2 factors you must consider before registering and insuring your next car

Valerie Raskovic

Mar 26, 2024

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As with most things, car ownership in the U.S. has become more expensive. Beyond the car prices there are a multitude of factors contributing to rising car ownership costs. Among these are the often-hefty costs associated with registering and insuring a vehicle. For many Americans, these expenses can pose significant financial strain and require careful budgeting to manage effectively. According to data from the Insurance Information Institute, the average annual cost of car insurance in the US was $1,202 in 2019, while registration fees vary widely by state but can range from under $50 to several hundred dollars per year.

We have compiled the top three factors contributing to increased registration and insurance costs along with strategies for navigating potential pitfalls caused by uninformed decisions.

Factors that influence Car Insurance rates:

Car insurance is not only a legal requirement in most states but also serves as a crucial financial safeguard against unforeseen accidents and loss. However, the cost of insurance premiums can vary widely depending on factors such as the driver's age, driving record, location, type of vehicle, coverage as well as the vehicles history.

While you may not be able to change where you live it is important to note that urban addresses in big cities like Detroit, Miami, Tampa, Philadelphia, Las Vegas, Jacksonville, Los Angeles will always have a higher insurance premium. The main contributor to this is a higher rate of loss claims due to more drivers on the road increasing the likelihood of collisions. Another prominent factor is higher rate of crime as the most common type of property crime often involve vehicle theft and vandalism. Contributing to the recent increased insurance rates is an uptick of this type of property crime in urban cities, posing significant challenges for resident’s law enforcement, insurance companies, impound lots and other agencies alike. Before moving to these cities, it is important to budget for higher insurance premiums.

Younger drivers and those with a history of accidents or traffic violations typically face higher premiums, while factors like living in urban areas with higher rates of accidents and theft can further drive-up costs. It may not be possible to alter your driving history however, for drivers with points added due to driving infractions it may be worth looking into various state/county programs that help drivers shave points off their license. Certain states provide driving school and other programs designed to expedite the removal of points from your driving record resulting from infractions, upon successful completion of the program.

In some cases, insurance companies may evaluate a higher insurance cost based on the vehicle’s history. It is highly advised to run an instant vehicle history report before buying your next preowned vehicle. Avoid buying a car with branded titles like salvage or rebuilt, as they are an indicator of significant damage sustained during vehicle's past that previously rendered the vehicle a total loss by an insurance company. These issues may compromise vehicles insurability and could also lead to higher repair costs and lower than expected reliability. Should you insure a branded title vehicle, in the event of an accident the issuance company may not cover the full replacement value of the vehicle. Instead, they may base the payout on the price of comparable branded title vehicles which can range upwards of 50% off less than a comparable vehicle of the same year, make, model and trim with a clean history. Venturing beyond simple free vin check a used car history report can help accessing the cars value based on the vehicle’s pros and cons.

The type of car you own can also have a significantly impact on car insurance rates, with factors such as the vehicle's make, model, age and safety features playing a crucial role. Insurance companies assess the risk associated with insuring different types of vehicles. For instance, most sports cars are more likely to be involved in an accident. For example, a Dodge Hellcat has a higher likelihood of being involved in an accident compared to an average mid-size, comparably priced vehicle. Luxury vehicles also demand higher insurance premiums mainly due to their above average repair and replacement costs. Conversely, vehicles with advanced safety features and a proven track record of reliability may qualify for lower insurance rates, reflecting their reduced risk of accidents and claims.

To help mitigate car insurance expenses it is advisable to shop around for the best insurance rates, comparing quotes from multiple providers. If you haven't bought a car yet, research the vehicle to assess its risk score and replacement cost, ensuring that the vehicle you intend to purchase will not demand a higher insurance premium. Moreover, if you have a history of driving infractions, explore whether your state offers discounts or incentives for safe driving behavior, like completing defensive driving courses or installing safety features in vehicles.

Factors that influence vehicle registration costs:

In addition to insurance, car registration is another considerable expense for vehicle owners. Every state in the US requires vehicles to be registered with the local Department of Motor Vehicles (DMV) or equivalent agency, typically on an annual basis. Registration fees vary by state but generally depend on factors such as the vehicle's weight, age and type. Some states may also impose additional taxes or surcharges based on factors like vehicle age, purchase date, price/value, emissions or fuel efficiency. Each state has its own set of rules and vehicle registration related fees.  For example, Massachusetts imposes an annual excise tax which is triggered any time you register a vehicle in the state and based on the vehicles price or assessed value.

You cannot reduce or eliminate registration fees however, if you are shopping around for a new or preowned vehicle it is advisable to research each make and model. You may need to pay higher registration and taxes depending on factors such as the vehicle's price, age or emissions. Additionally, in states like California additional fees may arise from buying a car out of state. It is vital to familiarize yourself with the specific laws governing your state. The best way to find out more information is to contact your local DMV. Some states even offer free fee calculator to help estimate your registration fees. All that is required is some information about the vehicle(s) you intend to register along with some personal information and you should receive a free quote instantly or through the mail/email. If your state does not offer a fee calculator it may be best to contact them directly for a price quote.

Despite efforts to minimize costs, car insurance and registration remain significant expenses for many Americans. As such, it's essential for drivers to carefully consider each and every cost related to legally driving the car on public roads when budgeting for vehicle ownership and explore all available options for reducing expenses while still maintaining adequate coverage and compliance with state laws. By staying informed and proactive, drivers can navigate the complex landscape of car insurance and registration with greater ease and confidence.