Finance Tips

Before you even think about buying a new car that would symbolize the success that you have been having recently, you have to think about all the repercussions of getting that luxury vehicle.  There are quite a few things that you have to think about before getting a ride that might just be a little out of your price range.  There is nothing worse than having to return a car or worse, sell it because you suddenly can’t afford it anymore.

The first thing to consider is if you can afford the monthly payments.  If you are going to lease something like an Audi A6 or a BMW 5 Series, then you need to have a rather large income and a great line of credit for them to even consider you.  The next thing is to call up a few insurance companies and ask for a plethora of auto insurance quotes.  This step requires quite a bit of research and you don’t want to skip it during the car buying process.  There are quite a few places that you can call in order to find quotes.  There are drastically different prices depending on which company you decide to go with.  It seems like it wouldn’t be a big difference, but a lot of different companies actually use different methods to assess risk.  Make sure that you figure out which firm you are going to go with before committing to a car purchase.  Insurance people will always try to oversell so be wary of their salesmen tactics.

Once you go through the painstaking process of finding insurance quotes you need to research your car as well.  There are many things to consider like resale value, warrantee information and even color to consider.  There are definitely different positives and negatives to every single car so be careful and decide what you are looking for before you go to the dealership.  Taking these steps may seem like a boring effort, but it will prevent you from making an impulse purchase you will regret later.  Remember that a car loses almost a third of its value right when you drive it off the lot.  In this economy, it is almost better to get a used, certified car than a new one.  You will save a third of your money and insurance will be cheaper as well.  The secret to buying a car is patience and planning.  You will be happy with your decision if you make it patiently.

With Alice back in Wonderland thanks to Tim Burton, we continue this series of articles on how to earn discounts when insuring your vehicle. This time, the trip down the rabbit hole (or through the looking glass as you prefer), deals with the practicality of your use of private transport. Remember the insurance companies want as little risk as possible so they prefer you to have the vehicle parked on your front yard where you admire it from a distance and, when it gets dusty, wash and polish it. In short, the less you drive, the more you save. So lets see how it works. There are three times during the day when accidents are more likely. These are the two main periods for commuting to and from work, and the late night and early morning when driving is often associated with alcohol and other “substances”. The statistics show the more vehicles there are on the road around you, the greater the chance one will collide with another. At peak times for commuters, the roads are suddenly full and the risks of accidents are high. Now change the weather from sunshine and gentle breezes to the first ice and snow of the winter. The majority of drivers have forgotten the risks, made no advance preparations and find themselves on a skating rink without any way of stopping in a hurry. The accident rate goes sky high until people relearn their winter driving skills. At night, its the reverse problem. From 11 p.m. through to the early hours, there are fewer vehicles on the road, but the majority of drivers may be less alert. At best, this is simple tiredness. At worst, its substance abuse and you are in the way.

So, if you agree not to drive at the most dangerous times, you get a discount. For the same reason, agreeing to restrict your mileage also earns a discount. If you only drive a few miles every now and again, the chances of you being involved in an accident are small. The lower the mileage you accept, the better the discount. For the same reasoning, where you drive affects the premium. Although the practice is outlawed in some states, your zip code sets the tone for the premium rate. Some areas of the cities and larger towns are statistically more accident-prone. Equally, if you live in a wilderness area or in a remote part of the prairies, you can go miles without ever seeing another vehicle. Collisions are therefore rare, although some trees are known to throw caution to the wind when crossing the road. Be honest with yourself. Do you have to use the vehicle? Yes, it may be slightly inconvenient to use public transport but, if you are saving money on your insurance, you can be safer and better off financially.

In an earlier article, we mentioned the problem of fraud. The biggest discounts are given to those prepared to prove their honesty. Check the auto insurance quotes for those companies offering monitoring, whether face-to-face or through technology. Some companies ask you to call in once a month to prove your mileage is within limits. Others have devices to fit into your vehicles that monitor when, where and how you drive. This information is then routinely transmitted to the insurer. Sure Big Brother is watching but, if this saves you big dollars, its worth searching through the auto insurance quotes to find these offers.

The main thing to understand about discounts is the thinking behind them. The insurance companies want to encourage you to act in ways that favor them. If you are contrary and do the opposite, you will probably cost them money so your premium rates will be higher. Let’s take a few examples and see how it works. Obviously the point of insurance is that, if you have one of those unfortunate accidents or someone steals your vehicle, you get to claim money from the insurance company. From the insurer’s point of view, this is bad news. It wants to be able to treat all your cash as profit. The more it has to pay out, the more it should raise premiums. Except, at some point, you throw up your hands and say, “We’re not going to pay that.” So a balance has to be struck. The insurer wants all the safe drivers like you, and aims to discourage all the drivers with bad records – they are the ones who get the really big premium hikes. Although loyalty bonuses go some way in the right direction, there are more ways in which the insurer can save money. It all starts with the make and model of vehicle you are driving.

Risk assessment is done by the actuaries. These are the math wonks who collect details of every accident reported in the US. This is not just the data from claims on vehicle insurance. This is every incident reported to the police, attended by the firefighters or ambulance crews, or dealt with through claims on health insurance. Put all this together and the actuaries can tell you the probability of an accident in any make and model of vehicle, given its color, whether it was fitted with any additional features, who it was driven by, the time of day or night, whether the driver and passengers were badly injured, so on. Yes, it’s that detailed. Turning this around, if you drive a vehicle that’s statistically unlikely to be involved in an accident or stolen, your premium will be lower than average. Put a safe driver in a safe car and the chances of the insurer having to pay out are small and the profit is higher. Everyone is happy. So how do you find out which are the safest vehicles with the lowest premium rates? Well, you start with http://www.safercar.gov/, a site run by the National Highway Traffic Safety Administration. This allows you to get the safety ratings from all the tests carried out by the NHTSA. There’s a guide published at http://www.nhtsa.dot.gov/staticfiles/DOT/NHTSA/Vehicle%20Safety/Articles/Associated%20Files/2009_Insurance_Costs_Comparison.pdf which is also helpful. Finally, the Insurance Institute for Highway Safety publishes its own list of safe vehicles at http://www.iihs.org/ratings/

The safer the vehicle you drive, the greater the discount on the premium rate. So when you are filling out the questionnaire for those auto insurance quotes, aim to have a safe vehicle. If you vehicle is not safe and you cannot afford to change it, try to upgrade it by fitting safety features. Look at the questions asked in the questionnaire and talk to insurance agents to find out what features save the most money. Similarly, fit better locks and any systems making your vehicle more difficult to steal. Anything you can do to reduce the risk of a claim will be reflected in low rates in the auto insurance quotes you receive.

Most of you are probably well aware of the fact that different age groups of drivers get different insurance rates, and the difference can be quite significant. Why the discrimination, you might ask? Well, don’t haste with accusing insurance company with unfair pricing, as there is a set of reasons behind such practices. When speaking about age groups and pricing, you have to understand how the insurance companies assess risk and set the rates you get when quoting.

The primary factors determining the price you will pay for insurance are risk and claim history within your demographic group. Insurance companies analyze the costs of insuring each age group and set their rates respectively. And due to a set of reasons, young adults are considered to be the most risky car owners, thus the high rates a young driver will receive when getting insurance quotes. That’s because young drivers have a larger claims history as a group, and the accidents they end up in tend to be more devastating and costly. Of course, it doesn’t mean that all teenagers and young adults get crazy on the road and have serious accidents. But that’s the situation when one has to pay for other’s mistakes, and unfortunately there’s little you can do about it.

But little doesn’t mean nothing. If you are a young driver looking for good auto insurance, you still have chances of getting better rates if your follow some of the following advices. Of course, they won’t drop your rates instantly and dramatically but by combining them you will be able to get quite reasonable car insurance rates.

Be a good driver

Being a good driver with a clean driving record with no accidents or traffic violations always pays of no matter how old are you. But you can go beyond that. Enroll in special driving schools and employ a defensive driving style – having proof of your good safe driving abilities will definitely give your significant discounts from the insurance company.

Buy a safe car

When you are young, you want to be fast and furious. That’s your right, but if you buy a fast sports car don’t expect to get advantageous auto insurance quotes for it. Sports and muscle cars are considered to be risky and have high insurance costs, so insurance companies will always charge more for owning a Mitsubishi Lancer Evo than for a VW Golf. That’s why you should think about the car you want to drive before actually buying it.

Do some comparison shopping

Shopping around has never hurt anyone. In fact, getting more auto insurance quotes from different companies will help you find a really competitive policy. Some companies give young drivers lower rates than others, so why not spending a bit of your time on comparing auto insurance quotes if you can save quite well on it? Besides there are so many free quote sites out there that it would be simply a crime to leave such a great opportunity for saving some money on car insurance unnoticed.

Looking around the US, all but three states mandate drivers to carry liability insurance. Some states have no-fault schemes. Others add in a requirement to buy a personal injury protection policy. As the healthcare reform bill was signed into law, many asked whether all insurance mandates were unconstitutional. This is a fun debating topic which sounds possible but will get nowhere. States have always had the right to impose conditions on people’s voluntary activities. If you want to drive, you have to carry liability insurance to pay compensation to anyone else you may injure. A more interesting question is the amount of the minimum requirements imposed by your state’s lawmakers.

Most of these minimums have not been changed for thirty and more years. For example, in 1972, Maryland set $20,000 for a person injured subject to a maximum of $40,000 for losses arising out of a single traffic accident. This was intended to cover medical treatment, loss of earnings while recovering, and so on. In 1972, the average annual salary was $12,000 and most hospitals charged no more than a few hundred dollars for treatment. Most new vehicles cost less than $4,000 to put on the road. You could easily buy a new home for less than $30,000. Looking back now, you wonder how we managed on so little money. Prices have risen fast for medical treatment. Injure the wrong person and the claim against you for loss of earnings is going to be frightening. Why should this matter?The liability coverage only pays out the minimum. You get to pick up the bill for all the other losses. So any savings or property you have may be taken to satisfy a judgment against you.

Should states increase their minimums? Many are thinking about doing so, but the politics of actually making new laws is difficult. During the recession, people are under financial pressure. Forcing them to spend more on vehicle insurance is not going to be popular among the poorer sections of the electorate. For the middle classes, there is the option to buy more coverage including an uninsured and underinsured policy. This is the American way. Those who have money can use it to protect themselves against losses. Those who are poor must take life as it comes.

In Maryland, the legislators have just increased the minimums to $30,000/60,000. This is curiously unreal. An increase to match the rate of inflation since 1972 should make the minimums $100,000/200,000. But, the political situation does not permit the lawmakers to restore the value of the minimums overnight. The answer was annual increases to inflation-proof the amounts. We would have arrived at $100,000 without anyone being too upset about it. But we have grown used to accepting the cheapest solutions even though millions of people across America actually lose money because of it.

Why millions of people? These are all the victims of bad driving who never recover anything more than the minimums and suffer major financial losses as a result. This is injustice on a massive scale. And it will never be cured because it would cost too much to make the necessary increases. The only people who come out of this smiling are the investors in the auto insurance industry. Their profits and dividends have been rising steadily despite the recession. To protect yourself, always get auto insurance quotes from this site to find the most affordable coverage. Insurance may be mandated but you don’t have to pay excessive premiums.