Why I’ll Probably Never Own a New Car

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Collectivism – the idea that “social costs” should be born by the individual, even when an individual hasn’t actually imposed any costs on “society” – is a big part of the reason why I’ll probably never own a new car. Because owning a new car means paying through the nose for insurance – the premiums based to a great extent not on what I have done or might reasonably be expected do (based on my track record, etc.) but rather, on what random strangers out there in society have done – or may do.

Consider: All states force everyone to buy insurance – on the theory that everyone should be financially responsible in the event of an accident. One problem with this nice-sounding theory is that out there in reality, irresponsible people routinely drive without insurance, irrespective of what the law requires. They may be theoretically liable to civil or even criminal consequences if they’re caught or cause someone injury. But unlike the responsible law-obeyers, the irresponsible law-ignorers typically have very little for the state to take. If Pedro the illegal alien totals your car, it’s you who will be left holding the bag. No, amend that. It is everybody who plays by the proverbial rules that gets left holding the bag – because the costs imposed by Pedro are distributed across “society” – in the form of higher premiums for everyone.

Everyone, that is, who isn’t irresponsible.

The “health care” system operates on the same principle. It socializes costs – which of course is a way of rewarding those who incur the costs – at the expense of those who are forced to pay them. This, in turn, causes the costs to rise, inexorably upward. Car insurance works just the same.

You may have never been the cause of an accident. You have a spotless driving record going back decades. One fine day you decide to treat yourself to a new car. Then you find out what it is going to cost to insure the car – and have to be revived with smelling salts. In a major metro area such as Phoenix or Philly, it can easily cost $1,000 annually to insure a car that sold for $25,000. This is a monstrous – disproportionate – expense. It is approximately five percent of the car’s purchase price. Paid not just once, but every year, for several years to come. For perspective, consider home insurance. If you had a home worth $250,000 a policy that cost about 5 percent of that would be on the order of $12,500 per year! (The average cost for a homeowner’s policy is more like $800 a year – not even close to 1 percent of the value of the home.)

If the home insurance shysters tried to foist a 5 percent per annum bill on homeowners, there would be a pitchfork and torches uprising. But when the car insurance shysters do exactly the same thing – no, a worse thing – because unlike a house, a car is a depreciating appliance, not an investment – we just shrug and write the check.

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Eric Peters [send him mail] is an automotive columnist and author of Automotive Atrocities and Road Hogs (2011). Visit his website.

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