When you finance a used car, you need to purchase full coverage auto insurance. But is there a date you need to have it in place? Here is what you need to know.
Buying a car and auto insurance
When you finance a used vehicle, lenders require that you have comprehensive auto insurance before you can drive it off the lot. In almost all states, even if you don’t fund a vehicle, any car on the road is required to have insurance coverage that meets state standards. In many states, you also cannot register a vehicle without insurance.
If you trade in your old car at a dealership for deposit requirement for an auto loan for bad credit or to reduce the amount you finance, you can usually transfer your current auto insurance policy to the new vehicle.
This can be done fairly quickly if you contact your insurance company and let them know the make, model, and VIN number of the new car that needs coverage. In many cases, you can set a date for the transfer to take place. If they don’t take the information over the phone, your dealership should be able to fax the vehicle information to your insurance company.
Go to the dealer prepared
Before you buy your next car and even if you are trading in a vehicle, but especially if you are not, it is worth comparing auto insurance prices beforehand. Many insurance companies can provide you with quotes over the phone or online, and some offer discounts for online coverage enrollment or paperless filing. Take the time to compare rates and coverage and choose the best policy that meets your needs and budget.
While shopping for your next car, take the time to look at the insurance price of various models. Insurance rates vary by make and model – some vehicles are more expensive to insure than others. Coverage costs for used and new cars usually vary as well.
Get quotes from different auto insurance companies. Remember that full coverage policies are required for all financed vehicles, and these policies are more expensive than liability coverage (sometimes referred to as PLPD).
If you have chosen an auto insurance policy but the underwriting process is not complete, you should be able to get an insurance binder so that you can take delivery of your vehicle.
Auto Insurance Binders
If you’ve found the used car you want at a dealership, picked an insurance company, and need the vehicle right away, there is a way to get it to leave with temporary proof of auto insurance. . This is called an insurance binder.
An insurance binder serves as temporary coverage until a policy is issued for a car. The expiration date for a workbook can vary, but they typically expire between 30 and 90 days.
Borrowers are usually given a binder so they can drive to the dealership with proof of insurance and drive their newly financed vehicle out of the lot. Binders are issued by insurance companies while the insurance company verifies policyholder information during the underwriting process.
Make sure you receive your policy and coverage begins before the contract expires – otherwise, your car will not be covered. A financed vehicle must have fully covered auto insurance for the duration of the loan. You risk having your lender add mandatory insurance to your monthly loan payment if the car is not properly covered.
Mandatory coverage, also called by the lender, is an auto insurance policy that is added to your monthly loan payment if your coverage expires. These policies are generally more expensive than regular auto insurance because your lender likely won’t assess the purchases – they just want the vehicle to be insured.
The bottom line
When you finance a car, new or used, you will have to get full coverage auto insurance. You must bring proof of insurance to the dealership before you can drive your new vehicle off the lot. If you’re hoping to drive a new car to a dealership and are looking for a dealership that can handle unique credit situations, we want to help.
There are resellers with special finance departments who are signed up with subprime lenders. These lenders help bad credit borrowers finance a vehicle that suits their financial situation – and when these lenders budget for you, they also factor in the cost of auto insurance. Here has Auto Express Credit, we know which dealerships work with bad credit lenders.
To be matched with a dealer with special financing options in your area, simply complete our free form. car loan application form.