Is that luxury car worth the cost of insurance?

Image by Getty Images; Illustration by Bankrate

What would you do if you won the lottery tomorrow? “Buy my dream car” is a common answer — and it makes sense. Luxury vehicles are more than just a status symbol. They can also be more comfortable, visually appealing and fun to drive. But when buying a luxury vehicle, it’s not just the upfront purchase price you need to consider. Ongoing costs, such as the cost of auto insurance, could make you think twice before committing to luxury vehicle ownership.

Luxury car owners can pay $1,000 more per year for insurance

The average cost of car insurance is $2,678 per year, according to Bankrate’s research — but if your car is worth more, you could end up paying more to insure it.

Using the latest premium data from Quadrant Information Services, we looked at average full coverage premiums for 15 popular luxury cars — from a basic Acura SUV to high-speed sports cars like the Porsche 911 and Tesla Model S. We then paired each luxury car with a comparable mass market model that shares some of the same attractive characteristics — a manual transmission, high-end accessories or a quick 0-to-60 time.

On average, owners of the 15 luxury vehicles we looked at paid $1,223 more per year for full coverage insurance compared to owners of their mass-market competitors. In some cases, luxury buyers stood to save nearly $3,000 per year by opting for the non-luxury alternative.

While we’ve focused our analysis on luxury cars with wide popularity, some luxury cars may have even higher insurance premiums. For instance, exotic sports cars like Ferraris or supercars like Lamborghinis are so expensive to insure that many standard auto insurers won’t cover them. You might also be looking at steep prices and specialty coverage if you purchase a rare or collector car.

Bankrate staffers weigh in: Are luxury cars worth the cost of ownership?

We talked to three Bankrate staff members who have bought luxury cars about their purchase. All three agreed that the cost of insurance was manageable, but while one staffer loves her luxury ride, the other two have found that other ownership costs — especially the cost of maintenance — have made owning a luxury vehicle more trouble than it’s worth.

The bottom line

Buying a luxury car will always come with higher costs — but the pros of owning a luxury vehicle might outweigh the steep price tag on expenses like insurance. Like all major purchases, this decision will come down to your personal priorities. To guide your choice, you may want to take the following steps:

• Revisit your transportation budget: In 2023, transportation made up around 17 percent of consumers’ monthly budgets. Take a look at your current costs and consider whether you’re prepared to devote more space in your budget to a car payment, insurance and other expenses.
• Do your research: Gather as much information as possible about the car you’re hoping to buy — from CARFAX and CLUE reports to reviews and personal accounts from current and former owners. The more information you assemble, the better you’re positioned to know what you’re getting into financially.
• Analyze the appeal of a luxury car: Depending on your reasons for wanting a luxury car, you may be able to find some of what you’re looking for in a vehicle that’s cheaper to insure. Whether it’s looks, speed, creature comforts or a manual transmission, many of the perks of luxury cars can be found in certain mass-market models.
• Shop around for insurance quotes: Not all insurance companies treat luxury vehicles the same way. By shopping around and finding a provider whose rates and customer service meet your needs, you may be able to gauge whether a luxury car will fit into your life.