7 Things to Know About Giving (or Getting) a Car for Graduation

If you're planning to buy a car for the new grad in your life, here's some advice on making the right choice.

Behind every diploma bestowed at high school and college graduations is a lot of hard work. And for some lucky grads, that hard work gets rewarded with a milestone gift: their own car. If you’re planning to buy a car for the new grad in your life, we’ve got some advice on making the right choice. And if you’re the recipient, we’ll share a few tips to help you drive into the future with confidence.

What to Consider If You’re Giving a Car to a New Grad

You’re so proud of your new grad for all their hard work that you’ve decided to shell out for a set of wheels to carry them on to their next adventures. Whether you’re getting your grad started with a well-loved (read: used) older car you bought from a neighbor or you’re splurging for a brand-new ride with all the bells and whistles, it’s important for you, the buyer, to take a moment to consider the realities of this major purchase — and of the needs of its soon-to-be owner.

1. Consider Total Cost of Ownership When Choosing a Car

First, let’s talk money. The car you buy should fit into your own budget, of course. But you also have to consider the total cost — including ongoing costs — of the car. Here are some things to think about.

Gas: If, for example, your child will be driving the car back and forth between home and an out-of-state university, would they (or you, if you’re footing the gas bill) be burdened by the costs of a gas-guzzling vehicle? If so, a fuel-efficient car might be a better option.

Insurance: This is the most expensive consideration after the vehicle itself. Neil Richardson, licensed insurance agent and adviser for The Zebra, says to keep insurance in mind right from the start as you shop for cars. If insurance is an afterthought when you’ve already purchased the car, you could be in for some unpleasant surprises. Further, the car you select will affect your insurance premium if your grad will be on your insurance policy (more on this below).

Maintenance: Consider the expenses related to repairing or replacing parts on the vehicle if it’s damaged in some way. Foreign car repairs may be much more expensive than domestic, but that’s not a hard-and-fast rule. Further, new cars may include manufacturer warranties or maintenance as part of your package, but if your grad is savvy with tools or has an interest in cars, they can take care of plenty of at-home car maintenance issues.

2. Prioritize Safety & Utility

When car shopping, safety should stay top of mind. The Insurance Institute for Highway Safety ranks the safest cars in different categories, from minis to large pickup trucks.

Also think about where and how much your recipient will be driving. If they’re headed for college or a new job in a crowded city, they’ll need a car that fits cramped streets and narrow parking spaces. A new college grad with a quick commute will appreciate a different kind of car than one whose new job requires them to be a road warrior.

3. Insure it

If your gift recipient is a high school grad who lives at your residence, they may get lower premiums if they stay on your policy, but whether that’s possible depends on your situation. If they’re headed to an in-state college or university, they can stay on your insurance policy as long as their primary residence is still your home address, Richardson says. Students leaving the state for college, though, may have to get coverage on their own, as rates are dependent on where the driver lives and “garages” the vehicle.

Remember that if your new grad is on your insurance policy, you could be held liable for damage they cause in an accident. For this reason, Richardson says it’s generally a good idea to go beyond the state-required minimums in liability coverage.

4. Get Your Paperwork in Order

Getting close to a decision? Before you seal the deal, prepare for some extra paperwork. Whether you’re heading to the dealer or buying a car privately, you’ll need to be prepared with the right documentation, such as the recipient’s driver’s license and current insurance, an IRS cash-reporting form and a security report. (Questions? Read more details about each of these documents.)

If You’re a New Grad Who’s Been Gifted a Car

So now you’re the proud owner of a new diploma and a car. Sweet! Take a moment to savor the payoffs for your hard work and generosity of your gift giver.

Once you’ve posted lots of photos of your new ride, you might be thinking about all the new freedom your car gives you or how you’re going to upgrade the stereo system. But there are some other things you need to keep in mind when it comes to how this car will affect your life. Nail down these details and you’ll be well on your way to acing this whole “#adulting” thing.

1. Know the Impact on Your Wallet

Even if you aren’t making payments on your new vehicle, a car can still have a huge impact on your wallet. (Here’s how car insurance affects your credit.) How much will you need to budget for gas, parking, insurance, registration and regular maintenance? Your folks or your generous benefactor may be picking up some of these expenses for you, at least in the short term. Be sure to establish clearly with others about who’s paying what and check in regularly to make sure necessary expenses related to your car are taken care of.

2. Your Insurance History Starts Now

We know that dealing with auto insurance for the first time is complicated, so it’s extra important to be clear on how your policy works, whether it’s in your name or you are on your parents’ policy for now. If you’re a registered driver of a registered vehicle, your insurance history starts now (even if you’re not paying for it), and a clean driving record and demonstrated history of continuous insurance coverage will mean huge savings on your insurance in the future.

If you’re in college, you can start building your insurance record by staying on your parents’ or legal guardians’ policies if they OK it. According to Richardson, as long as the parents’ address is still the primary residence of the student, on-campus housing is considered temporary since students have to leave at the end of each semester, so students can still be covered on their parents’ policy. Once they move off campus to a more permanent situation, i.e., a house or apartment, then they will need their own coverage. (Here are the states where your credit score really matters for car insurance coverage. No matter where you live, it’s a good idea to know where your credit stands — you can find out for free on Credit.com.)

If you’re not in college and you’ve moved away from your parents or guardians altogether and no longer share an address, you’ll have to have your own policy.

3. Keep That Car in Tip-Top Shape

Finally, regular preventive car maintenance will probably be the last thing on your mind as you adjust to college life or settle into a new job. So go ahead and set some reminders in your calendar to take care of oil changes, wiper fluid and other routine maintenance for your car. You’ll prolong the life of the car and make it less likely that problems will pop up just when you don’t need them — like on your Spring Break trip or on the way to a job interview.

Car not in your budget for a graduation gift? Consider these eight graduation gifts your kids will actually use. 

Image: kali9

The post 7 Things to Know About Giving (or Getting) a Car for Graduation appeared first on Credit.com.

6 Reasons to Leave Your Car Insurance Company

Here are six signs it's time to break up with your auto insurance company.

You might be familiar with a few scenarios that could make your auto insurance rates change: You bought a new car, moved, got in a car accident, or even got married or graduated from school. In all these cases, it’s important to shop around for car insurance to ensure you’re getting adequate coverage — at the right rate — to meet your needs.

Even if you’re happy with your car insurance company, simply checking out the competition on a regular basis (we recommend every six months) can help keep your current rate low because it indicates to your insurance company that you’re on the lookout for better deals, and your insurer will, therefore, be motivated to keep you.

Insurance rates and policy details vary widely by insurer and by person. If you get a quote from a dozen insurance companies, many of the quotes might look quite similar, while others might show your premium varying by hundreds of dollars.

Even if your rates and coverage were equal among a handful of insurance companies, we remind you: It’s not all about price.

Insurance is intended to protect you when you need it — legally, medically, financially. You want to make sure you choose the company and service that meets your needs and has your back. If you’re not getting that support, you might consider changing insurance companies.

The Zebra’s licensed insurance agent and adviser Neil Richardson offers his expert advice on when it’s time to leave your insurance company:

1. Your Rates Increase (And It’s Not Your Fault)

As we’ve discussed, countless factors impact your auto insurance rates, including where you live, what kind of car you drive, your driving record and insurance history, and your personal information such as age, gender, marital status, credit score and more in many states. (You can view two of your credit scores for free on Credit.com.)

When any of these factors change, your rates may change, too. Sometimes it’s for the better (the older you get, the lower your rates drop — until about age 60, that is), and sometimes for the worse (if you cause a collision, your rates could rise nearly 50%!). Long story short: It shouldn’t be a huge surprise.

Because auto insurance companies are businesses that must make money to stay afloat, they may raise premiums for their customers, likely following a high claims payout period in which they incurred hefty losses. You may or may not be able to find lower rates elsewhere (for example, if a violent storm caused damage in a certain geographical area, other insurance companies could be suffering the same losses from big claims payouts), but it’s worth shopping around.

2. Your Insurance Agent Is Inflexible About Your Policy

A big part of the insurance company choice comes down to customer service, and if you aren’t getting the results you expect, within reason, you might consider other options. You should expect a certain degree of flexibility from your insurance company, and if you speak with someone who isn’t flexible with your insurance requests, keep in mind that there are plenty of companies that would like to try to keep your business.

“Changes like updating coverage or adding or removing a vehicle are simple requests, so if you hit a roadblock with an agent, it can be a sign that you need a new insurer,” said Richardson.

You should have full access to your policy and the ability to make adjustments, even mid-cycle, so if you’re told it’s not an option, begin shopping around.

It’s also important to note that you should be realistic about rates. Every time you make an adjustment to your policy, whether you’re adding or removing drivers or vehicles, your rate will change. So, if your rate goes up a little in one of these instances, it likely doesn’t mean you’re being treated unfairly. Here are some things that may impact your car insurance.

And/Or a Member of the Company Is Rude to You

It goes without saying that if any member of the customer service team or an agent is rude to you, you should consider taking your business elsewhere.

“There are just too many insurance options out there for you to stick with a company that doesn’t value your business,” Richardson said.

There are certain issues outside a representative’s control, but you can always ask to speak with a supervisor to voice your concerns. And if you end up switching companies because of a customer-service issue that isn’t resolved to your satisfaction, mention the incident to your new insurer to avoid going through the same headache.

3. You Notice Changes to Your Monthly Bill That You Weren’t Informed About

If you’re billed monthly for your policy, the price should be consistent each billing cycle.

If you notice a change in your bill for which you were not contacted, it can be a sign that something’s amiss with your insurer.

“Sometimes policy updates get sent to your email spam, and sometimes phone calls or mailings are missed, but if you notice a change in your rate, you should look into it immediately,” said Richardson.

If you don’t feel you were adequately informed, shop around for a new company that meets your customer-service needs.

4. You Want 24/7 Agent Access

Many local insurance agencies aren’t available to customers at night or on the weekends, and while often this works just fine, if you’re the type of person who needs more access, you might consider a switch.

For instance: If you buy or lease a new car on a weekend and your insurer doesn’t have weekend availability, you might not be able to take your car home right away. Many dealers require proof of insurance (especially if you’re leasing or financing) before they allow customers to drive off the lot.

Plenty of big national insurance companies have 24/7 agent access, which can be a plus if you’re the type of person (or family) who regularly changes vehicles. Keep in mind, your local agent might be willing to make an off-hours exception for your insurance needs if you give them advance notice.

5. You Want to Conduct Insurance Business Online

Some of us are more comfortable conducting business online, and that’s OK. If you want to add or remove drivers or vehicles without speaking to someone on the phone, you’ll need an insurer who can meet your needs.

Insurers offering online access tend to be larger national brands, but every company is different, so check out all the options in your area. Most insurers spend a lot of money to allow customers online access, so if you want to know about an insurer’s online policies, just ask, and they’ll usually be happy to help you navigate.

If online access is important to you, remember that it’s just one piece of the insurance puzzle. You should always consider the importance of adequate coverage, as well as service and rates.

6. You Want to Add Drivers to Your Policy

When you have a new spouse, a newly licensed teen driver or a new roommate, you might consider adding them to your own auto insurance policy. Adding extra coverage or drivers to your policy often shifts both your needs and the discounts you qualify for enough that you might find you fit better — and save money — with another company.

Life changes — big or small — could put you in a new risk category, which might mean you’re a better fit with a different insurance company,” Richardson said. “There’s not an advertised rate for life-event changes, so you’ll need to shop around to see if you can get better coverage prices and discounts from other companies.”

If you’ve been with a company for a while, particularly a local one you know, the idea of changing companies might feel uncomfortable and make you feel a little guilty. But when it comes to insurance, you need to do what’s best for you.

Image: Mixmike

The post 6 Reasons to Leave Your Car Insurance Company appeared first on Credit.com.

7 Things You Never Knew Impacted Your Car Insurance

what-causes-car-insurance-rates-to-go-up

When searching for an auto insurance policy, there are things we expect will impact our rates: demographic details like age, home address, even credit score. But in the world of car insurance, there are still surprises, believe it or not. Below, you’ll find the top seven most surprising things that can impact your car insurance rates, taken straight from a comprehensive research report on the state of the auto insurance industry compiled by The Zebra.

1. Your History of Car Insurance — or Lack Thereof — Can Mean Big-Dollar Differences on Your Rate

If you’ve had a long history of insurance coverage, and if you’ve chosen policies with better coverage, you’ll pay less for your auto insurance. For example, in the case that you cause a collision that results in injury to another person, but you have higher coverage limits, that leads insurance companies to believe that you’re a more responsible person than someone else with a history of choosing the lowest possible coverage.

So what level of coverage do you need in order to see savings? The Zebra’s research shows that people with a five-year history of carrying $100,000 of bodily injury coverage per person and $300,000 per collision (often designated as “BI 100/300” in insurance documents) can expect to pay an average of $184 less per year for the same new insurance policy as someone with no history of insurance coverage.

Further, if you have any lapse in auto insurance coverage (even a few days), that can also cost you big time, as it indicates high-risk behavior to insurers.

Note: The only exception is for residents of California, which is the only state that doesn’t consider insurance history when determining average annual auto insurance premiums.

2. Insurance Companies Care Why You Drive

Do you drive solely to get to and from work? Do you use your car for business or to haul stuff around your farm? When you apply for your car insurance policy, the agent will ask how you use your vehicle, and your answer could have a big impact on your insurance rate. The Zebra found that prices can vary up to 18% depending on how a person uses their vehicle, even when every other detail stays the same.

People who use their vehicles on a farm will pay the least, while those who use their cars for business will pay the most for car insurance — up to $227 more each year. You can’t lie about what you use your car for, lest you risk a canceled policy, but you can make sure you tell the agent how you use your car when shopping for a policy to ensure you get the best rate (especially if you’re insuring a farm vehicle!).

3. Lying During the Application Process Can Cost You

It could spell trouble if you don’t disclose accidents and other violations when applying for insurance, The Zebra’s licensed insurance agent and expert Neil Richardson says. “Insurance companies don’t like dishonesty, so many times they will charge more for non-disclosed incidents. It pays to be honest about your driving history when you’re applying for your policy.”

4. Insurance Companies Care Whether You’re Coupled Up — & if You Aren’t, They Care Why

You might already know that married people pay less for their auto insurance policies than single folks (especially married men — a family makes men better drivers, it seems). But the rate differences became interesting when The Zebra looked at divorced and widowed people.

When a single person gets married, his or her rate will drop $74 a year, on average. Get divorced, and the rate goes right back to where it was. But if you’re married and your spouse passes away, your rates will also climb a little higher, though not as high as if you’d gotten divorced. It might not seem fair, but it’s all based on risk according to insurance company calculations.

Note: If you live in Hawaii, Massachusetts or Montana, insurers do not take marital status into consideration when calculating average annual premiums, so your policy won’t change because of it.

5. Not All Violations Are Created Equal When it Comes to Auto Insurance

Insurance companies don’t spell out exactly why there’s such a discrepancy among rates for each violation, but The Zebra’s research shows common violations vary widely — and vary among states. For example, speeding, causing a collision (“at-fault accident”), driving recklessly, racing or driving under the influence of alcohol will all raise car insurance rates at least a couple hundred bucks — and as much as several thousand. A DUI will raise rates more than 100% in seven states, more than 200% in Hawaii and more than 350% in North Carolina. And although DUIs increase average annual premiums the most nationally, 23 states cite racing as the costliest violation.

Further, penalties for various violations don’t appear to correlate closely with safety risk. Texting and driving can be as dangerous as driving under the influence of drugs or alcohol, but you’ll pay a lot more for your auto insurance if you’re caught doing the latter. The Zebra’s research found that a DUI will make a driver’s car insurance rate 3,200% higher than a texting-while-driving violation would.

6. Insurance Companies Factor Your Highest Level of Education Into Your Rate

The Zebra averaged savings across all 50 U.S. states and Washington, D.C., and found that, nationally, people with a bachelor’s degree save $32 more each year than people without a high school diploma. Keep in mind that this is an average, though, so depending on where you live, your degrees could have an even greater impact. In Delaware, for instance, a person with a PhD will pay $131 less than someone without a high school diploma, all else being equal.

Richardson says that customers are often surprised, and sometimes even offended, when asked about the highest level of education they’ve achieved, and some would choose not to disclose the information. But, says Richardson, “choosing not to disclose your education level can cause your rate to be higher because the default option for education level would be the lowest tier — a designation of ‘no high school or diploma.’”

7. How Long You’ve Had Your License Will Affect Your Insurance Rate

The length of time you been licensed to drive can also impact your rates, says Richardson, because this is a strong indicator of the amount of driving experience you’ve had. If you have been licensed for fewer than three years you will most likely pay higher rates than someone the same age who has been licensed for more than three years.

You might feel frustrated that many of the factors that determine your auto insurance policy rate are beyond your control (you can’t — or shouldn’t — get married just to save a few dollars on your auto insurance, for example). But it’s still important to know the details of how your insurer might determine your rate. This way, you can always make sure to ask the agent to consider every factor that might lower your rate when you’re shopping around (which you should do about every six months to a year).

Remember, your credit score can also affect your ability to qualify for car insurance. You can see where you stand by viewing a free credit summary on Credit.com.

Image: Tomatopictures

The post 7 Things You Never Knew Impacted Your Car Insurance appeared first on Credit.com.

6 Car Insurance Discounts You Should Ask About

happy_teen_driver

Insurance is the costliest car-related expense for drivers after the vehicle itself (recently surpassing gas), so it’s no surprise that consumers seek discounts to reduce their car insurance rates. Car insurance companies spend exorbitant amounts of money each year on advertising, and they’re certainly not shy about promoting discounts that supposedly make them more affordable than their competitors. No accidents? Discount! Defensive driving course? Discount! Good student? Discount!

But do these discounts actually reduce what consumers end up paying? Or are they just fluff to make you feel better about shelling out for your premium? Does the degree of the discount really offer relief to your wallet, or could you end up actually paying more by chasing discounts with one company than you would with a company that offers fewer discounts but a lower rate on your premium?

You may also wonder how insurance companies determine your rates. It’s important to note that while factors such as age, marital status, education level and employment have an affect on your rate, they are considered rating factors and not discounts since they directly impact your rates as determined by insurance companies’ unique pricing algorithms.

Here, we’ll discuss some common car insurance discounts, how difficult they are to qualify for and if they really make a dent in what you pay.

1. Anti-Theft Discount

If your vehicle has some type of alarm (in most cases it can be a factory alarm or aftermarket product that you may have added), most car insurance companies will offer a discount on your auto policy. This particular discount can be easy to verify because most new vehicles with a factory alarm can be identified using your vehicle identification number (VIN). This discount is normally fairly small, just a few percentage points off of your premium.

2. Defensive Driving Discount 

This is one of the most misunderstood discounts offered by auto insurance companies. Unfortunately, drivers are often told with a degree of certainty that they will get a discount after completing a defensive driving course. But this just isn’t true in a lot of cases. Yes, there are some insurance companies that will offer any driver a discount for completing a defensive driver course, but most companies have stipulations on how you may qualify. Chances are high that you can only apply the discount if you are 55 or older, have a clear driving record, didn’t take the course as a court-ordered requirement or live in a certain state.

Because you must pay for the course before completing it, you should always call your insurance company to check if they offer a discount for completing the course, what the stipulations may be and what percentage of a discount you’ll receive. Even if you do qualify for the discount, the cost of the course compared to the amount of the discount may tell you it’s not worth the time — or hassle.

3. Good Student Discount 

Young drivers are some of the most expensive to insure due to their lack of experience behind the wheel, and whether parents add their teen to their policy or a young driver secures his own coverage, the rates will be high. Insurance companies often offer discounts for good students, helping to offset the high costs of insuring a young driver who’s still in school. Commonly, a student (whether in high school, undergraduate or occasionally graduate programs) has to maintain a 3.0 GPA or better to qualify — and proof is generally required in the form of a report card, transcript or Dean’s letter.

Still, as is the case with insurance pricing, the good student discount varies by company, state and other circumstances. Certain insurance companies will only offer the discount if the student is listed on a parent’s policy; others will offer it only if the student is covered on his or her own separate policy; others don’t offer a student discount at all. Your best bet is to contact your insurance provider and ask about the discount, as it is normally a significant percentage.

4. Homeowner Discount

A homeowner discount is quite literal, though the discount will vary based on the type of residence, be it a single-family home, condominium or a mobile/manufactured home. Simply let your insurance company know you own your residence (and what type of dwelling it is), and they’ll let you know how the discount will affect your rate — it’s normally fairly hefty. You’ll also have to submit proof that you own your home, such as a home insurance policy, tax statements or a deed.

The homeowner discount is completely separate from the bundle discount that many insurance companies now offer for insuring your home and car through the same company, which is another great way to lower your rates. The bundle also benefits renters who purchase renter’s insurance through the same company.

5. Multi-Vehicle Discount 

Another simple-but-helpful discount may apply for multiple vehicles covered on the same policy. With auto insurance, there is a base cost of each policy that has nothing to do with your actual coverage. (In addition to rating factors, insurance pricing is affected by the company’s own level of financial solvency and overhead costs like paying employees.) If you were to insure two vehicles on two separate policies, then you would be paying two base costs. Combining those two vehicles on one policy allows the insurance company to offer a discount and you avoid paying multiple base costs. It’s a win-win scenario. (Note that additional household members will need to be listed.) This discount can be fairly significant and is easy to get — in most cases, it automatically applies when you add a vehicle to a policy.

6. Proof of Prior Insurance Discount (POP) 

One of the largest discounts applies for drivers who maintain their prior insurance coverage until starting a new policy. Gaps in insurance coverage are not good for your rates. Insurance is all about risk, and auto insurance companies see a driver with existing coverage as a much lower risk. Therefore, they are willing to offer hefty discounts to entice those drivers to switch companies for lower rates. The POP discount is fairly simple to qualify for in most states and only requires you provide proof that you were insured without any break or lapse in coverage for at least six months prior to starting your new policy. (California is the exception — it does not allow insurance providers to offer this discount.)

Seeing Through the Discount Fog

It’s easy to get sidetracked by all the persuasive “money-saving” advertising insurance companies put out there, but being a smart and informed shopper will help you cut through the fog. Do the research so you can answer the following question: How much is this particular coverage from this insurance company going to cost me? If discounts make it the best deal for you, great, but it’s also a real possibility that you can find a rate that fits your budget without them. Discounts and low rates aren’t always mutually exclusive, even if the TV ads say otherwise.

Remember, it pays to read the terms and conditions carefully on any financial paperwork so you can find the deal that’s best for you. It can also help to have a good credit score, since it may qualify you for better rates on auto loans, for example. (You can see where your credit score stands by viewing your two free credit scores, updated monthly, on Credit.com.)

More on Auto Loans:

Image: Lisa F. Young

The post 6 Car Insurance Discounts You Should Ask About appeared first on Credit.com.