-insure

Model YearMakeModelNationwide
2015Porsche918 Spyder$5,239
2019MaseratiQuattroporte GTS GranSpor$5,102
2018MaseratiQuattroporte GTS Granspor$4,778
2017MaseratiQuattroporte S$4,723
2018MaseratiGran Turismo MC Centennia$4,623
2016MaseratiQuattroporte GTS$4,549
2019MaseratiGhibli S Q4 GranSport$4,451
2015MaseratiQuattroporte GTS$4,388
2017MaseratiGran Turismo MC Centennia$4,350
2016MaseratiGran Turismo MC Centennia$4,248

Cheapest used cars to insure

If you do not have a lot of money to spend on car insurance, you could save a ton by opting for one of these models. These are the cheapest used cars to insure based on 100/300/50 liability coverage with a $500 deductible on comprehensive and collision coverage.

Cheapest-used-cars-to-insure

Model YearMakeModelNationwide
2006HondaOdyssey LX$922
2006ChryslerTown & Country$923
2006DodgeCaravan SE$925
2007HondaOdyssey LX$936
2007DodgeCaravan SE$937
2007ChryslerTown & Country$944
2008HondaOdyssey LX$952
2006FordEscape XLS$956
2006JeepWrangler SE$957
2006FordEscape XLS$958

Average used car insurance rates by year for 2006 to 2020

Average insurance rates for your Used Vehicle

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How much auto insurance coverage to buy for your used car?

Before getting quotes, map out what levels of comprehensive, collision and liability insurance you want.

Liability insurance covers injuries to people in another vehicle or property if you’re legally liable for an auto accident. Every state except New Hampshire requires at least a minimum level of liability insurance. Liability coverage is broken into two types: bodily injury and property damage. Though state minimums are much less, experts say you should get at least:

  • $100,000 coverage for bodily injury per person
  • $300,000 coverage for bodily injury per accident
  • $100,000 property damage for your vehicle

The higher the coverage, the better, since if your limits are exceeded you’ll be personally responsible. Insurance companies also consider a model’s claims history when calculating rates. This means you will likely pay higher auto insurance rates if your car's model is often stolen, gets into many accidents or its drivers receive many tickets, regardless of your driving record.

After settling on the liability amount you need, decide if you wantcomprehensive and collision insurance. These are the car insurance coverages that protect your vehicle.

Collision covers your car when it’s damaged after an accident with another vehicle or object. Comprehensive coverage covers thefts and damage caused by flooding, fire, vandalism and other causes beyond your control.

You'll want to run the numbers to see whether that makes sense for your situation. A good rule of thumb is:

  • If your car is less than 10 years old or worth more than $3,000, you should get full coverage.
  • If your car is older and you wouldn’t spend your own money for mechanical repairs, it may be time to skip comp and collision and start saving for a replacement vehicle.

Keep in mind that thieves steal more older vehicles than new ones, so keeping comprehensive insurance is a good idea unless the car isn't worth much. Some auto insurance companies offer you the option of carrying comprehensive without collision; others require you to buy both.

Remember to be sure you compare rates for the exact same coverage levels using an apples-to-apples comparison as you shop around.

Rating factors: Vehicle

Rating factors:Vehicle–Value, Repair, Claims & Type

Value: Whether new or used, the value of the vehicle is a big deal to insurers for your collision and comprehensive costs, since they may need to pay to replace it if ever is a total loss.

Repairs: The cost of repairs is also looked at, so a used car with expensive newer tech will cost you more to insure than an older car with little or no tech. An old car that has hard-to-find parts and needs a specialist to repair it will again cost more to insure, maybe even more than a new car that has parts and repair specialists readily available. The more an insurer may have to pay out for repairs, the more you’ll pay in premiums.

Claims history for vehicle: If your insurance company has historically paid out a lot of claims for your model vehicle, it will cost more to insure. For instance, if your model vehicle is stolen more frequently, you’ll normally pay more than a vehicle that is not as popular with thieves.

Type of vehicle: Same as with new vehicles, if the vehicle is a sports car, it will normally cost more to insure than a minivan. If insurance companies find that certain cars are notorious for being driven fast and others slow and the claims and accident data agree, those vehicles will cost more to insure.

Other rating factors – non-vehicle:

When looking for a used vehicle, remember it’s not just the vehicle that insurance companies care about and rate you on. You will get better rates with:

  • A good driving record
  • Good credit score
  • Driving experience (the more years licensed, the better)
  • Driving 10,000 or fewer miles per year
  • Having previous insurance coverage (a gap in coverage is not desirable, so if without a car for a few months, get anon-owner auto insurancepolicy)

Other factors looked at (where allowable) are age, marital status, gender and location.

Though the price is important, there is more to auto insurance than getting the cheapest rates. Make sure you get quotes with the same level of coverage so you can get accurate, comparable quotes from each insurance company. You'll also want to read consumer reviews of thebest car insurance companiesto make sure you're choosing one with stellar customer and claims service.

How long do you have to get insurance after buying a used car?

You'll need auto insurance before you drive off the lot or away from the curb of a private owner, so it's a good idea to contact your insurance company before making the purchase. That way, you can have that settled before you potentially forget and get into trouble. You don’t want the finance company placing “forced” insurance on your vehicle at a very high cost.

Also, be sure to make it clear if you are replacing a vehicle on your policy or adding an additional car to it, as that can make a difference if there is immediate coverage with your current policy.

If you don't have an auto insurance policy already, then shop around and be ready to finalize and buy it when you purchase the car.

Do I need car insurance before I buy a used car?

If you already own a vehicle, you can generally transfer your auto insurance to your new vehicle for at least a few days. Ultimately, it depends on your insurance company's policy and state laws how soon you need a new insurance policy for your “new” car.

If you are trading in a vehicle (or have another vehicle at home) that is insured, you may have a grace period that allows that policy to cover your new vehicle for a certain amount of time, typically 7 to 30 days.

If buying a vehicle from a private party and you’ll be making payments to the seller, you will need to title it in your name. The seller should sign over the title to you and then be listed as a lienholder so you can obtain the necessary auto insurance.

Frequently asked questions

How does car insurance change for a new vehicle versus used?

Insurance costs are generally cheaper for used cars because they can be cheaper to replace. If your car is fairly old, and you've bought it outright, you may decide that comprehensive and collision aren’t needed, which reduces your overall premium. However, if you financed it, the finance company will require that you carry full coverage to protect its investment.

Is it cheaper to insure a used car?

Used cars are typically cheaper to insure than new ones, but not always. Our used vehicle insurance rates tool gives you an average cost, so you don’t have to call or go online to get a quote for every car you see in your car search.

What used cars are cheapest to insure?

Like new cars, the cheapest used cars to insure tend to be family-friendly vehicles. Some of the cheapest used cars to insure include car makes and models like the Honda Odyssey, Chrysler Town & Country, Dodge Caravan, and Ford Escape.

How do I get insurance when buying a used car?

While you’re researching cars to buy, don’t forget to take into account the cost of car insurance so you can be sure you can afford to insure it after you purchase it. Insurance companies offer different discounts and devise rates in different ways, so you'll want to get at least three quotes to get the right deal for you.