While Americans have acquired new vehicles with the government’s cash for clunkers program the insurance industry has provided many with an unwelcome surprise as they surrendered older vehicles, for what the government promised would be a cash saving proposition.

Newer Vehicles are Worth More

While some Americans came to the table educated about what buying a new car would do to their insurance plans, others did not. Unless people were driving vintage collectible clunkers with high value, the Blue Book value on their cars was decreasing yearly. As the Blue Book value decreased, the replacement vehicle cost factored into the price of the policy decreased as well even if a consumer was not negotiating with the vendor for a better value. Many consumers with older cars had dropped higher value coverage like collision and were carrying higher deductibles.

When purchasing a new vehicle the value of the vehicle immediately affects the cost of the insurance premium. Since many consumers used the cash from the cash for clunkers towards the new car and others have rolled the payments from clunkers that were not yet paid for on to new car payments, some were not prepared for the additional costs being quoted by their insurance agents.

Some Consumers Have Increased Theft Risks Increasing Premiums

Older cars generally have lower theft risks. This is a factor many do not consider when purchasing a new car. The higher a theft risk, the more one can expect an insurance policy to increase in price. For those who purchased a car without checking the theft risk, finding a newly purchased car on this list can be an unpleasant shock. Some insurance companies have begun sending out high theft lists to customers to increase awareness on the topic. The information is also readily available on websites. Unfortunately, for those who have already made the purchase it does little to help with the increased cost to the budget.

Credit Ratings will Need to be Maintained

Consumers taking on new credit issues will need to maintain good credit to keep insurance costs down. Credit scores can impact insurance rates. Increasing debt always creates a risk for credit problems. Purchasing a new car can have the potential to lower a credit rating and higher one’s premium. Taking steps to maintain and improve your score can help offset these costs.

Cash for clunkers has provided consumers with new vehicles but now consumers are going to need to handle the responsibility of car loans and higher insurance premiums that came with the government incentive.