Car Insurance Rate Increases Offset the Gradual Price Drops


car insurance rate increases offset the gradual price drops

New car prices are slowly returning to reality, but the universe isn’t done torturing buyers. A new report from Reuters found that insurance rates are climbing just as the financial pain of buying a new car is easing.

Last year, auto insurance premiums jumped by the largest margin since the 1970s, while new car prices showed a decent decline during the same period. But, while expensive technology, high-priced repairs, and limited parts availability play a role, our driving habits have had an outsized impact on insurance rates.

Distracted driving, speeding, and other behaviors have contributed to more crashes – many fatal – since the pandemic kicked off. Some areas have it worse than others, of course, but COVID-19 brought a level of brazenness behind the wheel not seen before. There’s also the problem of climate change, and the more intense weather that comes along with it, making it riskier to insure cars in some parts of the country. It just so happens that many of those places are highly populated, driving up the averages for everyone.

Higher insurance rates hurt car owners, but they also hurt dealers and automakers, though it’s hard to crank out a tear for million-dollar businesses. The cost to cover a new car has grown so much that buyers are rethinking their purchases, which could slow sales, especially on higher-margin, more expensive models.

[Image: Photo Spirit via Shutterstock]

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