Buyers often overlook insurance rates when it comes to shopping for a car on a designated budget. Consequently, reality sets in quickly when buyers of new, fancy cars receive their initial, higher-than-expected insurance quotes.

To avoid this happening to you, always remember there's a simple formula when it comes to assessing insurance rates on cars: The greater the value, the higher the rate. So if you're trying to decide between buying a new or a used car while adhering to a budget, be aware the new car will come with higher insurance premiums.

The reason for this is that a new car carries higher value, making it a greater risk. In the event of an accident, the cost to repair or even replace it carries a steeper price than if it were a used vehicle. Plus, newer cars are more susceptible to theft.

Another thing to keep in mind is that used cars, depending on condition and whether you paid with a loan or cash, might not require collision insurance. Though an option, collision is generally a given with new cars. With older cars low in value, collision becomes excessive since the cost to repair exceeds the cash value of the car. For example, if your used car only has a market value of $2,100 and you're carrying collision with a $1,000 deductible, it makes no sense to have a policy that only gives you an insurance maximum of $1,100.

So if budget is a factor when car shopping, always bear in mind you'll generally find used cars come with lower insurance premiums. Unless, of course, you're shopping for a classic of some sort―in which case you'll probably see premiums go up again.