Car Insurance and the Scrappage Scheme

Car insurance and the scrappage scheme

Though it has faced criticism among environmental groups, such as the Environmental Transport Association, for not being green enough, there is no denying the success of the UK car scrappage scheme in lifting the motoring industry in the UK. In fact, demand has been so great that Business Secretary Lord Mandelson has taken the decision to extend the £2,000 scrappage incentive for an additional 100,000 cars and vans.

The decision to extend the funding should offer a major boost to a host of motorists who would have otherwise missed out on this money saving concept. However, while the prospect of upgrading an old banger to a brand new car may offer savings in terms of maintenance, road tax and fuel costs, it could actually increase car insurance premiums.

Why car insurance premiums could rise

Many drivers assume that new cars are cheaper to insure than older vehicles because they are generally more reliable - however, the bulk of insurers take a different stance.

In fact, new cars generally cost much more to insure than older cars for a number of reasons. Firstly, they are more valuable which means that if they are written off they would cost more for an insurer to replace. Repairs can also be more complex too as replacement parts can be less easy to come by and technology can be more sophisticated.

Trading your old car for a more powerful new car can be a mistake - the faster the car, the more likely it is to be driven at high speeds. New car owners are notorious for "showing off" their new wheels, and this parading inevitably leads to accidents.

In addition, new cars are also more desirable to thieves and joyriders as they are more attractive and reliable. Some of this risk is offset however, if the car has a more sophisticated security system.

So how can you drive down car insurance for a new car?

Just because car insurance premiums are generally higher for new cars, it doesn’t mean you should stick with your older vehicle until you run it into the ground. You can get cheap car insurance on a new car - you just need to be savvy in your approach.

The first step is to think carefully about the car you’re choosing. Selecting a high performance car with a large engine could send premiums through the roof as these vehicles are more likely to be driven at fast speeds. So make your car choice as conventional as possible. This also means avoiding cars that have been modified beyond the factory specification and steering clear of vehicles with high specifications and letters after their name such as ‘GTI’.

One of the simplest ways to assess the car insurance premiums you’re likely to receive is to use the Association of British Insurers’ database to find which insurance group the vehicle you are interested in fits into. Insurance groups, which range from 1-20 (but will expand to 1-50 in December) rank vehicles based on their repair costs, availability of replacement parts and a host of other factors. The lower the insurance group, the lower the premium - so, look for cars that fit into low groups before you buy.

Pay attention to the vehicle’s security levels too. Look for cars that are fitted with a good alarm and immobilizer system and possibly a tracking device - you could benefit from a significant discount from an insurer if you have a high level of car security.

More tips to cut car insurance premiums

Use the fact that you’re buying a new car to assess your car insurance premiums and look at whether you’re truly doing everything you can to save.

Insurers offer a range of discounts that you could benefit from. For example, some providers will cut premiums if you agree to a mileage limit - which could be possible if you only use your car as a run-around. Others will slash premiums if you park in a garage at night; or if you restrict yourself to using the vehicle purely for social, domestic and pleasure use as opposed to commuting or business use. Think about how many named drivers you need on a policy too - you can normally add a driver for a limited period at a later date so restrict your policy to those who will be using the car on a regular basis.

Finally, make sure you shop around for car insurance and don’t stick with your existing provider. Most insurers offer incentives to new customers, particularly if you buy online, so use a comparison website to get an overview of the premiums you could be paying.