Finder makes money from featured partners, but editorial opinions are our own.
Car Insurance: Owned vs financed or leased car
Is it cheaper to insure an owned car vs a financed or leased car?
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 your 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 | $1,048.04 |
| Toyota Corolla | Yes: Finance / Hire Purchase | $1,104.79 |
| Toyota Corolla | Yes: Lease / Novated Lease | $1,149.82 |
*Quotes pulled on 19 Oct 2020
The above example highlights the disparity in costs, with those owning a vehicle outright paying $56.75 (5.42%) less than those that have financed their car and $101.78 (9.72%) 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:
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? |
|---|---|
 |
|
AI Insurance |
|
|
|
|
|
|
|
|
|
|
|
 |
|
|
|
 |
|
 |
|
 |
|
"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
Not at fault car accident
Frequently Asked Questions
More resources on Finder
More guides on Finder
-
Cheap car insurance in Australia – November picks
Here's a guide to getting affordable car insurance that will still cover the essentials.
-
Car registration Victoria
Find out how to get your car registration transferred in Victoria.
-
NRMA roadside assistance options compared
NRMA offers 3 levels of roadside assistance. We’ve compared the pricing and features of them all in this article.
-
Youi vs Budget Direct car insurance
A side by side comparison of Youi and Budget Direct car insurance including expert analysis of pricing, features, complaints and reviews.
-
When can you drive an unregistered vehicle legally?
Here's when you can and can't drive an unregistered vehicle legally.
-
Blue Slip NSW
Your guide to Blue Slips.
-
Car Insurance ACT
Living in the ACT? Here’s all you need to know about car insurance.
-
Rideshare car insurance
Find out what car insurance options are available for rideshare drivers, including Ubers.
-
Learner driver insurance
Complete guide to getting car insurance for learner drivers in Australia.
-
Car insurance cover notes explained
Car insurance cover notes are no longer available in Australia. Read on to learn why and what your alternatives are.
Ask a question