Should I Buy or Lease a Car Now?

Q: It’s no secret that the semiconductor chip shortage is driving up the price of both new and used cars, but I do need a new set of wheels. Am I better off buying or leasing a car now? 

A: The chip shortage and other factors relating to the pandemic and inflation have created a tight auto loan market, the likes of which haven’t been seen in years. 

As a result, finding a new or used car that meets your criteria is challenging in today’s market. Unfortunately, though, leases have also risen in price and there is limited availability among many models. 

If you need a new car right now, what’s your best choice? 

Let’s take a deeper look at buying and leasing a car, paying particular attention to factors that are unique to today’s market, to help you determine which option makes the most sense for you. 

Buying a car in 2021

If you choose to buy a new or used car, you’re looking at inflated prices and a supply shortage that’s been ongoing for months. Expect to pay approximately $40,000 for a new car and $23,000 for a used car, according to Edmunds.com. You’re also unlikely to get the service you may be used to getting at a dealership since salespeople likely have more customers than they can serve at present. This can translate into reluctance to move on the sticker price and in a delayed processing of a car purchase. 

Leasing a car in 2021

The leasing market has not been spared the after-effects of the chip shortage and resultant lag in supply of new vehicles. Many lease companies are struggling to service customers while facing a shortage in available cars. The rising prices have hit this market, too. 

If you’re nearing the end of a lease, you may be in luck. Auto dealerships are in desperate need of cars to sell, and they may offer to buy out your lease at an inflated price, leaving you with extra cash to finance your next car. The dealer pays the leasing company what you owe, and gives you a check for the remaining equity. Of course, you’ll also be facing high prices, but it may be worth getting a head-start on your purchase. 

Buying VS. leasing

In every market, there are some drivers who are better suited toward owning a car and others who benefit more from leasing. Here are some important factors to consider when making this decision: 

  • How long do you hold onto your cars? If you like to swap in your cars for a newer model every few years, a lease may be a better fit for your lifestyle. On the flip side, if you tend to hold onto your cars for many years, consider buying a car instead. 
  • Insurance costs. Leases require full insurance coverage, which can be pricey. When you own your vehicle, though, the amount of insurance coverage beyond what is required by law is your decision. If you like having full protection, including GAP insurance, which pays the difference between what you owe on a car and its true value if it’s totaled in an accident or stolen, a lease may be a better choice for you. If, however, you tend to purchase just minimum coverage, you may be better off purchasing your vehicle. 
  • Mileage. If you usually put more than 10,000 miles on your car each year (the standard amount allowed by most leasing companies before charging extra), you may be better off buying a car. Keep in mind, though, that you’ll still need to pay for those miles in depreciation costs of the car. 
  • Maintenance costs. When you lease a car, most maintenance costs are on the leasing company. You’ll need to spring for anything related to wear and tear of the vehicle, but most other repairs will be covered. You’ll also have the option to pay extra for tire protection, and dent and scratch insurance. 

When you own your car, you’ll be footing the bill for all these costs, plus any maintenance needs. To minimize these costs, don’t finalize a car purchase without first ensuring it’s in good working order. You can do this by using its VIN (vehicle identification number) to look up its history and by having it professionally inspected by a mechanic.

While individual circumstances vary, in general, you can expect the cost of purchasing and leasing a vehicle to break even at the three-year mark. While a lease may offer you cheaper monthly payments, you’ll likely earn back two-thirds of the price you paid on a car if you sell it after three years. 

Today’s auto loan market makes every decision challenging. If you’re choosing between buying or leasing a car, be sure to weigh all variables carefully before making your decision. 

Your Turn: Do you buy or lease your cars? Which factors drive that decision? Tell us about it in the comments. 

How will my Insurance Premiums be Affected by a Car Crash?

two men involved in a minor car accident exchange insurance informationQ: I’ve recently been involved in a car crash and I’m wondering what to expect as far as my insurance rates. How big of an increase can I expect to see in my monthly premiums?

A: In most cases, car insurance providers will add a surcharge to your monthly premiums following a car accident involving one of the drivers on the plan; however, the exact increase you’ll see, and whether you will see one at all, varies by the driver, insurance carrier and state.

Here are the answers to all your questions regarding vehicle accidents and insurance rates.

What should I do after an accident?
If you’ve been in a car accident, you may be wondering whether you should involve your insurance provider and the authorities at all. If only minor vehicle damage was sustained in the accident at costs that are below or just above your deductible, it may be smarter to pay for the repairs on your own and not to involve your insurance provider. Before you decide to take this route, though, check your policy to see if there is a caveat requiring you to report all accidents.

When you need to file an insurance claim, you’ll also have to file a police report. Be sure to do so as soon as possible after a vehicle accident. You can find the information needed for filing an insurance claim on the insurance documents that you should have in your vehicle at all times. Exchange the following information with the other driver while still at the scene of the accident:

  • Name of driver
  • Name of car owner
  • Names of any passengers in the car at the time of the accident
  • The vehicle make, model and license plate number
  • The driver’s insurance company name, policy number and contact number for claims filing
  • If the police are at the scene of the accident, ask for an official police report right then as well. If you are incapacitated because of the accident, you may need to do some follow-up work when you are back on your feet to get this information. You should be able to access it through your local police department.

How much of an increase in my monthly premiums can I expect to see after an accident?
The exact increase (if any) you will see in your monthly premiums depends largely on what kind of accident you were involved in and whether you were at fault. Other factors that come into play when determining this number include your particular policy and the state where you live. Another crucial point that insurance providers consider is whether this is your first at-fault accident while on the plan. Some providers will allow one minor accident to slide without any lasting impact, while a second crash can raise your rates up to a whopping 80 percent.

A joint study between Insurance Quotes and Quadrant Information Services, which looked at data in all 50 states, found that drivers who made a single insurance claim worth $2,000 or more saw their premiums increase on average by 44.1%, or $371 a month.

Is there any way I can guarantee that my insurance provider will look away from the accident?

If you’ve been with the same insurance provider for a while, you may qualify for accident forgiveness, or a program many insurance providers offer in which they waive the usual post-accident surcharge for qualified drivers. In general, only drivers who’ve been insured by the carrier for a lengthy period of time and who have excellent driving records will be eligible for this free program. Some carriers allow other drivers to join the program for an additional monthly fee. If you are not enrolled in accident forgiveness and you think you may be eligible, speak to a representative of your insurance company to see if you can enter the program.

What if the accident isn’t my fault?
If you’ve been involved in an accident that was clearly not your fault, your rates may or may not increase, depending on your carrier, state and whether this is your first no-fault accident. If you’ve been involved in several no-fault accidents, you may see a significant increase in your premiums. Your insurance provider can also refuse to renew your policy at the end of its life.

Will the car accident affect my credit score?
Your accident and the consequent higher insurance premiums will not affect your credit rating; however, a lower credit score can result in higher monthly premiums, and the reverse is true as well.

Is there any way I can lower my rates after a surcharge?
Implement some or all of these tips to lower your rates:

  • Improve your credit score. Increasing your credit score by paying your bills on time, keeping your credit utilization low and working on paying down your debts can help you earn a lower insurance rate.
  • Increase your deductible. If your insurance premiums have become unaffordable, you may want to increase your deductible. It will mean paying more out of pocket if you are involved in another accident, but you’ll be able to lower your monthly premiums to a more affordable rate.
  • See if you qualify for any discounts. Lots of car insurance companies offer rate discounts for customers who qualify for a specific criteria, such as a multi-policy discount for bundling different kinds of insurance policies, or a good student discount for students who maintain a high academic average in school.
  • Shop around for another policy. If you can’t find a way to lower your premiums, you can look into rates being offered by other carriers. With a bit of research, you might find a provider offering a much better rate for the same amount of coverage.

Your Turn:
Have you recently been involved in a car accident? Tell us how your insurance premiums were affected in the comments.

Learn More:
bankrate.com
carinsurance.com
thesimpledollar.com
moneyunder30.com

What Does Your Car Insurance Really Cover?

Deciphering car insurance coverageCar Insurance registration form
Car ownership involves purchasing auto insurance. But what circumstances does it protect you against? What does car insurance not cover? Discover the ins and outs of car insurance to make sure you have the coverage you need.

Collision coverage
According to Barbara Marquand, contributor at Nerdwallet.com, this type of insurance protects you during a car accident with either another car or an object. It also covers you if your car flips over and suffers damage.

Comprehensive coverage
This type of insurance is usually sold together with collision coverage, as a package. Comprehensive coverage protects you from harmful incidents not related to car accidents. Per Esurance.com, it covers damages incurred from storms, falling objects, vandalism and collisions with animals like deer.

Liability coverage
In the case of an accident with another car, this type of coverage goes towards paying for the person’s injuries and any car damage incurred.

Liability coverage is usually expressed in three numbers, as Marquand states. For example, a 100/300/500 liability coverage means it will pay a maximum of $100,000 bodily injury per person, $300,000 bodily injury per accident and $50,000 property damage per accident.

Each state varies in the minimum liability insurance that they require; check your state’s requirements before purchasing car insurance to make sure you comply with this standard.

Personal injury coverage
Even if you have health insurance, it’s wise to opt for a car insurance policy that includes personal injury coverage. It covers the medical bills for you or passengers in your car in the case of an accident. If the accident proves fatal, this insurance covers funeral expenses.

Personal injury coverage can be broken down into two subcategories: medical payment coverage or personal injury protection. Some states require one or the other policy, so check your state’s requirements before purchasing this type of insurance.

Uninsured motorist coverage
This insurance protects you if you have an accident with someone who is uninsured or underinsured. It covers your medical expenses if the other driver doesn’t have insurance. If the other driver’s insurance covers only some of your medical bills, then uninsured motorist coverage will pay the difference.

According to Christina Couch, contributor for Bankrate.com, some states have more uninsured drivers than others. In Mississippi, for example, one in three drivers is not insured. If you’re on the fence about whether or not to purchase this insurance option, find out what the statistic is for your state.

Circumstances not typically covered
Although collision and comprehensive car insurance policies can shield you from a wide variety of circumstances, there are some situations that they will not cover.

As Couch notes, car insurance usually won’t cover you for items that are damaged or stolen from your car. For instance, it would cover features that came with your car when you first bought it, such as the radio or CD player. However, it would not cover any gadgets or personal items that were in your car.

Car insurance usually will not cover drivers who are living with you, unless they are specifically listed on your car insurance policy. So this insurance would not cover an out-of-the-house friend or relative who borrowed your car.

Towing and roadside maintenance are two other services that car insurance typically will not cover. However, many insurance companies offer these services as available add-ons to your overall insurance package.

Equipped with this knowledge, you can have peace of mind knowing what each type of car insurance coverage means and exactly what circumstances your policy protects you from.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Does Gender Impact Auto Insurance Rates?

A few facts you need to know

If you drive a vehicle, as most people do, auto insurance is a fact of life. And everyone is continuously looking for ways to cut their rates. But there are some interesting facts that you may not know when it comes to gender and its impact on those rates.

Car insurance rates are based on various factors, including your age; the make, model and year of your vehicle; and both your driving history and driving record. Location is also crucially important, with insurance rates varying greatly by state. But gender can also impact your rates, with women generally paying less than their male counterparts. While this may seem unfair on the surface, when you dig a bit deeper you’ll see there’s a rationale behind this decision as well.

The Insurance Institute for Highway Safety notes that “Many more men than women die each year in motor vehicle crashes. Men typically drive more miles than women and more often engage in risky driving practices including not using safety belts, driving while impaired by alcohol, and speeding. Crashes involving male drivers often are more severe than those involving female drivers.”

A 2015 study from InsuranceQuotes found that a 20-year-old male will pay just over 20 percent more than a 20-year-old female. “At the end of the day, young men are less cautious, riskier, more distracted drivers,” the study notes.

According to a 2015 article in the Huffington Post, there are three states (Massachusetts, North Carolina and Hawaii) that don’t allow gender to play a role in the setting of insurance rates. Pennsylvania, Michigan and Montana apply the same set of rating factors to both men and women, so there’s no difference in rates in those states either.

There are a few things you can do to alleviate the insurance burden you’re facing; this is especially true for younger drivers who may feel the heaviest crunch of high insurance costs. There are good student discounts of around 20 percent for students who maintain at least a 3.0 GPA and take part in a Driver’s Ed course. If you don’t drive a lot, you can also consider a pay-as-you drive policy that factors in how far, how well and how often you drive. Making fewer small claims and shopping around to compare pricing can also keep your premiums low.

There are many things to consider when it comes to auto insurance rates, but the most important thing you can do is speak to your insurance representative and ask about the best ways for you to save. If you do your homework, you may be able to save big.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

How the Type of Car Impacts Auto Insurance Premiums

What you drive affects how much you pay for insurance

When you’re buying a vehicle,CarTypeInsure_Featured there are many aspects to consider — comfort, fuel economy, technological features. — but one consideration that is often overlooked is potential auto insurance rates. And this oversight could be a very costly one, depending on the vehicle.

There are a variety of factors that go into determining a car insurance premium, even when it comes down to the vehicle type itself.

Size – It’s a common misconception that smaller cars often have lower insurance rates due to the fact that they have better maneuverability and ability to avoid a potential accident. In actuality, the opposite is true.

“Statistics prove smaller, sportier cars are driven at higher rates of speed by younger, riskier drivers. Because they’re involved in more accidents, they’re more expensive to insure,” reports Kelly Blue Book’s website KBB.com.

Does that mean larger vehicles like trucks and SUVs are cheaper to insure? Not necessarily. Bigger vehicles mean there is a larger potential to cause damage to other vehicles in the event of an accident, which inflates liability costs.

Price/status – KBB.com states that the cost of a vehicle is the first and primary consideration for most insurance companies when setting the price of the policy. Insurers’ rationale is typically that the more expensive the car, the more expensive it is to repair — namely when it comes to replacing parts, especially on foreign luxury vehicles, or when an entire vehicle is “totaled.”

Engine size – Speed comes back into play here, as the more horsepower a motor has, the more likely the car will be driven faster, leading to a higher risk of accidents. If motor size is not an important factor to you when choosing a vehicle, KBB.com recommends opting for a vehicle with less horsepower.

Likelihood of theft – This factor is somewhat arbitrary, as there can be any number of reasons cars get stolen, from overall desirability to demand for rare parts or even demand for common parts. Unfortunately, it’s those more desired vehicles that can carry with them higher insurance premiums.

The National Insurance Crime Bureau’s (NICB) most recent Hot Wheels report chronicles the most stolen vehicles in the United States. Honda Accord and Honda Civic were the top two most frequently stolen, respectively, in 2014. The list was also inundated with sporty imports due to their high desirability and to the fact that many are convertibles, and soft tops are relatively simple to break into.

Age – When it comes to used versus new in the fight for lower insurance premiums, you may be surprised that there is no clear-cut answer. It’s commonly believed that new vehicles will just cost more due to the fact that they’re new, but the advanced technological safety features and structure of new vehicles drive down those costs. Cars can now more easily avoid accidents before they occur and can also better protect their occupants if an accident does happen.

On the other hand, used vehicles aren’t always cheaper, due to their likelihood of theft.

“Newer cars may be more desirable but are actually targeted for theft far less often, as they are often equipped with anti-theft devices and GPS tracking systems,” auto information research site DMV.org discloses. “Also, car thieves tend to target older cars because they can easily disassemble them and sell their parts for profit.”

With so many varying factors affecting insurance rates, you are not likely to find one single vehicle with the lowest possible premiums. Instead, speak with your insurance provider for more information and guidance.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.