Used vs. New Cars: Which Is Cheaper to Insure?

New and used car prices have surged over the past few years, and while they've leveled off recently, cars are still more expensive than just a few years ago. The average transaction price for a used vehicle is about $25,500, while a new vehicle will set you back about $48,400.

Unfortunately, it's not just vehicle prices that have risen. Auto insurance premiums spiked 26% this year.

If you're in the market for a new or new-to-you vehicle, here's which one is cheaper to insure.

Used cars are usually cheaper to insure

In general, used cars are typically cheaper to insure than new vehicles. The main reason is that an older vehicle is usually worth less than a new one, making their replacement costs cheaper.

Older vehicles are also usually cheaper to repair because they may have less technology and fewer complex parts. Because of this, insurance companies usually charge lower premiums for used vehicles.

If your older vehicle is still costing you too much in insurance, you might want to consider dropping some of your coverage. Some experts suggest dropping collision and comprehensive coverage if your premiums are more than 10% of your car's value.

How can you keep insurance costs within budget? Be on the lookout for a good deal. Many drivers save money when they compare insurance quotes. Click here to see the cheapest car insurance companies.

This can help lower your new car insurance costs

Two of the best ways to help keep your car insurance costs lower for a new vehicle is to choose one with a high safety rating and select a vehicle style that's more likely to get a lower rate.

For example, AAA says compact SUVs (like a Honda CR-V) are usually the cheapest vehicle types to insure. Meanwhile, EVs and luxury vehicles are usually more expensive to insure. Electric vehicles are expensive to fix, and their parts are often pricey to replace (like large batteries), which makes them cost about $528 more to insure annually than gas-powered vehicles.

Similarly, expensive luxury vehicles often require special parts and have higher replacement costs, pushing insurance premiums higher.

You may also want to choose a vehicle with a high safety rating to help lower your new vehicle insurance costs. These vehicles can be cheaper to insure because they may have less damage and protect you better in a collision. Insurance companies are always weighing which vehicles will cost them more money in the event of a claim, and safer vehicles usually save them (and you) money.

Insurance tip: You can compare insurance quotes for new vehicle models before you make a purchase. Click here to compare rates from the best car insurance companies.

How to save no matter what you drive

Whether you own a newer or older vehicle, there may be a few ways you can save money on your insurance. Here are a few suggestions:

• Shop around: Just like finding good deals when you're out shopping, comparing insurance quotes is the best way to ensure you've found the lowest price.
• Raise your deductible: You might have to pay a higher out-of-pocket expense if you're involved in an accident, but your monthly premiums can be up to 40% lower by raising your deductible.
• Lower your coverage: Talk to your insurance company and find out which coverage options you might be able to drop to help premiums better align with your budget.

With car insurance costs up significantly this year, taking the time to consider a few insurance options to lower your rate is likely a smart financial move. And remember that no matter what vehicle you own, you always have the option to switch to an insurance company that offers a cheaper premium.