Will Scrappage Scheme Lower Car Insurance Premiums?

Will scrappage scheme lower car insurance premiums?

Now that the dust has settled on Chancellor Alistair Darling’s 2009 Budget, motorists can gain a clearer perspective on the implications of the measures introduced. While a two pence increase in fuel duty will hit most of us in the pocket, there is at least good news for new car buyers thanks to the introduction of a vehicle scrappage scheme.

The vehicle scrappage scheme, which is based on a similar model in Germany, sees drivers who have owned a vehicle that is at least 10 years old for 12 months, qualify to pick up a £2,000 incentive when they buy a new car. The move is aimed to stimulate the flagging auto industry which is still reeling from the credit crunch. However, for drivers, a vehicle upgrade may prove to be an expensive mistake thanks to their car insurance providers.

How the scrappage scheme affects car insurance

There may be no obvious correlation between the scrappage scheme and car insurance but the notion of drivers rushing out to buy vehicles over the next 12 months will almost certainly push premiums up.

This is because car insurance providers actually view brand new cars as more of a risk than older cars.

It may seem odd that car insurance companies typically penalize those with new cars when they are likely to be more reliable and are less likely to suffer a fault which leads to an accident. However, it is the approach drivers take when behind the wheel of a new car that leads insurers to put premiums up.

For example, many motorists like to show off their new pride and joy, and drive at faster speeds. It can also take drivers some time to become accustomed to the vehicle they are driving making an accident more likely. Furthermore, thieves and vandals are likely to look favourably on a new car when compared to a vehicle with 10 years on the clock – so there is an increased risk of theft.

All of these factors mean that if you trade your old banger in for a brand new car you may well celebrate a bargain deal with the scrappage scheme but you’re also highly likely to see your car insurance premiums rise significantly.

Is there any way to prevent a car insurance premium increase?

If you’re in the market for a new car then take the time to assess how it will affect your premiums.

For example, most insurers will hike premiums if you drive a high performance car because cars with more powerful engines are generally driven at higher speeds. Modifications too are also considered a "no, no" with insurers, as new parts can be difficult to repair and replace, while modified cars are also popular with thieves and joy-riders.

So the message is to think conventional. Choose a car that has a small engine and no modifications.

Also remember to factor car insurance premiums into the car buying process. If you spot a car you’re interested in, do a search on a comparison website to see how much you’d have to pay in insurance costs for that vehicle every year so there are no nasty surprises.

Can you cut car insurance premiums?

If you decide to capitalize on the vehicle scrappage scheme and secure a new car then don’t panic – there are still ways to keep your car insurance costs down.

For example, increasing the security of your vehicle reduces the risk of theft and vandalism. So, if possible, park in a garage at night and in a secured car park during the day. Also ensure that you have security systems installed in your car that are recommended by your provider – this could include car alarms, immobilisers and tracking devices.

Another step is to increase your voluntary excess, albeit this should be done with caution as the higher the excess the more you will pay out if an accident occurs. Paying premiums annually instead of monthly is also a smart move, if you have the cash, as you will be able to cut out interest charges.

Make sure you’re not paying for cover options you don’t need – for example you’re unlikely to require child seat cover if you don’t have children and you won’t need business cover if all you do is commute back and forth to work.

Whatever your reason for buying a new car, and no matter which vehicle you pick, make sure you compare car insurance quotes first with a comparison website. The leading websites can now search more than 100 different policies making it easy for you to find a good deal.