'Social Costs' of Buying New
Collectivism the idea that social costs should
be born by the individual, even when an individual hasnt actually
imposed any costs on society is a big part of
the reason why Ill 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
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
theyre 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, its 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 isnt irresponsible.
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.
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 cars 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 homeowners 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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columnist and author of Automotive
Atrocities and Road Hogs (2011). Visit his
© 2012 Eric Peters
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