Jumping Over Insurance Cost Barriers

A 33-year-old woman with a clean driving record was excited to buy a used Porsche 911 even though it wasn’t a performance model such as a GT3. It wasn’t even turbocharged. Then she researched how much insurance for the used Porsche would cost and found it would be $900 a month. The purchase was off.

“That is an example of the scariness you face if you buy a car now,” Karl Brauer, executive analyst at iSeeCars.com tells WardsAuto.

Auto insurance rates have skyrocketed, causing some consumers to delay a new car purchase. Rather than lose a sale, there are strategies dealers can employ to help customers find affordable insurance.

Rising rates are a problem that will only grow, Brauer says.

“More and more people are going to be aware of this insurance issue,” he says. “It is probably going to be a bigger problem over the next few years.”

Bankrate reports the average annual cost of auto insurance has risen to $2,453, up 26% compared to 2023. That’s 3% of the 2023 real median household income of $80,610, according to the U.S. Census Bureau. Other analysts report even higher increases.

That increase is a lagging result of the rise in vehicle prices and repair costs, says Chris Harto, senior policy analyst, transportation and energy, at Consumer Reports.

Given those increases, “the cost of insurance is eventually going to go up,” he tells WardsAuto. “It is just another thing squeezing people’s pockets.”

Brendan Harrington, president of the Autobahn BMW Ft. Worth dealership, says that while he can’t directly attribute any sales losses to the rising rates, “I know it must be weighing on people’s minds.”

There may be lost sales he just doesn’t know about, Harrington says.

“My guess is that the combination of already high monthly payments due to interest rates and inflated sales prices, plus insurance rates rising so fast, has led many customers to simply not shop right now,” he says.

Auto insurance strategies

Strategies for helping consumers overcome the insurance cost hurdle: —

“What I would do as a dealer is research on the cost of insurance and actively try to find the best insurance rates for cars,” Brauer says.

That feeds into a second strategy: “Have a talking point” if customers mention the insurance cost as a concern, Brauer says. “If the dealer feels like they have been able to find competitive insurance rates on the cars they are selling, they should introduce it.”

Another idea: Dealers can cooperate with an insurance company to offer special rates to that dealership’s customers or special deals such as a lower rate for the first year.

These strategies could be evergreen. Auto insurance costs are unlikely to fall in the future, Harto says.

“Insurance costs are going to track with vehicle costs,” he says. 

While vehicle costs are unlikely to decline, they will stabilize, Harto says.

For insurance costs, that likely means “I don’t think we will continue to see large increases in premium rates, but they probably aren’t going to go down,” he says.