The value of a car insurance quote before buying a car

Tyler Wade
by Tyler Wade November 6, 2020 / No Comments

The pandemic practically wiped out car sales for the 2nd and 3rd quarters of the year, but drivers, now in tune to pandemic shopping, are clicking to buy. If you’re one of them, good for you, because the best time to buy a car is at the end of the year as dealers look to sell off 2020 inventory to make room for the 2021 models. Before you rush out, it’s smart to get a car insurance quote before buying a car. Here’s why. 

NOTE: This article’s calculations are on financing a car. If you’re planning on leasing, read our blog: Buying vs. leasing: what’s better?

 

The cost of owning a car

The sticker price on the car is not the total cost of owning a car. Car ownership includes fuel consumption, maintenance, and the cost of auto insurance.

I’m always confused watching drivers line up for cheap gas. People hunt or hold off on filling up to get the best price. A friend’s car stalled on the side of the road before he could get to his nearest Costco gas station. If great gas mileage is important to you, buy a car with the best fuel efficiency – maybe a hybrid or electric. Regular gas cars are also far more efficient than before which should negate the unhinged desire for fuel efficiency.  In fact, since its peak in 2008 the interest in fuel efficiency, according to Google data, has all but vanished. 

Maintenance is hard to calculate because it’ll depend on how well you care for the car. In the first year, a few oil changes and lubrication for $100 every few months isn’t bad. There are many reports on how well (or poor) cars age, but the driver factor is too hard to ignore. A driver that brakes hard, forgoes maintenance, or doesn’t mind the dents and scratches – well, their car may not last as long. 

One of the most significant factors with insurance for a car is the make and model of the vehicle you buy. Sure, there are many other factors that go into a rate calculation, including your age, location, and driver history (more on this later), but the vehicle you choose to buy will have serious implications on your budget for years to come. 

To highlight how different cars impact insurance, we looked at Canada’s best selling vehicles to compare their insurance costs. 

The Best Selling Vehicles in Canada in 2020 (so far)*

*source: driving.ca

Make & Model MSRP Annual Insurance Premiums
Ford F-150 XL reg cab 2wd $30,389.00 $1,488.00
Dodge Ram 1500 Tradesman $34,545.00 $1,680.00
Honda CR-V LX 4DR 2WD $30,126.00 $1,764.00
Chevrolet Silverado 1500 regular cab $31,298.00 $1,800.00
GMC Sierra 1500 $32,498.00 $1,800.00
Hyundai Kona Essential 4DR 2WD $21,249.00 $1,908.00
Nissan Rogue S 4DR 2WD $28,498.00 $1,920.00
Toyota RAV4 LE FWD $28,090.00 $2,028.00
Toyota Corolla L CVT 4DR $20,790.00 $2,340.00
Honda Civic Sedan LX CVT $23,901.00 $2,352.00

*costs are calculated using base models, which may not be the best sellers, but important for comparison

The top selling vehicle in Canada is the Ford F-series. It outsells all other trucks combined and is nearly one out of every 10 vehicles sold in Canada. At $124 per month for insurance, it’s also the cheapest of the best selling vehicles to insure.

The cost of insurance for trucks is generally pretty low. Perhaps drivers make fewer claims – the scratches and dents are for style, or maybe because their commutes are often earlier in the day thus avoiding traffic congestion and reducing the chances of a collision. 

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In the SUV world, the number one selling model is the RAV4, much to the chagrin of Honda’s CR-V. But, battling against an SUV which outsells the entire Toyota passenger car division is no small feat. The CR-V, however, does take home the prize for the cheapest insurance among the top selling SUVs coming in at $264 per year cheaper than the RAV4, the costliest SUV to insure in our chart. 

The Honda Civic and Toyota Corolla, which are pretty much the same to insure at just under $200 per month, also puts these 4-door sedans as the most expensive vehicles to insure in our list. 

Average cost to insure of the top selling vehicles in Canada: by category

Most drivers will stick to one category when buying a vehicle, be it a sedan, truck, minivan, or SUV.  For a quick comparison, here is the average cost to insure each vehicle category of the top sellers. In case you’re trying to decide whether to buy a truck or an SUV. 

  • Trucks – average insurance: $141 per month
  • SUVs – average insurance for SUVs: $159 per month
  • Sedans – average insurance: $196 per month

The value of a car insurance quote before buying a car

The average cost to insure the top selling vehicles is $1,908 annually, so it’s a sizable portion of the overall cost of owning a car. Getting a quote ahead of time allows you to see if it fits into your budget. 

For instance, let’s compare the monthly costs of the Honda CR-V vs. Toyota RAV4. 

Based on  4-year financing at 3.00% interest and a down payment of $3,000, here is the monthly cost of your auto loan. 

  • Honda CR-V: $687
  • Toyota RAV4: $636

The Honda CR-V costs $51 more per month, however it’s cheaper to insure by $22 making the difference between the two only $29 per month. 

So, after your 4-year finance, your monthly cost of ownership for the CR-V, thanks to the insurance savings, is cheaper than the RAV4. After 10 years of ownership, the savings you get with the RAV4 are nullified. In fact, after 10 years, the CR-V is cheaper than the RAV4

$264 (insurance savings) x 10 years = $2,640. 

The price tag difference between the two cars = $2,036. 

So, $2,640 – $2,036 = $604 – The CR-V, after 10 years of ownership, is $604 cheaper than the RAV4. 

Insurance could sway your decision. Of course, this assumes you’re buying the car and owning it for at least 10 years. 

Your situation is unique, so arm yourself with information. Not everyone is a 30-year-old female with a clean driving record like we used in our example. For that reason, here are some other insurance factors that will affect your rate and the importance of getting a quote. You can see the average increases in each scenario using the same methodology from our original quotes. 

Example 1 

High-risk car insurance: We didn’t add any discounts to our quotes, such as bundling home and auto insurance, nor did we add any claims or driving infractions. So, we kept everything the same, but this time added a DUI with a 90-day license suspension. The insurance rate increases varied considerably, with many companies wanting much more to insure her, but the average was a 52% increase in her car insurance quote

Example 2 

First time driver insurance: In our case study, a 30-year-old woman was getting new car insurance after 10 years of driving and being insured. In this example, we instead say she is a first-time driver for insurance purposes. She may have been driving since she was 16, but insured with her parents, or it’s her first time driving in Canada. Despite years of experience, her insurance shot up an average of 111%

Example 3 

Young driver car insurance: The woman in our case study was 30 years old. If she was 20, without any insurance history, would her insurance rate change? We did the math and, on average, her insurance increased by a whopping 240%. The Ford F-150 nearly quadrupled the cost to insure it. It’s why many young drivers are turning to usage-based car insurance

Quick note: get car insurance before buying a car

You can test drive a new car using the dealer’s fleet insurance, but to take it home, you’ll need insurance. If you’re replacing a car, most car insurance companies give you a grace period between six to 14 days when you’re switching to a different car on your policy. Buying a car for the first time, however, you’ll need insurance before you drive it off the lot. 

The bottom line

Buying a new car is difficult, but exciting. Knowing all your costs and getting the best price are two ways to make the journey worth your time. Hopefully this underlines the value of a long history of safe driving to get the best price for car insurance, and just how much insurance may help you decide what car to buy. Happy shopping!

Our methodology: We compared insurance quotes for a single 30-year-old with a clean driving record who is living in Toronto. Her car insurance included both collision and comprehensive with a one way commute of 25km and 15,000km annually. Insurance premiums are based on the base model of the vehicles. 


categories: Auto Insurance Insurance
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