The popular Car Allowance Rebate System (CARS) of the federal government may not be as promising as it seems, according to several insurance experts. Analysts say that car owners who lack the knowledge about the “cash for clunkers” program can actually spend more money in the long run, instead of saving thousands of dollars through the rebates.
Car owners who trade in their gas-guzzling vehicles can qualify for as much as $4,500 from the federal government. Drivers can only get the maximum amount if the new car they are planning to purchase gets more than a 10 mpg improvement over their old car. While promising, the ‘clunkers’ program can be quite misleading for Americans who rush into buying new cars without even considering its costs and benefits.
Insurance specialists say that car owners have to consider several factors before committing to the ‘clunkers’ program. The amount of money shouldered by the government should cover any new costs that come with a new car. They explain that newer cars are considerably more expensive to insure than older, less valuable vehicles. However, ensuring that the new car is more economical can help even out the differences.
With a gas-sipping vehicle like a hybrid car, car owners can make regain any additional expenses with the savings in gas alone. Insurance providers also give special discounts for drivers who own hybrids. Analysts say that the standard discount is 10 percent.
Even with the $4,500 maximum amount, car owners can find it difficult to save any money especially if they choose to pay for the vehicle over several years. This would mean shelling out anywhere from $100 to $300 each month, quickly going through the rebate amount.
Car owners, on the other hand, can potentially save money if they purchase cars that come with warranty and lower maintenance costs. Because insurance companies base premiums on risks, having a relatively safe and well-maintained car can mean lower risks. Drivers shopping for new vehicles should also check statistics and studies to know which cars are rated higher by car safety research centers. Most insurers make use of data from studies to come up with insurance rates.
For added measure, motorists can also install safety devices on their vehicles to decrease the likelihood of an accident. Insurance providers also prefer policyholders who take steps to avoid car theft by installing anti-theft devices. Any of these additional equipment can drive insurance costs down, experts contend.