Broadcast Retirement Network’s Jeffrey Snyder discusses the factors that may lead to increases in car insurance rates with automobile enthusiast Ray McGrath.
Jeffrey Snyder, Broadcast Retirement Network
Well, joining me now is Ray McGrath. He is a car enthusiast. Ray, so great to see you.
Thanks for joining us this morning.
Ray McGrath, Automobile Enthusiast
Oh, thanks for having me, Jeff. Always love being on your program.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, and you are such a practical person because not only do you know so much about cars, Ray, but you also refurbish them. You go out and buy parts yourself. This is kind of a hobby of yours.
Tell us a little bit about that.
Ray McGrath, Automobile Enthusiast
Yeah, I mean, I actually just dropped the frame of my car off at a place down the road to get it sandblasted. So I’ve disassembled the entire vehicle. But that’s an older car from the 60s where, you know, I think the average shade tree mechanic can work on it.
New cars today require specialized tools, dealer-specific computers. So, you know, a lot more, a lot more is required technologically, which obviously causes things to be a little bit more expensive. But also, and I know I’m running on here, kind of takes it out of the individual, so to speak.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, well, I think you’re selling yourself short, Ray, because you have a lot of technical expertise that goes beyond the 1960s, 70s, and 80s. Okay, Ray, you have probably noticed, like so many Americans, that affordability, we’re under so much strain. We can talk about the geopolitical events, but for another day.
But I wanted to talk to you specifically about car insurance rates. They seem to be coming down, and that’s handled by the insurance commissions and whatnot. But there are things that we can control as consumers that will impact our car insurance rates.
So let’s start out with number one here, the geography. How important is geography to getting that, we’ll get to car in a minute, but geography to where you live and your car insurance rate?
Ray McGrath, Automobile Enthusiast
You and I used to live in the same neighborhood. And obviously, rates in that neighborhood, because it was a little rougher, were a little bit higher, because most cars are parked out on the street. But if you live in the suburbs, and you have your car garaged, in theory, there’s less likelihood of making a claim for getting sideswiped while your car is parked.
So geography definitely plays a role. And then there’s areas of the country where a lot of folks, I read some study, 15% of the drivers don’t have insurance. So if you’re hit by an uninsured motorist, obviously, that can raise the cost for you and your insurance company, because there’s no one to pay for that claim, so to speak, if they’re at fault.
Jeffrey Snyder, Broadcast Retirement Network
So geography, a major factor. Ray, what about the type of car you have? You hinted that cars today are more expensive, they have more technology.
But does the type of car that you’re looking to insure matter?
Ray McGrath, Automobile Enthusiast
It definitely does. I know some of the newer brands like a Rivian or a Tesla, yeah, they’re electric, but also maybe they don’t have a supply chain built out like a Honda or a General Motors, where they have a network of dealerships providing parts. But I’ve seen folks with a brand new Cadillac need a bumper, and there’s a shortage.
And so there’s definitely cars that there’s not a wide market adoption of, or there’s just a shortage of parts, and you might have to wait for it to be shipped from overseas for a replacement door, for example. So yeah, things can definitely get expensive.
Jeffrey Snyder, Broadcast Retirement Network
And what about theft? There are a lot of cars that are very popular among thieves. How does that impact?
I would imagine that impacts the replacement value of a vehicle should your car be stolen.
Ray McGrath, Automobile Enthusiast
Right. I mean, there were TikTok videos on how you could start certain model Hyundai’s with a USB memory stick. I don’t know how to do that.
But, you know, so there are definitely certain models that are higher than maybe because they’re just desirable or what have you, but, or there’s a TikTok video on how to steal it, you know, so yeah, there’s definitely models that are have a higher insurance rate, just because they’re more commonly stolen.
Jeffrey Snyder, Broadcast Retirement Network
Yeah. And I know the manufacturers, we talked about this, the manufacturers are working to make the car, you know, it’s not ideal, obviously, for your consumers to have their cars stolen. So they’re working on that.
But it seems like, as you said, with the proliferation of information on social media, something gets out and it makes it very difficult to get ahead of things like theft or damage or taking out catalytic converters and selling them off on the third party market.
Ray McGrath, Automobile Enthusiast
Yeah, I mean, I’m in the suburbs, but there are thieves that come at night, they walk into your garage, and they look for where you might be depositing your key, take your key and then run off with your car. So yeah, there’s definitely, and people have cameras, but I think the thieves are still somewhat successful.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, well, if they cover their faces, it’s really, I don’t know how you identify somebody if you can’t see their eyes, their facial structure. So they’re pretty cunning.
Ray McGrath, Automobile Enthusiast
This is something we’ve talked about. I was going to say, Jeff, with average cars costing, you know, 50,000 or more, the insurance cost has to absorb that, you know, so it’s all a factor.
Jeffrey Snyder, Broadcast Retirement Network
Let’s talk about, you talked about this at the beginning, and you were kind of downplaying your skills as a technician. Again, I think that’s not true. But there’s a lot of technology built into these cars.
There’s avoidance systems, collision avoidance systems, backup cameras. There’s even a 360, in a lot of cars, they have a 360 camera that shows you everything around the vehicle to make you so you don’t hit anything. There’s a cost to that.
That adds to the replacement cost value. That adds to the expense for car insurance.
Ray McGrath, Automobile Enthusiast
Most definitely. You know, you think of the old days when a car, all the models had the same, say, side mirror, it wasn’t painted to match the car, it didn’t have power tilting mirror glass, it didn’t have a camera, it didn’t have a signal built in, it didn’t have collision or blind spot detection. And it probably didn’t need the dealer’s computer to have it identified to the car’s network.
And you know, you don’t think of cars having their own network, but just like a local area network on a computer system, cars have gotten much more sophisticated. I mean, these features are beautiful, but they come at a price.
Jeffrey Snyder, Broadcast Retirement Network
Yeah. And hence what you were saying earlier, the average American car purchase is around $50,000. Absolutely absurd.
It’s a lot of money, but I guess you’re getting a lot of bang for your buck. Let’s talk about this one, your credit score. So if your credit score drops, you know, it ranges anywhere from zero to 850, typically, if you look at the different credit scores, right?
If your credit score drops, you could actually be paying more in car insurance. Why is that? I’m an actual victim of that.
Ray McGrath, Automobile Enthusiast
Even though I have high credit score, like right around 800, I was told that I had applied for too many credit cards. And basically, I was considered more of a risk. And they raised my rates just because not my credit score was low, but my insurance score was low because I had applied for too many, say airline credit cards or what have you.
So yeah, they’re always, I don’t want to say insurance companies are not your friend, but they’re looking for ways to raise your rates, so to speak. And they’re looking for any way of identifying risk. And they feel that folks with either a low credit score or too big of a line of credit could be a risk.
And that’s based on, you know, their underwriters or their actuaries looking at prior claim history. So, and I had no claim history, but sorry, it’s a long answer there, Jeff, but.
Jeffrey Snyder, Broadcast Retirement Network
Well, first of all, you bring up whether insurance companies are your friend, they’re not your friend, they’re providing a service, they’re beholden to their shareholders or their policyholders, depending on the type of company. So, you know, people I think should be able to know their relationship. But all of this, I guess, gets factored in to that ultimate decision of what your rate’s going to be.
Last thing, you may be aging, not you in particular, but you may be aging out of an age-friendly rate. And we can’t control our aging, but I guess there are pools, you look at the demographics, there are certain demographics that are more favorable in driving. Like it used to be that, you know, when you got older, like us, you got better rates.
Maybe it’s when you get into your 70s, 80s and 90s, maybe you’re not getting the best rate. Or when you’re off your parents’ car insurance for the first time, you have no driving experience, you’re going to pay a higher rate.
Ray McGrath, Automobile Enthusiast
You know, I drive with my wife a lot. She’s always giving me feedback and she’s telling me, you’re not the driver you used to be. Your reflexes, your vision, your ability to judge distance, it’s just not the same.
So there’s some truth to that, Jeff.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, definitely, definitely truth to that. But Ray, in looking at some of these factors, a lot of them are in your control. You can control your credit score to some extent.
You can control the type of car you buy, whether or not it’s attractive to theft. You can control the technology and the type of car you buy. So some of these are in our control, other things are out.
But just being aware, Ray, makes you probably a better consumer.
Ray McGrath, Automobile Enthusiast
For sure. And, you know, when my rates recently increased over 25% here in New Jersey, and I shopped around and it turned out I was kind of on the low end. So I wasn’t happy about it, but I guess you have to pay the higher rates.
I mean, there are definitely folks that are educated and I like to consider myself educated at times, but I did shop around them, but I could not find better rates currently, you know, so.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, that’s probably a really good recommendation to close things out. Really important to shop around, do comparison shopping. There’s lots of sites out there to do that, or you can go out and get rates from the big, big providers.
A lot of things to consider there. Ray, we’re going to have to leave it there. Always great to see you, my friend.
Thanks for joining us. And we look forward to having you back on the program again very soon.
Ray McGrath, Automobile Enthusiast
All right.
Jeffrey Snyder, Broadcast Retirement Network
Stay happy and healthy, Jeff.