What To Know Before You Buy A Car

You may have already had your eye on a new car for awhile, but before you even pick out the color of your new ride, you should think about how your purchase will affect your insurance. You are no doubt well aware that most states require a minimum level of car insurance in order for you to drive. However, you may not be aware of how your method of purchase affects your future insurance needs.

If you finance or lease a car, the car is officially owned by the bank. In order to protect their investment, they will require you to purchase specific types of insurance coverage. Cars generally depreciate, or decrease, in value. As time goes on there's a chance that you could owe more on the car than it is actually worth. If your car is destroyed in an accident, or stolen, your auto insurance will give you the actual cash value for it, but you will need to come up with the difference in order to pay the lender what is still owed on the car. Gap insurance will cover the gap between what's owed and what it's worth. Gap insurance is usually standard on leased cars and may be included in your car note.

Collision and comprehensive coverage will be needed for financed and leased cars also. Collision protects the car in the event that it is damaged in a collision with a car or other object. Comprehensive coverage covers a wide variety of losses such as damage from storms, flood, earthquake, fire, theft and a host of other circumstances.

You may also want to see what it would cost to insure the car you are interested in purchasing. Certain types of cars are more expensive to insure, especially if they are models that are common targets of theft. InsuranceBureau can aid you in your search for auto insurance. To request quotes from auto insurance providers, fill out InsuranceBureau.com's short, online form.

Sources

1. What if I lease a car? Retrieved April 11, 2008, from http://www.iii.org/individuals/auto/a/lease/
2. What Is Gap Insurance, and Who Needs It? (2007). Retrieved April 11, 2008, from http://www.progressive.com/understanding-insurance/what-is-gap-insurance.aspx