Buying a Car and Auto Insurance

When you’re financing a used car, you’re required to have full coverage auto insurance. But is there a date that you’re required to have it in place? Here’s what you need to know.

Buying a Car and Auto Insurance

When you finance a used vehicle, lenders require you to have full coverage car insurance before you can drive it off the lot. In almost every state, even if you aren’t financing a vehicle, it’s required that any car on the road must have insurance coverage that meets state standards. In many states, you can’t register a vehicle without insurance, either.

If you’re trading in your old car at a dealership to help with a down payment requirement for a bad credit auto loan, or to lower the amount you’re financing, you can typically transfer your current car insurance policy to the new vehicle.

This can be done rather 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 that the transfer needs to take place. If they won’t take the information over the phone, your dealer should be able to fax the vehicle information to your insurance company.

Go to the Dealership Prepared

Before you buy your next car and even if you’re trading in a vehicle, but especially if you aren’t, it’s worth it to shop around for auto insurance prices beforehand. Many insurance companies can give you quotes over the phone or online, and some offer discounts for signing up for coverage online or for paperless filing. Take your time to compare rates and coverages,and pick the best policy that fits your needs and budget.

While you’re shopping for your next car, take time to look at the price of insuring various models. Insurance rates vary between makes and models – some vehicles are more expensive to insure than others. Used and new cars usually also vary in coverage costs.

Get quotes from a few different auto insurance companies. Just remember that full coverage policies are required for all financed vehicles, and these policies are more expensive than liability coverage (sometimes called PLPD).

If you’ve chosen a car insurance policy but the underwriting process isn’t complete, you should be able to get an insurance binder so you can take delivery of your vehicle.

Car Insurance Binders

If you’ve found the used car you want from a dealership, chosen an insurance company, and you need the vehicle right away, there’s a way to drive it off the lot with temporary proof of auto insurance. It’s called an insurance binder.

An insurance binder serves as temporary coverage until a policy is issued for a car. The expiration date of a binder can vary, but they typically expire anywhere from 30 to 90 days.

Borrowers typically get a binder so they can go to the dealer with proof of insurance and drive their newly financed vehicle off the lot. Binders are issued by insurance companies while the insurance company verifies a policyholder’s information during the underwriting process.

Make sure you receive your policy and coverage starts before the binder expires – otherwise, your car won’t be covered. A financed vehicle must have full coverage auto insurance throughout the entire loan term. You may risk getting force-placed insurance added to your monthly loan payment by your lender if the car isn’t properly covered.

Force-placed coverage, also called lender-placed, is an auto insurance policy that’s tacked onto your monthly loan payment if your coverage lapses. These policies are typically more expensive than regular car insurance, since your lender likely won’t rate shop – they just want the vehicle insured.

The Bottom Line

When you finance a car, new or used, you’re going to need to get full coverage auto insurance. You’re required to 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 to you car off a dealer lot, and you’re looking for a dealership that can work with unique credit situations, we want to help.

There are dealers with special finance departments that are signed up with subprime lenders. These lenders help bad credit borrowers finance a vehicle that fits within their financial situation – and when these lenders set a budget for you, they also consider the cost of auto insurance. Here at Advantageautoloans.com, we know which dealerships work with bad credit lenders.

To get matched to a dealer with special finance options in your local area, simply fill out our free car loan request form.

Owning a Vehicle: Know the True Cost

When it’s time to purchase a vehicle, whether new or used, it’s important to pay attention to more than the purchase price. Of course, that’s the primary expense, so let’s first take a look at the monthly car payment. According to Experian, for 2017, the average payment for new vehicles is $506 and $364 for used vehicles. Whether new or used, car payments vary based on your credit. If you’re going to purchase a car soon, you’ll benefit if you pre-qualify for a car loan before visiting the dealership.

AAA has been studying the total cost of car ownership since 1950. According to the organization’s 2017 study, it costs nearly $8,500 annually, or just over $700 monthly, to own and operate a new vehicle beyond the actual purchase price. For new vehicles, AAA accounts for fixed costs such as finance charges, insurance, depreciation, as well as the variable costs of fuel and maintenance. Used vehicles incur additional expenses too.

If you’ve purchased a new car, you’ll want to consider depreciation. Unfortunately, you’ll lose an average of $15,000 in value over the first five years according to AAA. Some vehicles depreciate more quickly than others. If maintaining value is important to you, possibly a small sedan or small SUV is best, both depreciate more slowly than other vehicles. Not surprisingly, electric vehicles depreciate at the quickest pace, followed by minivans.

As for the annual variable costs of car ownership, the largest this year is fuel. This expense varies greatly depending on the type of vehicle and gas. AAA derived a standard, determining Americans spent, on average, $1,500 to fill their tanks.

We also look to AAA for average maintenance and repair costs per year, which is $1,186 for 2017. This figure includes regular maintenance such as oil changes and replacement parts like new lights, batteries, and tires in addition to more complicated repairs.

Regarding used cars, the purchase price, and therefore loan value, will decrease compared to a new vehicle. Insurance and depreciation costs will be lower with used vehicles as well. Maintenance costs may be higher, however, in the end, you can save substantially by buying a used vehicle.

Thinking of buying soon? Visit Advantageautoloans.com and use the convenient tools to discover your possible car payment. Be informed before going to the dealership and get the offer you deserve.

Note – There may be minimal monthly cost overlap of finance charges. This charge was factored into both Experian and AAA studies.

Can Flex Fuel Save You Money?

Flex Fuel also known as E85 (Blended 85% ethanol and 15% gasoline) can be used in approximately 11 million vehicles today.  It current runs about 60 cents per gallon less than regular gasoline.

Some drivers have a Flex Fuel vehicle and do not realize it, so you can check under your fuel door and look for the E85 Label or the Yellow gas cap.  Other vehicles have a badge with the term E85, Flex Fuel or FFV.

     

E85 provides fewer miles be gallon (less energy content), so you fill up more frequently.  FFVs typically get about 15% to 27% fewer miles per gallon when fueled with E85.  As a rule, E85 would have to be priced 30% less than gasoline for you to save money.  You should test this on your own Flex Fuel Vehicle and do the math to confirm if the numbers work for you.

You may also have trouble finding E85 and a gas station near you.  There are approximately 2400 Stations that carry Flex Fuel across the US.   Many are located in the upper Midwest.

My 2014 Chevrolet Captiva is rated for 24 MPG combined City/Highway using Regular Gasoline and only 18 MPG combined City/High when using E85.  It costs me about the same to run gasoline versus E85, so in my case there is no actual savings.

Extended Warranties – What is covered and what is not covered.

As a general rule, maintenance items are not covered under any extended warranty. Oil changes, Tires, Brakes and Windshield wipers are examples of maintenance items and are the car owner’s responsibility.
Normally your new vehicle comes with a factory warranty, which is also known as a Bumper to Bumper warranty. Factory warranties may also cover powertrain, corrosion and emissions coverage.

Bumper to Bumper
• A basic warranty or new-vehicle warranty, a bumper-to-bumper policy covers components like air conditioning, audio systems, vehicle sensors, fuel systems and major electrical components.

Powertrain warranty
• This warranty typically covers just the engine and transmission, along with any other moving parts that lead to the wheels, like the driveshaft and constant velocity joints.

Emission warranty
• Major components like catalytic converters and engine control modules are covered for performance and defects.

Here are some examples of Manufacturer Factory Warranty Coverages

Company Bumper to Bumper  Powertrain          Corrosion   Emissions
Buick  4 yrs/50000miles 6 yrs/70000 miles 6 yrs            8 yrs/80000 miles
Chevrolet 3 yrs/36000 miles 5 yrs/60000 miles 6 yrs/100000 miles 8 yrs/80000 miles
Dodge 3 yrs/36000 miles 5 yrs/60000 miles 5 yrs 8 yrs/80000 miles
Ford 3 yrs/36000 miles 5 yrs/60000 miles 5 yrs 8 yrs/80000 miles
Kia 5 yrs/60000 miles 10 yrs/100000 miles 5 yrs/100000 miles  8 yrs/80000 miles

As you can see, coverages vary by Manufacturer and there are some exceptions which can be found in your owner’s manual.

When purchasing a used vehicle, the coverage of an extended warranty becomes very important. An extended car warranty must be purchased before your vehicle needs repairs, you can’t expect to receive coverage on pre-existing problems.

If you meet the years and mileage above, you would continue receiving factory warranty coverage. Once you reach the year or mileage limits, then your extended warranty kicks in.

Extended warranty coverage varies by provider, but in some cases you can extend your coverage up to 10 years and 160000 miles.

Each extended warranty company offers different levels of coverage, so it is important to investigate and understand the coverages offered before selecting a plan.