Car Insurance: Owned vs 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:

*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?
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

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

Product FCI	Accidental damage	Roadside assistance	Fire and theft	New Car Replacement	Hire car after theft
Promoted Youi Comprehensive Finder Award				If your car is written off or stolen in the first 2 years	Limit not disclosed - Up to 14 days	Summary: One of the only insurers to automatically include roadside assistance. It also won 12 out of the 22 categories in Finder's 2024 customer satisfaction awards. Winner of 12 out of the 22 categories in Finder's 2024 customer satisfaction awards. Yes, that many.	Get QuoteView details Compare	loading Fetching your data...
Youi Third Party Fire and Theft Best Rated Brand					Limit not disclosed - Up to 14 days	Up to $20 million legal liability cover and 24/7 claims team.	Get QuoteView details Compare	loading Fetching your data...
Youi Third Party Property Damage Best Rated Brand						⭐ Current offer: Covered up to $5,000 for accidental damage to your car caused by an uninsured third party. Who it might be good for: Drivers who want a reliable insurer. It was the 2022 Insurer of the Year for Customer Satisfaction.	Get QuoteView details Compare	loading Fetching your data...

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Not at fault car accident

Frequently Asked Questions

• Is a novated lease worth it?

  A novated lease can be worth it for those looking for tax savings and they're especially good for those who like to drive a new car every few years. It allows you to use pre-tax income for payments, which is better value than making your repayments with your gross income.

• How does car leasing work in Australia?

  In Australia, car leasing typically involves monthly payments for using a vehicle over a set term, often with the option to buy at the end. A novated lease is a popular option where payments are made from your pre-tax salary.

• What is the difference between leasing a car and buying it?

  Leasing a car involves paying to use the vehicle for a set period, without taking ownership at the end. Buying a car means you pay the full price, either upfront or via a loan, giving you full ownership.

• Do I need comprehensive car insurance for a loan?

  Yes, most car loans require comprehensive car insurance. This protects the lender's investment by covering various potential damages or losses.

• Does finance affect car insurance?

  Yes, when you finance a car, it usually requires comprehensive car insurance. Lenders want the vehicle to be fully covered to protect their investment, as the car is technically owned by the lender until the loan is paid off.

Written by

Richard Laycock

Editor

Richard Laycock is Finder’s insights editor after spending the last five years writing and editing articles about insurance. His musings can be found across the web including on MoneyMag, Yahoo Finance and Travel Weekly. Richard studied Media at Macquarie University and The Missouri School of Journalism and has a Tier 1 Certification in General Advice for Life Insurance. See full bio