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How to insure a new car

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CarInsurance.com

Americans get a little giddy over their cars, especially new, sparkly ones. The auto industry's May sales figures show that consumers have been buying big in recent weeks.

May sales climbed 11.3 percent to about 1.6 million vehicles, with the annual sales rate rising to 16.77 million units, the highest since before the 2008 recession, according to statistics released by automakers. Even most economists who had predicted good results were surprised -- the consensus was a 7 percent increase in May and an annual rate of 16.1 million sales.

Almost all of the major car companies were smiling, with many showing double-digit gains in May. General Motors, Ford and Chrysler reported increases of 12.6 percent, 3 percent and 17 percent, respectively. The news has to be especially welcome at GM, the target of several recent recalls and a congressional hearing into its handling of dangerous mechanical problems.

Here are the May numbers reported by each company, followed by analysts' previous estimates:

  • Chrysler: a jump of 17 percent (estimates were 14 percent)
  • GM: +12.6 percent (+6.4 percent)
  • Ford: +3.0 percent (a drop of 0.2 percent)
  • Toyota: +17 percent (+8.1 percent)
  • Nissan: +18.8 percent (+11 percent)
  • Honda: +9.0 percent (+4.5 percent)
  • Mazda: +22.5 percent (no estimates available)
  • Hyundai: +3.7 percent (no estimates)
  • Subaru: +11 percent (no estimates)
  • BMW: +13.3 percent (no estimates)
  • Mercedes-Benz: +8.1 percent (no estimates)
  • Kia: +14 percent (no estimates)
  • Mitsubishi: +54.2 percent (no estimates)
  • Volkswagen: a drop of 15.4 percent (no estimates)

Automakers said an improving economy is a prime reason for the rise. "Industry sales in May soared as consumer confidence improved and demand for new vehicles continued to strengthen," said Bill Fay, group vice president of Toyota Motor Sales USA, in a statement.

Robert Nardelli, Chrysler's former CEO, told Bloomberg that several other factors are pulling consumers into showrooms, including easier financing, safer vehicles that have newer technologies and a "deplasticizing" of cars that ups quality and comfort.

"The auto is becoming much more like your family room," he said. "It has all the amenities and appointments and comforts."

According to Kelley Blue Book, the average May price for a new vehicle was about $32,300. That's about $650 more than the same time last year, but slightly less than in April.

Car Insurance and that fresh ride

You usually need auto insurance before you can drive the new car off the lot -- a dealership wants proof of coverage. If you already have a policy, it will generally protect your new car temporarily, but policies do differ so get the details before you start shopping for a vehicle. An insurer may require that you notify it of the change within 30 days or less.

If this is your first vehicle, you'll still need insurance that meets your state's minimums for coverage. Minimums do vary state by state. You can check out this map for a complete round up of state car insurance rates.

Penny Gusner, the consumer analyst for Insure.com, advises getting quotes beforehand to find the best rates. Most people, she notes, buy coverage that provides up to $100,000 per person and $300,000 per accident for bodily injury liability and up to $50,000 for property damage liability.

Also, the vehicle model factors into how underwriters set rates. Gusner says they'll consider the car's safety, how much it costs to repair or replace and what the odds are it could be stolen, among other factors.

Gusner details the insurance needs depending on how you actually pay for the vehicle:

Are you buying it outright? You can then get any coverage you want, as long as it meets the state's minimum auto insurance requirements. 

How about a loan? A lien-holder wants to protect its asset, so it will require you to cover damage to the car and carry collision and comprehensive in the policy. There may also be limits on the deductible; you may have to keep it at $1,000 or less. You'll also need to buy at least the required state coverage minimum.

Leasing? Because the auto is in the leasing company's name, you'll be required to include comprehensive and collision coverage. You'll also need higher liability limits of $100,000 per person and $300,000 per accident for bodily injury liability and $50,000 for property damage liability (100/300/50). As with a finance company, the lessor will also require you have collision and comprehensive and may limit your deductible.

Gusner offers a final bit of advice for anyone looking at used cars: "If you buy a used vehicle that is much older, you may be able to get by with just liability coverage," she says. "You don't want to pay for collision and comprehensive when the premiums cost more than your vehicle's fair market value."

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