Things you need to know about insurance before you buy a car
7 traps to avoid falling into
Choosing the right car is hard. There are so many decisions: make, model, cost, colour … the list can seem endless. But the choices you make when buying a car have a lasting effect on your wallet in one way in particular … I am of course talking about your insurance premiums.
While most people automatically think about car type and age of the driver, there is far more that goes into the calculation of your premium. That's why it’s always important to have these issues in mind when you’re buying a car.
1. Black cars are more expensive to insure
Yes, believe it or not, the colour of your car does factor into your car insurance premiums. According to an analysis conducted by News Corp Australia, if you drive a black car you’re likely to pay 10% more for your car insurance than someone with a white vehicle. That’s not entirely surprising when you consider the stats. Research shows that black cars are 47% more likely to be involved in a crash.
There are various other theories as to why colour affects your insurance, ranging from white cars being easier to repaint to them being more visible on the road.
2. Don’t be suckered in by add-on insurance
One of the biggest mistakes people make when buying a new car is getting coerced into purchasing insurances they don’t need such as consumer credit insurance. These types of policies cover you in the event that you lose your job and are unable to service your loan. However, a recent ASIC report showed how the market is failing consumers with poor value products. Make sure you do your homework before buying any policy.
3. You’ll have to get comprehensive insurance if you want a car loan
If you’re getting a loan, a lender can insist that you get comprehensive insurance. However, they can’t tell you which insurer to go with, so don’t let anyone else pressure you into making a financial decision. Make sure you compare your options so that you’re getting the right cover at the right cost.
4. Make sure the previous owner has paid off their car loan
If you’re buying a secondhand car, make sure you find out if there is any outstanding finance from the previous owner. The best way to do this is to get a Personal Property Security Register (PPSR) report from the Australian Financial Security Authority (AFSA).
If you don’t do this and you’re involved in an accident while there is money owing on your car, your insurer will pay the finance company who owns the outstanding debt, rather than you. Ouch.
5. Buying your car on finance? You'll pay more each year
Speaking of financing your car, if you’ve chosen to take out a loan to buy your car rather than buying it outright, you could pay over $200 more for your car insurance each year.
6. You’ll need some insurance before you’re allowed to drive your car
Now, you may be asking yourself whether you need to buy insurance before driving off the lot. This will all depend on whether the car is registered. If it is, then the car has compulsory third party (CTP) insurance and you can hit the road. If it’s not registered, then you’ll have to wait.
Remember, CTP only covers you for legal and medical costs arising from injuries and deaths caused by car accidents. It doesn’t cover you for your vehicle or any third party property damage. If you’re worried about that, you might want to consider either third-party property damage or comprehensive car insurance.
7. You can transfer over your current policy
If you had insurance on your old car, most insurers will allow you to switch the insurance from that vehicle to your new one.While the process differs from insurer to insurer, generally you’ll need to jump online and head to the policy management section of your insurer’s website. Once there, you have to enter the details of the new vehicle. If your new car is “a higher risk” than your last one, your premiums will be adjusted. If it’s not, you might score a refund.
About the author
Richard Laycock is the insurance editor at finder, and has been wrangling with insurance Product Disclosure Statements for the last 4 years. When he’s not helping Aussies make sense of the fine print, he can be found testing the quality of Aperol Spritzes in his newfound home of New York. Richard studied Journalism at Macquarie University and The Missouri School of Journalism, and has a Tier 1 certification in General Advice for Life Insurance. He has also written for CSO Australia and Dynamic Business.
How likely would you be to recommend finder to a friend or colleague?
Very UnlikelyExtremely Likely
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Important information about this website
finder.com.au is one of Australia's leading comparison websites. We compare from a wide set of major banks, insurers and product issuers.
finder.com.au has access to track details from the product issuers listed on our sites. Although we provide information on the products offered by a wide range of issuers, we don't cover every available product. You should consider whether the products featured on our site are appropriate for your needs and seek independent advice if you have any questions.
Products marked as 'Promoted' or "Advertisement" are prominently displayed either as a result of a commercial advertising arrangement or to highlight a particular product, provider or feature. Finder may receive remuneration from the Provider if you click on the related link, purchase or enquire about the product. Finder's decision to show a 'promoted' product is neither a recommendation that the product is appropriate for you nor an indication that the product is the best in its category. We encourage you to use the tools and information we provide to compare your options and find the best option for you.
The identification of a group of products, as 'Top' or 'Best' is a reflection of user preferences based on current website data. On a regular basis, analytics drive the creation of a list of popular products. Where these products are grouped, they appear in no particular order.
Where our site links to particular products or displays 'Go to site' buttons, we may receive a commission, referral fee or payment.
We try to take an open and transparent approach and provide a broad based comparison service. However, you should be aware that while we are an independently owned service, our comparison service does not include all providers or all products available in the market.
Some product issuers may provide products or offer services through multiple brands, associated companies or different labelling arrangements. This can make it difficult for consumers to compare alternatives or identify the companies behind the products. However, we aim to provide information to enable consumers to understand these issues.
Providing or obtaining an estimated insurance quote through us does not guarantee you can get the insurance. Acceptance by insurance companies is based on things like occupation, health and lifestyle. By providing you with the ability to apply for a credit card or loan we are not guaranteeing that your application will be approved. Your application for credit products is subject to the Provider's terms and conditions as well as their application and lending criteria.