I mean I don’t expect them to always know the current value of my car and adjust for that but if the car depreciates to 50% of original value and then 75% of original it seems like your insurance cost should be lower because their payout would be less if stolen right? EDIT to clarify I am talking about the comprehensive aspect of the insurance obviously NOT the collision.
In: 5
Liability. Regardless of the depreciation of your car, if you hit someone, the cost of liability is the same. Your risk in an old car is actually higher, so you’re not less risky for the insurer.
Well, cost of repairs don’t depreciate, and the value of the car you hit, or hits you, won’t depreciate in line with your car either, and those are the two major things that insurance has to pay out, so beyond having your car totalled, the market value of the whole thing doesn’t really come into play.
As for registration, that’s the government. They always get their money.
In theory,
a) The registration fee covers the cost of maintaining roads etc. This is rather independent of whether the car is worth 1m or 10,000.
b) Most of the cost of the car insurance is for third party and medical claims. You can just as easily injure someone or damage property with 1m car or a 10,000 car. Only the first party damage coverage will be dependent on the value of the car. But other factors like the driver’s record, age, gender (actuarial factors) probably vary the cost of insurance more.
So there is no reason to expect that these fees/costs would scale by the value of the car.
Your car being stolen is only part of the risk an insurance company weighs. They will also have to pay to get your car repaired if it crashes, and those repair costs don’t tend to change as your car ages. In fact, with inflation, the cost of repairing your car probably increases every year.
I would imagine that the small risk of a stolen car is outweighed by the gradual increase in repair costs. Given the [246 in 100,000](https://www.iii.org/fact-statistic/facts-statistics-auto-theft) chance of having your car stolen in a year, you’re looking at ~40 bucks a year to cover the theft risk on a 20,000 car.
Registration varies from state to state in the U.S. Some states do lower it with age and value, some charge per axle, some are just a flat fee.
It does, but only a little bit… while it’s true that as your vehicle ages and depreciates, the payout were your vehicle to be totaled/stolen decreases. But that’s only a small percentage of claims, only a small portion of your coverage. Claims where the vehicle needs to be repaired typically cost about the same no matter whether it’s a 6 month old car or 6 year old one — the parts and labor costs are similar. And a lot of the cost of insurance costs cover your liability for damage and injury caused to others. Your car could be 20 years old, but you hit somebody’s brand new BMW & send them to the hospital… your insurance covers that, too.
As for registration, that’s your contribution to maintaining the roads and a car uses the road just the same whether brand new or not, whether it cost $10k or $100k.
Liability insurance is insuring you as a driver for damage you might cause while driving your car. As such, it goes down when you as a person become less of a risk. In America, young men under the age of 25 are the riskiest drivers, so their liability insurance is more expensive. Which is why my liability insurance when I was in college was several hundred dollars per month on a crappy car while I can now, at 46, drive a brand new pickup and insure it not just for liability, but comprehensive and collision for $50/mo.
The comprehensive and collision insurance aren’t required by state laws in the US. They are usually required if there’s a loan on the vehicle and those portions of the policy cover damage to your vehicle itself. And, those DO get cheaper if you drive a cheaper vehicle. The cost to reimburse me for “replacement cost” on my truck is $50,000. If I total a $3000 car, the payout is much lower, so the insurance to cover that is as well.
In many states, the registration fees also DO go down as the vehicle ages and depreciates. But, a lot of those fees are intended to cover the costs of road repairs, which don’t magically get cheaper because your car driving on the roads is worth less than a newer one.
Latest Answers