Buying a Car Online: Pros and Cons

 

With the Covid-19 pandemic closing in on the two-year mark, never has online buying been more popular.  This applies to goods that have always been popular to purchase online such as restaurant meals, jewelry, clothing and books, but also more unusual purchases like buying a car online.  Shopping for car insurance online has been popular for some time now, and in fact, it's estimated that more than 70% of those buying car insurance last year began by going online to do some research.

What's really surprising is that, according to J.D. Power, about 2/3 of consumers buying new cars do their shopping online.  The Internet is an incredibly useful tool for those doing their "due diligence" by researching products before putting their money down, especially with higher-priced items.  Keep in mind that there's a difference between shopping online and buying online.  Shopping for a car online includes:

• Researching a particular model car
• Finding cars that are listed for sale
• Comparing different models of cars
• Calculating car loan rates and payments
• Determining what their current vehicle is worth
• Obtaining car dealer information

You may also utilize social media in your search for buying a car by chatting on dealer websites and even negotiating with dealers.

Pros and Cons of Buying a Car Online

Deciding whether or not to buy a car online will depend on just what you're looking for in a car-buying transaction.  Buying online can be fast, convenient and without the hassle of having to deal with a car salesman.  But if you're the type of person who wants to see, touch and smell your potential vehicle while taking it out on a test drive, then an online purchase might not be right for you.  Here are some of the pros for online car purchasing:

• Streamlines the process, saving time from the traditional in-dealership experience
• Offers a car deal with no negotiations, no haggling and no sales pressure,
• Shop at your convenience.
• Take delivery at home or anywhere else you choose.

Here are some cons:

• Inability to inspect (see and feel) the car you're buying.
• Less chance of taking a test drive.
• Less ability to negotiate a price.
• May restrict your financing options.
• Getting a fair price for your trade-in may be difficult.

Whatever you decide, know that thousands of people are successfully buying cars online today and the trend only seems to be getting more popular.

How to Choose Your Auto Insurance Deductible

 

There are numerous ways available for saving money on your auto insurance coverage, many of which can be seen here.  The last item on the list, "raise your deductibles," is one that many policyholders consider doing first because it's simple to do and the results show up almost immediately.  The question is, what amount should your deductible be?

The Purpose of Your Auto Insurance Deductible

Vehicle insurance, like virtually all other insurance, is based on the sharing of risk.  When you take out an auto insurance policy, the insurer underwriting the policy is taking on a portion of the risk to which you're subject by owning and driving a vehicle.  If you suffer a covered loss, the insurer is responsible for compensating you for an agreed upon portion of that loss.  

The deductible associated with your policy is the amount you agree to pay toward the loss before your insurer pays their portion of the claim.  This deductible represents the amount of risk for which you retain responsibility in the event you suffer any loss covered by the policy.  The larger the deductible, the greater your risk of personal financial loss when a claim is made and the lower the insurer's financial risk.  Because of this, a lower deductible typically means a higher premium and choosing a higher deductible will mean a lower premium.

Choosing Your Auto Insurance Deductible

Choosing your auto insurance deductible is done when you take out your policy but can be changed, if desired, while the coverage is in force.  The average amount most people select for their deductible is $500, although some policyholders may opt for an amount as low as $100.  Upper limits can be in the thousands, especially when insuring a very valuable vehicle.

Since a lower deductible means higher premiums, you may opt for a higher deductible such as $1000 or $2000 in order to save money on your policy premium costs.  Contact your agent to learn how much you can save.  There is no deductible required for the liability portion of your coverage and you may choose to carry different amounts on your collision coverage and your comprehensive coverage.

Though you may save money when selecting a higher premium, any claim you submit will require you to come up with more out-of-pocket money.  You should have an emergency fund allowing payment of your deductible in the event of a covered loss.

What Drives Auto Insurance Rates Up?

 

Many of our clients are noticing that their Greensboro auto insurance rates continue to increase year over year and they're wondering why.  There are a number of answers to this question and they can be divided into two sections:

1.  Rate increases affecting everyone
2.  Rate increases specifically affecting you

Everyone's Coverage Rates Going Up

The auto insurance business is highly competitive and many auto insurance companies are struggling to stay profitable in these days of unusually high claims payments.  This has caused insurance rates to spiral upwards during the past several years.  This affects your Greensboro auto insurance rates as well as rates with companies all across the country.

Like any other business, an auto insurance company must stay profitable in order to remain in business.  They make money in two ways:  by collecting premium dollars from their policyholders and by putting these collected funds into profitable investments.  These funds are then used to pay out claims and to cover employee salaries and other administrative costs.  When claims payments going out surpass premiums coming in, a phenomena that's known as underwriting loss, premium costs must be increased in order to make ends meet.   There are some definite reasons why claims have risen so much recently.  Consider this:  

In the past several years, eight out of the ten largest auto insurance companies in the U.S. have reported losing money in their policy underwriting efforts.  In other words, they've paid out more in claims than they've collected in premiums.  Reasons for this include:

• A record number of disasters occurred in 2018-2019, including wildfires, hurricanes, floods and more.  These disasters not only negatively affected home insurance companies but also those companies insuring automobiles.  An inordinate number of claims were made on vehicles that burned, suffered flood damage or were damaged in tornadoes.
• An increase in distracted-driving accidents, mostly attributed to cell phone use, have been occurring lately.  Millions of crashes are blamed on distracted driving, causing insurers to raise rates.
• Expensive technology added to newer vehicles have made repairs more costly.  What used to be a simple rear bumper repair, for example, now includes repair of rearview video cameras, now required on all new cars sold in the U.S.

Rate increases affecting you individually may result from:

• Too many claims filed
• Adding a teen driver to your policy
• Moving to a higher crime/higher accident-prone area
• Too many moving violations
• You've turned 70 years old

What Is Usage-Based Car Insurance?

Usage-based car insurance is known by a number of different names, including:

• Pay-as-you-drive (PAYD) insurance
• Pay-per-mile insurance
• Behavior-based insurance
• Telematics

These forms of usage-based car insurance are ones where your insurer calculates your insurance premium rates based on your car usage and how you actually drive your car rather than the way they think you'll drive your car based on their statistical data used during the underwriting process.

Traditionally, car insurance premium rates are determined by using lots of data that are meant to tell the insurance company what type of risk you represent to them.  This is done by trying to figure out how other drivers displaying your characteristics and driving habits are most likely to drive. There are also lots of other factors used to determine what level of risk you represent to your insurer. These may include:

• Age
• Gender
• Zip code
• Occupation
• Marital status
• Driving record
• Credit rating
• and other factors, depending on the insurer

How Usage-Based Car Insurance is Different

With usage-based car insurance, your policy premiums are based on how and how much you actually drive your car. As a safe driver, you should look forward to saving some money. Conversely, as a riskier driver, your premiums will be higher than your peers who are considered safer.

This type of insurance is relatively new and has been fairly slow to catch on with the public. One reason for this is the fact that people may feel it an invasion of privacy to allow their insurance company to track their driving.

 

 Different Types of Usage-Based Coverage

Some usage-based policies figure premium costs strictly on the number of miles you drive during the policy period. Even as a risky driver, you won't see a premium penalty unless a claim is filed against you.

Other policies are behavior based, meaning premium rates are determined by how and when you drive. Using a mobile app that works in conjunction with your smart phone, data can be sent to your insurer to tell them not only where and how many miles you drive, but also any risky actions you take. These may include:

• Talking on your phone while driving
• Fast accelerations
• Hard braking
• Speeding

As an alternative to the mobile app, some companies use a dongle that plugs into your car's on-board diagnostics port.

Not all insurers offer usage-based car insurance, but some of the best, such as Progressive, do.

Will My Greensboro Car Insurance Premiums Increase Once My Teen Has a License?

Operating a motor vehicle carries with it certain risks, as is evidenced by the number of minor and major auto accidents that occur on our roads every day. Car insurance is a means for the potential risk of financial loss resulting from owning or operating a vehicle to be shared. Car insurance companies are in the business of taking on the financial risk of their policyholders in exchange for a predetermined amount of money (premium), should said policyholder suffer a loss regarding their automobile.

 

Who Determines Your Policy Cost?

The amount of Greensboro car insurance premiums you're charged for your auto insurance policy is directly related to the amount of perceived risk you represent to your insurer. Lots of data figures into the calculations used during the underwriting process, including:

• Age
• Geographic location
• Driving history
• Make, model and value of your car
• Credit history
• Claims history
• Coverage types and amounts
• and much more

Drivers with a poor driving record or poor claims history represent a higher risk to their insurer and will, therefore, be charged a higher rate for their Greensboro car insurance premiums. A more expensive car or full comprehensive coverage will also cost more in the way of premiums because the insurance company's exposure is increased and, in the event a claim is made on an expensive or fully insured automobile, the claim will be higher.

Experience is a Big Determining Factor

A driver's experience is a huge factor in determining the amount of risk he or she represents, especially if they're below nine years of driving. It's been proven statistically that new drivers are more likely to be involved in an accident due to their lack of driving experience. When a newer driver takes out an auto policy, he/she will be charged some of the highest rates of any drivers. If a teen living at home is added to his or her parents' policy, it will cause a significant increase in the policy cost, although generally less than what the teen's individual policy would cost.

A recent study found that the amount of increase a married couple adding a teen to their car insurance policy depends greatly on their geographical location. At the time of the study, the most expensive states for adding a teen driver were Arkansas (+116) and Utah (+115%). Fortunately for you, North Carolina was one of the lowest at +59%.

Does My Greensboro Car Insurance Cover Rentals?

Even though you may have had your Greensboro car insurance policy for a number of years, there's still a chance that you're not totally clear regarding what your policy actually covers. One question we often hear from our customers is, “Does my car insurance policy provide coverage when I'm driving a rental vehicle?” The answer to that question is, “Probably,” but not necessarily.

Much depends on your specific Greensboro car insurance policy and its particular provisions. Everything is spelled out in the policy itself, but many policy holders either haven't thoroughly read their insurance contract, don't understand what they've read or, over the years, have forgotten what their benefits are. Here's what you can do.

Make a Call

As always, the best solution to the question about rental car coverage and your personal car insurance policy is to contact your agent or broker and ask. This should be done in advance of any occasion where a car rental is planned. You should also call your credit card company to find out what rental car insurance benefits, if any, they provide. Many major credit card companies include rental car insurance benefits when you use their card to pay for the purchase of your rental vehicle.

What You'll Likely Find

Generally speaking, you should find that your personal car insurance coverage will extend to a rental car, in which case an accident you cause will be covered by your liability coverage to pay toward losses for damages done to other people or property as a result. These benefits will typically pay up to the benefit limits of your policy.

Collision coverage carried on your personal auto policy should pay toward damages sustained by the rental car you were driving and your comprehensive coverage should pay toward losses suffered by non-traffic accident related events such as vandalism or theft. Be aware, however, that even having full coverage on your regular vehicle may not be enough to pay for every single charge that could be imposed by a car rental company.

What About That Credit Card Coverage?

Rental car insurance benefits provided by your credit card may possibly supplement or, in some cases, take the place of your regular car insurance when renting a vehicle. In many cases you must use your credit card to pay for your car rental (in full) and must decline the car insurance option offered by the rental company.