I recently went through one of the most horrendous experiences that a majority of people will also go through in their life time. Yep, I’m talking about buying new car. Hours upon hours in the dealership, negotiating, waiting, telling your fiancé you would walk home if this didn’t end soon, and more waiting were just some of the highlights of my experience. Financing a car can be a good thing. It can help you build credit. Financing can also require certain insurance requirements which may end up costing you big bucks in the end.
When you buy your car with cash, you own it outright. The title is fully in your name, with no loans to pay back. When you buy with cash, the car is solely yours. You have all the freedom to do exactly as you please with insurance, provided of course, that you meet your state’s minimum requirements. It’s not that simple when you finance a car. When you finance a car, you’ll often find that your lender will have insurance requirements. The reason for this is simple: You’re not the sole owner of the car anymore, and the co-owner (your lender) is interested in protecting its investment. Many lenders require low deductibles, which likely will drive up your insurance rate high than what you had previously been paying or expected.
It may be tempting to start off your insurance for your new vehicle with the required coverages and then change it after the proof has been sent to the lender. I hate to break it to you, but that won’t work. The lender will be listed on your policy as a loss payee in regards to the new car. They’ll be notified of changes to the policy. In fact, notifying your lender even when switching companies to a company with lower rates is preferred. Otherwise, expect a letter or phone call asking why you cancelled the insurance on your car.
Before buying a car, do research. Find a financier on your own that has insurance requirements you know you can afford. Not only does this give you an idea for your insurance requirements, but it can give you more room to negotiate with the dealership. Ask the lender what deductibles they require and get quotes beforehand.
If you have questions regarding your insurance, ECI is always here.
Contact us for auto insurance questions.