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Auto Insurance on a Financed Vehicle

Financed Vehicle Insurance, Full Coverage Insurance, New Car Insurance Add comments

I am financing a new car. Can the lien holder repossess my vehicle if I do not pay for auto insurance?

If you are financing a vehicle, the lien holder will require that you carry full coverage auto insurance on the vehicle for the life of the loan. You will be typically be required to send in proof of insurance coverage to the lender within a week of purchasing the vehicle.  If you do not purchase the
correct amount of auto insurance coverage or do not purchase an auto insurance policy at all, the lender can choose to repossess your vehicle.

If you do not have full coverage insurance the lender will see you as too high of a risk and will not let you continue to drive around in a car that is not insured. For example, let’s say that you bought a $30,000 vehicle and financed $25,000. If you get in to a car accident and total the vehicle without insurance coverage, you will still owe the lien holder that $25,000. In this situation you would be required to pay for the repairs or pay off the loan out of your own pocket.  The lender is not going to take this risk, and this is exactly why they require the owner of the vehicle to have insurance coverage.

Unfortunately, there is no way to avoid paying for full coverage insurance if you finance a vehicle.  Once you pay off the loan on your car, you
can choose to reduce your insurance coverage to liability only.  To make the cost of your insurance more affordable, take some time to compare quotes from multiple companies.  The more time you spend comparing quotes, the more likely you will find the cheapest auto insurance possible.

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