Do financed cars required substantially more expensive auto insurance than owned cars?

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Hi everyone,

I am planning to buy a new 2023 Honda Accord Sedan LX. GEICO quoted me about $350 for insurance if I finance the car and about $150 if I pay in full. Does financing make insurance that much more expensive? Does this sound right to you? Is there any way to avoid paying for “full coverage” when financing a car?

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Hey Gabriel!
Great question, and congrats on considering the new Accord – it’s a sweet ride! Let’s unpack your insurance conundrum.

First off, financing a car doesn’t directly jack up insurance rates. Whether you’re financing or you’ve paid off your car, if you choose the same coverage, your rates should be pretty consistent. The twist comes from lenders usually requiring full coverage on financed cars. That’s comprehensive and collision coverage, which, yeah, costs more than just the basic liability coverage.

The big quote difference you’re seeing is likely because of that full coverage mandate. Pay in full, and you’re free to opt for less coverage, hence the cheaper quote. Lenders need that full coverage to make sure their asset (your soon-to-be car) is protected against all sorts of mishaps until you’ve paid off that loan.

Now, for the million-dollar question: can you dodge the full coverage bullet when financing? Short answer – not really.

But you can try a few maneuvers to lighten the financial load. A hefty down payment might reduce your loan amount and, by extension, your insurance cost. Also, don’t put all your eggs in one insurance quote basket – shop around, compare rates, and play the field.

Just remember, skimping below what the lender requires is a no-go. It could breach your finance agreement and lead to the lender slapping their own pricey insurance on your car, which is a scenario you want to avoid at all costs.

Keep us posted on what you decide, and drive safe!

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It is right, financing makes insurance cost much more . You’re gonna have to roll with it.

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Hello, Gabriel
The main distinction is that, while the state does not, your lienholder will need collision and comprehensive coverage on your policy to safeguard their interests. On a new automobile, the most expensive parts of the coverage are often collision and comprehensive.