Car Insurance Costs
What drives your comprehensive insurance premium, why financed cars must be insured and how to keep cover affordable.
If your new car is financed, the bank will require comprehensive insurance for the full term, so the premium is a fixed part of your monthly cost from day one. Premiums are set by risk: the car's value, how attractive it is to thieves and how expensive it is to repair, where it sleeps at night, your age and claims history, your annual mileage and the excess you are prepared to carry. Two similar cars can attract quite different premiums.
Because insurance runs for as long as you own the car, it deserves as much attention as the instalment. Get quotes for the exact model and variant before you commit, compare the excess and the cover for extras such as car hire and sound equipment, and ask about credit shortfall cover, which protects you if the car is written off while you still owe more than it is worth. The Car4Less insurance guide explains the terms in detail.
Car Insurance Costs — questions
The questions people ask about car insurance costs, answered plainly.
Do I have to insure a financed car?
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Yes. Vehicle-finance agreements require comprehensive insurance for the full term, because the bank has an interest in the car until it is paid off. You choose the insurer, but the cover must be in place before the car is delivered. Letting it lapse breaches the finance agreement, so budget for the premium as part of the instalment.
What affects my car insurance premium the most?
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The car itself, meaning its value, parts cost and theft risk, is the starting point. Then your profile: age, driving and claims history, where the car is parked overnight, how far you drive each year and whether you use it for business. A higher voluntary excess lowers the premium; security devices and tracking units often earn a discount.
What is credit shortfall cover and do I need it?
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It covers the gap between what your insurer pays out if the car is written off or stolen and the amount you still owe the bank. Early in a finance term, especially with a small deposit or a balloon payment, that gap can be large. It is an optional add-on but worth serious consideration for any financed new car.
How can I reduce my car insurance premium?
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Shop around for quotes on the exact variant, choose a sensible excess, install an approved tracking device, park the car in a locked garage overnight, keep your claims record clean and be accurate about your annual mileage. Bundling household and car cover with one insurer can also help. Review the premium each year rather than letting it renew automatically.
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