Most dealerships won't let you drive a new car off the lot without proof of insurance. You can buy car insurance on the spot with your smartphone, but it's worth your time to do some prep work before you buy. Comparing quotes and seeing about adding a new vehicle to your current car insurance policy can go a long way toward saving you money.
In this article
When do you need to get insurance for a new car?
If you do not have car insurance when you go to buy a car, the dealership will require you to buy a policy before you drive off the lot. You might have heard of a "grace period" for getting coverage for a new vehicle, but this can be misleading.
Some car insurance providers have a span of time, anywhere from a few days to a month, when your current car insurance applies to a new vehicle. After that time limit passes, you need to add the car to your policy. Otherwise, the vehicle is considered uninsured. Check with your car insurance company to see how much time, if any, you have to get your new car covered.
How much is insurance for a new car?
The price of car insurance usually increases as a car ages. How much of a cost difference you're looking at depends on the insurance carrier. The table below shows the respective average monthly premium some major car insurance companies charge for a 2012 and 2022 Honda Accord LX in Washington.
| Company | 2012 | 2022 | Premium increase |
|---|---|---|---|
| Allstate | $161 | $205 | 27% |
| GEICO | $128 | $149 | 16% |
| State Farm | $127 | $138 | 9% |
| Average rates are based on non-binding estimates provided by Quadrant Information Services. Your rates may vary. | |||
Providers look at different factors when calculating a car insurance quote for a new vehicle. These considerations include:
- Make, model and year of the car
- Your ZIP code
- Your claims history
- Your coverage limits
- The deductible you choose
A standard car insurance policy tends to be similar across insurers, so why does the cost differ from company to company? Car insurance quotes differ because providers put different risk values on various factors when they calculate premiums. For example, one company may consider where you live to be a higher risk than another company. To make sure you get the best coverage at the best price, compare quotes.
See how much you could save on car insurance
Top states to own a new car
Buying a new car isn't cheap. According to a recent Kelley Blue Book report, the average cost of a new car is $49,507 — a record high. Along with the expensive price tag come taxes, fees and insurance before you can even leave the lot.
Luckily for those in Alaska, fees included at the dealership are the lowest in the nation, at just $315, compared to those in Louisiana who pay an average $6,369 more on top of the initial cost of the vehicle.
Another unexpected cost is the state taxes included in the sale. Alaska, Oregon, New Hampshire and Montana are the few states that do not have any associated taxes. Kansas, California and Utah rank the highest for car sales taxes, all above 7%.
In addition to taxes and fees come the unavoidable costs associated with car ownership: insurance and gas. Vermont has the lowest average cost for insurance, at $714 annually. The most expensive state is Michigan, where residents pay $3,815. Drivers who opt for a traditional gas vehicle instead of an electric vehicle also face high gas prices. The national average for a gallon of gasoline is currently $3.64. Drivers in Washington, California and Hawaii can expect to pay nearly $5.
To determine which states are the overall best to own a new car, we looked at these four factors and created a composite score ranking. We found New Hampshire to be the overall cheapest state for new car ownership, while Nevada is the most expensive.
| State | Average annual insurance rate | Dealership fee | State tax | Average price of gas per gallon |
|---|---|---|---|---|
| New Hampshire | $831 | $1,372 | 0.00% | $3.51 |
| North Carolina | $805 | $1,996 | 3.00% | $3.42 |
| Wisconsin | $886 | $2,753 | 5.00% | $3.41 |
| South Dakota | $861 | $2,759 | 4.00% | $3.53 |
| Oklahoma | $1,502 | $2,205 | 3.25% | $3.30 |
| Iowa | $930 | $2,666 | 5.00% | $3.46 |
| Virginia | $1,131 | $2,486 | 4.15% | $3.46 |
| North Dakota | $1,015 | $2,370 | 5.00% | $3.48 |
| New Mexico | $1,338 | $1,603 | 4.00% | $3.52 |
| Montana | $1,273 | $537 | 0.00% | $3.76 |
| Alaska | $1,279 | $315 | 0.00% | $4.31 |
| Mississippi | $1,145 | $4,125 | 5.00% | $3.09 |
| West Virginia | $1,162 | $2,873 | 6.00% | $3.38 |
| South Carolina | $1,529 | $2,977 | 5% | $3.36 |
| Vermont | $714 | $3,216 | 6.00% | $3.64 |
| Texas | $1,425 | $2,730 | 6.25% | $3.31 |
| Hawaii | $1,192 | $2,179 | 4.00% | $4.69 |
| Delaware | $1,961 | $2,486 | 0.00% | $3.57 |
| Wyoming | $1,020 | $3,582 | 4.00% | $3.64 |
| Tennessee | $969 | $3,497 | 7.00% | $3.27 |
| Alabama | $1,536 | $5,490 | 2.00% | $3.23 |
| Kentucky | $1,660 | $3,021 | 6.00% | $3.32 |
| Ohio | $1,403 | $3,507 | 5.75% | $3.35 |
| Nebraska | $1,198 | $4,266 | 5.50% | $3.40 |
| Oregon | $2,216 | $353 | 0.00% | $4.58 |
| Maine | $771 | $3,891 | 5.50% | $3.66 |
| Missouri | $1,455 | $4,877 | 4.23% | $3.32 |
| Arkansas | $1,073 | $5,045 | 6.50% | $3.25 |
| Idaho | $768 | $3,900 | 6.00% | $3.88 |
| Indiana | $953 | $3,498 | 7.00% | $3.53 |
| Georgia | $1,495 | $3,259 | 6.60% | $3.43 |
| Minnesota | $1,270 | $3,323 | 6.88% | $3.50 |
| Kansas | $1,050 | $4,772 | 7.50% | $3.34 |
| Louisiana | $2,363 | $6,369 | 4.45% | $3.22 |
| Maryland | $1,725 | $3,151 | 6.00% | $3.64 |
| New York | $2,203 | $3,751 | 4.00% | $3.72 |
| Massachusetts | $1,785 | $3,112 | 6.25% | $3.58 |
| Pennsylvania | $1,454 | $3,675 | 6.00% | $3.73 |
| Illinois | $1,382 | $3,265 | 6.25% | $3.87 |
| New Jersey | $1,688 | $3,269 | 6.63% | $3.57 |
| Colorado | $1,779 | $5,890 | 2.90% | $3.86 |
| Florida | $2,029 | $4,655 | 6.00% | $3.55 |
| Washington | $1,459 | $2,952 | 6.80% | $4.93 |
| Connecticut | $1,937 | $3,340 | 6.35% | $3.66 |
| Rhode Island | $2,270 | $3,309 | 7.00% | $3.56 |
| Arizona | $1,614 | $5,791 | 5.60% | $3.80 |
| Michigan | $3,815 | $4,902 | 6.00% | $3.57 |
| Utah | $1,367 | $4,098 | 7.25% | $3.95 |
| California | $1,357 | $4,960 | 7.25% | $4.90 |
| Nevada | $2,371 | $4,572 | 6.85% | $4.21 |
| U.S. average | $1,448 | $3,380 | 4.95% | $3.64 |
| Methodology: The QuoteWizard research team evaluated buying a new car in all 50 states. A composite ranking system was used to rank each city for its average cost of insurance, the associated fees with buying a new car, their sales tax percentage and average fuel costs. Average insurance rates are based on non-binding estimates provided by Quadrant Information Services. Your rates may vary. Associated fees for each state were sourced from LendingTree. The sales tax percentage for each state was sourced from the individual state’s DMV and Department of Revenue websites. Gas prices were sourced from AAA in July 2023. | ||||
Seasonality plays a major role in the price tag of a new vehicle. As dealerships get new inventory and work to sell the previous year's vehicles, incentives increase to get rid of what they have. Experts encourage prospective buyers to look for holiday sales and end-of-the-year promotions. October, November and December are considered the best months to purchase a car from a dealership.
How to get a new car insurance policy
If you don't have a current car insurance policy, getting a new car covered takes a little time. Still, it's worth it. Once you decide on the make, model and year of the car you're going to buy, use that information to compare quotes from multiple car insurance providers.
Look over the quotes you receive side by side. This gives you a good overview of your coverage options and helps you decide which car insurance company is best for your needs. Once you make a decision, you'll receive a quote number from the provider.
After you buy your new car, use the quote number you received to pull up your quote on your smartphone. Fill in any missing information, such as the new car's VIN number, to finalize the policy purchase. You should receive proof of insurance from your provider immediately. Show this to the car dealership, and you're off!
How to add a new car to your insurance
It's fairly simple to add a new car to an existing insurance policy. Contact your current insurer with your new car's make, model, year and VIN number. They'll give you a quote for the cost to add the car to your existing policy. Many insurance companies offer multi-car discounts to help you save money on your premium. If your provider doesn't, take the opportunity to shop around.
Once you decide on the company and policy you want, finalize the policy purchase. Then it's just a matter of showing your proof of insurance to the auto dealership.
Do you need gap insurance?
Gap insurance can be a good investment for a brand-new car. If your new car is financed or leased, gap insurance covers the difference between what you owe on a car and what your insurance company pays out if it's damaged or destroyed. Gap insurance protects you against value depreciation of the car that starts as soon as you drive it off the lot.
For instance, say you owe a lender $30,000 for your new car that's totaled in an accident. Your insurer looks at the actual cash value (ACV) of your car. ACV is the value of your car after factoring in depreciation. If your provider decides that the ACV of your car is $20,000, that leaves you responsible for the remaining $10,000 owed to your lender.
If you have gap insurance, it would pay the outstanding $10,000 to your lender. Otherwise, you'll pay that amount out of your own pocket. Some lenders require you to carry gap insurance, along with full-coverage car insurance, to make sure their investment is protected.
Methodology
We compared rates from several insurance companies for this article. The driver profile we used to generate quotes was for a 30-year-old male who lives in Washington. He drives either a 2012 or a 2022 Honda Accord LX, depending on the quote. He has a clean driving record and 100/300/100 full-coverage limits.
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