Do I need insurance before I buy a used car?
Before you buy a used car from a dealership or private seller, you’ll need to have insurance in order to drive it home legally. You can save time and money by comparing insurance before you purchase a used car.
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UPDATED: Mar 21, 2022
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Do you need insurance before you buy a used car? Having at least liability insurance coverage before buying a used car is generally a good idea. Buying a car is usually easier if you already have insurance, and you may not be able to take it home if you don’t have proof of insurance. Depending on the value of your used car, you may also want to have collision and comprehensive coverage (sometimes called “full coverage” when bought together) to ensure that the cost of repair or replacement is covered if you’re involved in an accident. And the sooner you have these on your policy, the better.
In this article, we’ll help you decide what sort of insurance you need before buying a used car. We’ll also answer a few common insurance questions related to purchasing a used car, including how much you should pay to insure a used car and how to add a used vehicle to your existing insurance policy.
Do you need insurance before buying a used car?
Generally speaking, yes, you do need your state’s minimum required insurance before buying a used car. If you’re buying from a dealership, you won’t be able to take your car off the lot without proof of insurance. If you’re buying a used car from a private seller with cash, you may be able to purchase the car without insurance, but you still won’t be able to drive it legally without coverage.
You can save time by purchasing insurance before you buy your used car. If you know what car you plan to purchase and have the vehicle identification number available, you’ll be able to set up a coverage start date before you get your car. If you have an existing insurance policy, your insurance company may also offer a grace period. With a grace period, your existing coverage will apply to your newly purchased vehicle for a set amount of time that varies based on your policy.
Contact your insurance company to see if you qualify for a grace period. And if you do qualify, check with the dealership you plan to buy a used car from to see if they honor insurance grace periods.
How long do you have to get insurance after buying a used car?
How long you have to obtain insurance after buying a used car depends on if your current insurance policy offers a grace period for buying a new vehicle. If your insurance doesn’t offer a grace period or you don’t already have car insurance, you’ll want to obtain insurance before buying a used car.
You should also plan to buy insurance before you purchase your car, so you can compare quotes from multiple car insurance companies first. This way, you can get a better idea of the true cost of the car you plan to purchase and keep your insurance rate to a minimum for the coverage you need.
If you do have an insurance grace period through your existing car insurance policy, expect your grace period to last between one and 30 days. In most cases, a grace period is intended to give you just enough time to purchase a vehicle and adjust your insurance policy accordingly. Make sure to contact your insurance company as soon as you buy your new car.
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How much should you be paying for car insurance for a used car?
Car insurance for a used car should almost always be less expensive than insurance for a similar new car. This is because it costs less to replace a used car than a new one due to the fact that a new car’s actual value depreciates by 20% within a year after it’s purchased and continues to steadily drop from that point.
For certain types of used cars, including minivans, insurance can cost less than $1,500 annually. When comparing insurance options for used cars, you should keep in mind that used luxury and sports cars are almost always more expensive to insure than even new mass-market minivans or sedans. Likewise, electric vehicles and hybrids tend to raise car insurance rates due to their higher repair costs for certain parts.
The National Foundation for Credit Counseling recommends having a used car inspected before you decide to purchase it. This way, you can make sure that it doesn’t have any hidden problems that will cost you in the near future.
Here’s what you should look for if you want to buy a car that saves you as much as possible on used car insurance:
- Good safety rating: Cars with higher-than-average safety ratings from a source like the National Highway Traffic Safety Administration tend to be cheaper to insure since they’re less likely to be involved in serious accidents.
- Mass market vehicle: Sports cars and luxury vehicles will virtually always cost more to insure than more affordable mass-market cars.
- Not a hybrid or electric: Gas vehicles are typically less expensive to insure than hybrid or electric cars. While these types of vehicles may help you save in other areas, insurance will cost more.
What type of insurance do you need for a used car?
The type of insurance coverage you should have for a used car depends on how comfortable you’d be to pay for repairs or replacement out of pocket. You’ll need the minimum amount of insurance required by your state — which usually means liability coverage. But with just the minimum coverage, your insurance company won’t help you pay to repair or replace your car if it’s damaged or lost in a collision or another event.
Here’s an overview of the types of coverage you can obtain for a used car and why you might want to have each one:
- Liability: Required in most states, this coverage pays for expenses if you injure another driver in an accident or damage someone else’s property
- Collision: Optional coverage that helps pay for repair or replacement costs if your vehicle is damaged in a collision with another vehicle or someone’s property
- Comprehensive: Optional coverage that helps pay for repair or replacement costs if your vehicle is damaged by or lost due to an event other than a collision, including vandalism, theft, natural disaster, or falling objects
- GAP: Coverage that supplements collision/comprehensive coverage and helps pay the difference between your vehicle’s actual value and what you owe on a car loan if your vehicle is totaled
What to Remember About Insurance When Buying a Used Car
- Most states require you to have a minimum amount of insurance before you can legally purchase a used car from either a dealership or private seller.
- If you know the vehicle identification number for the car you intend to purchase, you can buy insurance before purchasing the used car, saving both time and money in many cases.
- If you had insurance for a different vehicle before you bought your used car, you may have a grace period of one to 30 days, meaning the coverage for your old car applies to your newly purchased vehicle. If you’re currently in a grace period, you should contact your insurance company to adjust your policy as soon as possible.