Car Insurance: Owning vs leasing a car

Does owning a car affect how much you'll pay for insurance?

When you're buying car insurance you're asked a bunch of questions including the type of car you drive, where it's parked and the age of the main driver. One question that sometimes sneaks past us is "Is there a current loan or lease on your vehicle".

While you may not think anything of it, if the car is leased or under finance, you're actually going to end up paying more for your car insurance than someone with the same car that owns it outright.

How does ownership affect the cost of car insurance?

Like we previously stated, your car insurance premiums are affected by a range of factors and these factors vary depending on your car insurer. However, we found that those looking for insurance who owned their own vehicle paid quite a bit less than those who financed or lease their vehicles.

For example, we got a dummy quote for a Toyota Corolla with Budget Direct and the only factor we changed with each quote was whether or not there was a loan or lease on the car:

Vehicle Is there a current loan or lease on the Toyota Corolla? Cost per year
Toyota Corolla No $732.26
Toyota Corolla Yes: Finance / Hire Purchase $772.66
Toyota Corolla Yes: Lease / Novated Lease $814.36

*Quotes pulled on 15 Jan 2019

The above example highlights the disparity in costs, with those owning a vehicle outright paying $40.40 (5.52%) less than those that have financed their car and $82.10 (11.21%) less than those who leased their vehicle.

Why do insurers care if you own your vehicle

Like with all factors that affect your premium the answer lies in historical data and whether or not an insurer has spotted a particular risk associated with that factor. According to Suncorp spokesperson James Spence, drivers of non-financed vehicles are less risky:

"Our analysis of historical claims shows that drivers of financed vehicles have a higher chance of making a claim than non-financed drivers, and when they do make a claim, the costs are higher. There are several factors that contribute to this, including that drivers of financed vehicles are more likely to be younger, drive more frequently and have a newer vehicle"

- Suncorp spokesperson James Spence

Which insurers ask about vehicle ownership?

We are currently in the process of compiling a list of car insurance brands that factor in car financing into its underwriting process. However, if you are with any of the major brands underwritten by Suncorp then it will be a factor. We researched some major car insurance players and here's what we found:

Insurer

Asks about car loan?

Virgin

  • Yes

AI Insurance

  • Yes

Bingle

  • Yes

GIO

  • Yes

AAMI

  • Yes

Coles

  • Yes

NRMA

  • Yes

RAC

  • Yes

Budget Direct

  • Yes

Allianz

  • Yes

Huddle

  • Yes

Real

  • Yes

"Currently we take into consideration the financing of the vehicle for all of our major insurance brands, however the price impacts does differ between brands and by product. Vehicle financing is a common question used by insurers to help predict an individual's risk and to calculate their premium."

- Suncorp spokesperson James Spence

Suncorp underwrite the following Australian car insurance brands:

How to avoid paying more for insurance if you don't own your car outright

If you've got money owing on a vehicle be it via a loan or lease, you're going to pay more for coverage if the insurer takes that into consideration. So, the best way to avoid these charges is to look for insurance brands that don't take ownership into account.

At the time of writing, the only brand we could find that didn't take financing or car loans into account when using their online quote tool was Youi.

Now, while this brand may not ask if there's any money owing on your car that doesn't necessarily mean that it will be the best policy for you or even the best price, so make sure you compare a range of quotes before committing to a brand based on one underwriting factor or the price.

The only brand on finder that doesn't ask your car loan history is Youi

Name Product Accidental Damage Roadside Assistance Fire and Theft New car replacement Hire Car After Theft
Yes - If your car is written off or stolen in the first 2 years
Yes - Reasonable costs (Max 14 days)
Highlights: Emergency roadside assistance included in Comprehensive policies.
Yes - If your car is written off or stolen in the first 2 years
Yes - Reasonable costs (Max 14 days)
Emergency roadside assistance included in Comprehensive policies.
Emergency roadside assistance included in Comprehensive policies.

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Picture: Unsplash

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