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Things you need to know about insurance before you buy a car

7 traps to avoid falling into

car on countryside

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 insurancenew car key

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.women driving car

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.
Richard Laycock
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.

Comparing car insurance now just makes sense

Name Product New Car Replacement Pay monthly at no extra cost Choice of repairer Roadside Assistance Hire car after theft Personal effects
Optional - If your car is written off in the first 3 years
No
No
No
Optional - Up to $50 a day until your claim is settled
$0.00
Save 24% on your policy if you've been claim free for 3 years.
Yes - If your car is written off in the first 2 years or is under 40,000 km
No
Yes
Optional
Yes - Up to $1,000 (Max 14 days)
$250.00
Buy online and save 15%.
Yes - If your car is written off or stolen in the first 2 years
No
Yes
Yes
Yes - Reasonable costs (Max 14 days)
$750.00
Emergency roadside assistance included in Comprehensive policies.
Yes - If your car is written off in the first 2 years
No
No
Optional
Yes - Up to $70 per day (Max 14 days)
$500.00
Save up to 10% when you buy online.
Yes - If your car is written off in the first 2 years or is under 40,000 km
No
Yes
Optional
Yes - Up to $1,000 (Max 14 days)
$500.00
Save 15% when purchasing online. Eligible customers can earn 5,000 Velocity Frequent Flyer Points when purchasing a new policy by 31 Dec 2018. Excludes NT. T&CS apply.
Yes - If your car is written off in the first 2 years
Yes
No
No
Yes - Up to $70 per day (Max 14 days)
$500.00
Transforms your driving so it's 100% carbon neutral.
Yes - If your car is written off in the first 2 years
Yes
Yes
No
Yes - Up to $100 per day (Max 30 days)
$1,000.00
Buy online and save up to 10% on your policy.
Yes - If your car is written off in the first year or is under 20,000 km
No
No
Optional
Optional - Up to $60 per day (Max 14 days)
$500.00
Save up to 20% on car insurance when you purchase cover online.

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