Everything you need to know about car insurance and getting a car on finance
If you’re wondering ‘does a new car come with insurance?’, then you can expect the simple answer to be ‘no’. When you get a new car, it won’t automatically come with a car insurance policy in place, so this is something you'll have to sort out yourself.
However, if you’re looking into different car finance options, specifically cars on finance with insurance, then you’ll be pleased to know that there are a few options you can look into.
While not every finance agreement will include an insurance policy as standard, there are some providers who will offer different packages that you can look into.
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Can you get a car on finance with insurance included?
More and more car manufacturers are introducing the ‘Just Add Fuel’ finance deal which is a type of car finance package that includes the cost of car insurance, breakdown cover and tax costs.
It’s important to remember that not every manufacturer will offer this type of deal, so don’t take it for granted that you’ll automatically get car insurance as part of your car finance deal.
Also, if you do find a car finance deal with insurance included, make sure that it covers you for your driving needs (ideally, fully comp cover).
Is insurance higher if you finance a car?
More often than not, you’ll find that the cost of car insurance is higher if you finance a car.
While this isn’t always the case, some insurance providers will have increased costs for car insurance on financed cars as you may be required to have full coverage in order to ensure that you’re fully comped for things like collisions and repairs.
It’s a good idea to check around with different insurance providers in order to find the most affordable, but still comprehensive level of cover for you.
You might like: Is comprehensive cover cheaper than third party?
How much is insurance on a financed car?
The cost of insurance on a financed car will depend on a number of different factors such as your driving history, your personal details such as where you live, how old you are and any medical conditions that you have that could affect your driving.
The make and model of the car you’re financing will also play a part in the cost of the insurance for it. Learn more about the average cost of car insurance and how it is calculated here.
What is the best car finance option?
Many people think that the cheapest way to purchase a car is to buy it outright in cash in one upfront payment, but due to car depreciation, you may actually lose out on money when it comes to selling it on years later. Also, this option is not always possible for many people, which is where car finance comes into play.
Thankfully, when it comes to financing a car, there are many different options available that you can choose from in order to get the best deal.
Here are some of the most popular car finance options:
- Personal loans - if you have a good credit score, you can take out a personal loan from a bank or building society and then spread the cost of repayments out over several years.
- Hire purchase - this type of loan is secured against the car and you’ll need to put a 10% deposit down and then make fixed payments over an agreed-upon period of time.
- Personal contract purchase - this is similar to a hire purchase deal, but your monthly repayments are usually slightly lower and at the end of the contract, you are given three options: to buy it with a balloon payment, exchange it for a new car, hand it back and end the agreement. This is usually the most flexible finance option for many people.
- Personal contract hire - this is a type of leasing where you’ll never actually own the car - instead, you just pay a fixed monthly amount in order to effectively “borrow” the car.
- Buying it with a credit card - using a credit card to finance a car is often a smart idea as you can pay off your credit card each month and you’ll also have an added layer of protection against your purchase in case something goes wrong.
What credit rating do you need for car finance?
There’s no exact figure across all car finance companies that is considered to be the ultimate credit rating that you need to finance a car, but obviously the better your credit rating, the more likely you are to be accepted for car finance at a good interest rate.
According to credit bureau experts Experian as of June 2020, a credit score of 660 or above is a good target credit score to aim for in order to get a good car loan with an interest rate of around 6% or lower.
Is it worth buying a car on finance?
If you cannot afford to purchase a car outright, then you might have to consider getting car finance in order to pay for your car. In the long-run, you may even save money on your purchase by doing it this way.
However, it’s imperative that you’re aware of the pros and cons of doing so as you will be entering into a loan contract where you will have to make repayments each month, usually with added interest. If you miss any payment, this will have a negative impact on your credit score, which can take months to rectify.
Car finance isn’t necessarily an easy means of “paying” for a new car and you should only get car finance if you’re comfortable paying for it.
How to get the best deal on car insurance
There are many ways that you can get a good deal on your car insurance, with one of the most basic ways of obtaining the best deal being to simply shop around and compare quotes from numerous insurance providers online.
While comparing quotes from many different car insurance providers can be a tedious and time-consuming task, it’s worth spending the time browsing different quotes so that you can be sure to get the best deal.
Remember to reduce the level of risk you pose to insurers while driving, by avoiding speeding, driving safely at all times, increasing the security of your car and always being accurate about your mileage when getting a quote from a provider.
You can also lower the price of your car insurance somewhat by paying for your policy annually in one upfront cost, rather than monthly in order to avoid any interest that you would have to pay with monthly installments. You may also want to consider increasing your voluntary excess in order to obtain cheaper policy premiums, but it’s important that you can pay the excess in the event that you need to make a claim on your policy.
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