Buying a used car and car insurance

With the car scrappage scheme wiping out a host of used cars, the values of those that remain have risen as stocks plummet. With serious bidding among franchised dealer groups desperate to fill empty spaces on their forecourt, British Car Auctions reported a three per cent rise in values in August, 2009.

However, while rising values is good news for those looking to sell, those wanting to find a bargain used car may find life more difficult than ever making it vitally important to ensure they're getting value for money on all aspects of the deal, including car insurance.

Is car insurance cheaper for new or used cars?

The good news is that used cars generally qualify for cheaper car insurance. This is because their values are lower and so in the event of a write-off they would cost less for a car insurance company to replace. Some older cars are also much simpler and are less complicated and cheaper to fix. They are also less desirable to thieves meaning their overall insurance risk is drastically reduced.

What to consider with car insurance for a used car

Before even starting your search for a used car, you should weigh up how much you can afford to spend - not only initially but also as part of a month-by-month budget. This includes fuel costs, vehicle excise duty, tolling charges and car insurance.

In terms of car insurance you can get a clear picture of how much you will spend even before you buy. This is because all cars are classified into insurance groups ranging from 1-20 (1-50 from December 2009) with those in lower groups attracting lower premiums.

Car insurance groups are set by the Group Rating Panel which includes members of the Lloyds Market Association and the Association of British Insurers (ABI). The factors used to assess cars include: damage and parts costs; repair costs and times; values; parts prices; performance; and security. You can use the ABI database to search for the model you are interested in and see which group rating it fits into.

Once you've found a used car you're interested in, use a comparison website to compare the rates available. Comparison websites can compare quotes from more than 100 companies to give you a clear idea of how much you'll be paying.

How to save money on car insurance for a used car

To save cash on car insurance premiums for a used car, first consider how much cover you need. For example, if you're buying a cheap used car then third party only or third party fire and theft cover may be sufficient as the low value of your own vehicle may make insuring it against an accident too expensive.

Make sure you test-drive the vehicle and if repairs are necessary consult your insurer about any work you have done - it may be able to recommend a repairer. Also get a vehicle history report for further reassurance.

From there, follow the steps that any driver should take to save money on car insurance. These include enhancing the security of the car with alarms and immobilisers; parking in a garage at night; agreeing to a mileage limit if appropriate; increasing the voluntary excess if affordable; and paying the premiums annually instead of monthly to cut out interest charges.

Remember too that driving safely and steering clear of accidents and convictions will help you lower your car insurance premiums over time.