New or old car – which is cheaper to insure?

Average comprehensive auto insurance premiums continue to soar across the UK, hitting £586 between July and September – a 6% rise from the previous quarter and 14% year-over-year, new data from Confused.com has revealed.

The financial comparison website’s car insurance price index, done in collaboration with insurance giant WTW, has recorded a £32 quarterly jump in auto premiums, which is the highest in the past four quarters. Annually, rates have increased by £72.

“Car insurance prices have risen across the board as insurers have found it increasingly challenging through 2022 to absorb a bitter cocktail of rising cost pressures,” said Tim Rourke, UK head of property & casualty pricing, product, claims, and underwriting at WTW.

“Soaring inflation, rising accident frequency due to a post-pandemic increase in road traffic, higher used car prices, and a supply chain crisis resulting in more costly repairs have caused the biggest annual jump in premiums for five years.”

Rourke also noted that the spike in premiums adds to the cost-of-living squeeze already facing consumers, prompting them to seek savings on insurance.

Read more: Cheap car insurance in the UK: Everything you need to know

“While choosing a higher excess and less add-on products can help reduce premiums, this may also increase the risk of drivers being left without an adequate safety net when they need it most,” he said. “This places further pressure on insurers to keep motor premiums as competitively priced as possible, while continuing to deploy robust defences to policy and claims fraud, which typically rise during difficult financial times.”

How are car insurance premiums calculated?

Every vehicle on sale in the UK is categorised into a car insurance group, which helps insurance providers determine how much premiums they will charge. The groups are numbered anywhere from one to 50. As a general rule, the lower the insurance group, the cheaper it will be to have the car insured.

A group rating panel consisting of representatives from the insurance industry and members of the Association of British Insurers (ABI) and Lloyd’s Market Association (LMA) are tasked to determine in which category each car will fall. To do this, the panel considers eight factors, with the goal of finding out how much damage a vehicle sustains in a collision and how cheap and easy it is to repair after an accident. These parameters are:

• Damage and parts costs
• Repair costs and times
• New car values
• Prices of parts and components
• Car performance
• Safety
• Bumper compatibility
• Car security

Read more: These are the cheapest cars to insure in the UK in 2022

But while a vehicle’s insurance group can have a major impact on auto insurance premiums, it is not the only factor that car insurers take into account when determining coverage costs. Insurance companies consider a range of parameters when calculating car premiums, and the goal has always been determining how much of a risk a motorist is at being involved in a traffic accident. These include:

• Age: Young motorists are often considered riskier to insure and face higher premiums than older drivers. Parents who are considering adding their teenage children to their policies should also bear in mind that doing so can push up premiums depending on their kids’ driving history.
• Gender: Insurers also view male drivers to have a higher likelihood of getting involved in accidents than their female counterparts.
• Residence: Premiums for postcodes with higher vehicular crime and accident rates will likely be more expensive.
• Occupation: Some professions present a higher risk for auto insurers, including food delivery and taxi drivers, pushing up insurance rates.
• Driving record and claims history: Past accidents and claims can raise a driver’s risk, increasing their car insurance rates. Motorists with a clean driving and claims history, meanwhile, are often rewarded with discounts from their insurance providers.
• Level of coverage: The choice of policy – whether comprehensive, third party, fire & theft (TPFT), or third party only – dictates how much a motorist will pay in car insurance.
• Add-ons: Adding optional extras such as roadside assistance, widescreen excess, and rental car cover can raise premiums, although some comprehensive policies already offer these types of coverage.
• Parking location: Keeping a vehicle in a secured garage or monitored car park will likely result in cheaper premiums compared to just leaving it on a public road.

Read more: Why are automatic cars more expensive to insure?

Are newer cars cheaper to insure than older models?

One of the biggest factors affecting premium prices is a car’s market value, which is determined by looking at its age, make, model, condition, and distance travelled.

The common assumption is that older or used cars have cheaper insurance because they are worth less. But this is not always the case.

An old high-end luxury car such as the Porsche 911, for instance, is likely more expensive to insure than brand-new versions of popular hatchbacks Volkswagen Golf and Ford Focus.

Most new car models also incorporate the latest safety and security features lacking in older units – including traction control, anti-lock brakes, rearview cameras, tyre pressure monitors, adaptive cruise control, alarms, and immobilisers – which can drive down premiums.

But because brand-new vehicles often adopt the latest technology, they may also entail higher repair and replacement costs. Having advanced features can also make cars more attractive to thieves. These factors can raise insurance rates.

Read more: Which are the safest new cars in the UK?

How can UK motorists save on car insurance?

Because each driver carries a unique set of risks, there is no simple and straightforward way of getting the best deal on car insurance. There are, however, several measures that UK motorists can take to reduce auto premiums, including:

• Checking out the insurance costs when buying a car: As some cars are more expensive to insure than others, drivers looking to save on car insurance costs can benefit by checking out sedans, hatchbacks, and other family-friendly vehicles, which often have the lowest premiums.
• Comparing auto insurance rates: The internet is replete with insurance comparison websites that are easily accessible to drivers, helping them pick the cheapest policies with the best coverage.
• Investing in the right level of cover: Because cheaper does not necessarily mean better, motorists can save more in the long run if they pick the level of cover that matches their needs.
• Maintaining a clean driving history: Keeping a clean driving record is one of the best ways drivers can access affordable car insurance rates as most insurers provide considerable discounts to those adopting safe driving practices.
• Installing anti-theft devices: Many car insurance companies also reward policyholders who have installed anti-theft devices, including alarms and immobilisers, in their vehicles with discounts.
• Being smart about what you claim: Each claim can have an impact on car insurance rates at the time of renewal, so it pays to be smart and strategic about when and what to claim to protect risk rating and future premiums. Car insurers also offer no-claims bonuses to policyholders, which can yield considerable savings.
• Opting for annual payment: Paying auto insurance as one lump sum rather than in monthly instalments can result in savings as policyholders can avoid being charged for interest or finance arrangement fees.
• Avoid letting your car insurance auto-renew: Reviewing coverage and shopping around for a better deal is something that policyholders should practice every year to reduce auto premiums or to find a policy that they are happier with. These steps can also help drivers determine if they are still getting value from their current cover.

Want to know more about the cheapest cars to insure? Read the top 10 cheapest cars to insure in the UK in this guide.

Related article: 10 cheapest cars to insure for first-time drivers in the UK