If your car is on the road, you’re going to need some type of insurance coverage, regardless of your credit score. There are many different things that go into the cost of auto insurance, and we cover what you may be able to do to lower that cost.
What Determines Car Insurance Costs
Your car insurance premium, what you pay each month to maintain coverage, depends on the cost of the vehicle, cost to repair the car, overall safety features, the size of the vehicle, the likelihood of it being stolen or broken into, and more.
Other things such as your marital status, where you live, your gender, and even your job can also affect your insurance cost. If you’re a delivery driver or you’re always on the road, your insurance premiums usually cost more. Densely populated areas could mean a higher cost, simply because there are more cars on the road. And, of course, your past driving record impacts what you pay as well. In fact, if you've had multiple accidents, you’re going to pay more for your insurance.
If you have bad credit, depending on the state you live in, it could also mean a higher insurance premium. There are a few states that don’t allow this, so check with your state regarding the use of credit scores as a basis for auto insurance rates.
While there are a few things out of your control when it comes to determining your car insurance premium, there are a few ways to find the best deal and take advantage of discounts.
Auto Insurance Saving Tips
There are some states that allow your credit score to impact the cost of your auto insurance, which can be bad news for bad credit borrowers. To help offset the increased cost of car insurance because of your credit score, make sure to keep up on your auto loan payments and all other bills and loans each month. Payment history is the most important factor that determines your credit score, and missed or late payments can stick around on your credit reports for up to seven years.
If you're a bad credit borrower driving a used vehicle, you may already be seeing some savings! On average, used cars are cheaper to insure than new ones for multiple reasons. New vehicles tend to have more expensive safety features like backup cameras or complicated infotainment systems – which are expensive to repair or replace. The more it costs to repair or replace your car, the more you’re going to pay in insurance premiums.
If you’re simply looking to free up some income each month, you could opt for higher deductibles which means that you’re responsible for paying more before insurance coverage kicks in. If you choose a higher deductible, you have to have a savings safety net in case you need to make a claim in the event of an accident or theft. Try not to opt for a higher deductible than you can handle, or you might be left without a vehicle if you can’t cover the amount.
Other quick tips can include:
- Bundle savings – Many insurance companies offer savings if you bundle items together, such as homeowner’s or renter’s insurance with your auto insurance. If you rent, have a mortgage, or another car, look into the possible savings of bundling these items together on one policy.
- Good or safe driver discounts – Are you a safe driver? Great! Look into discounts for being exactly that, or ask an insurance agent.
- Switch to PLPD – If you’ve already paid off your vehicle, you aren’t required to carry full coverage auto insurance. You can opt for personal liability and property damage (PLPD) coverage. This is the minimum amount of coverage that's mandated in most states. The quicker you pay off your car loan, the quicker you can switch to a cheaper insurance policy. This type of coverage isn’t as comprehensive, but it’s much cheaper than full coverage. Make sure you know what's covered before deciding to make this change, since PLPD doesn't cover vehicle replacement if you're in an accident.
- Paying ahead – Many insurance companies offer savings if you prepay your policy, instead of making monthly payments. While it might be a big lump sum, it could save you a lot of cash in the long run. It’s also one less bill to worry about each month! Ask an insurance agent about prepaying and possible savings.
Shop Around Before Financing a Vehicle
While you're car shopping, you should also be auto insurance shopping! To drive your vehicle off the lot, you’re going to need full coverage insurance. Your lender needs proof of insurance while you’re completing the car buying process.
Before you sign the dotted line on your auto loan contract, shop around for the best prices on car insurance. There are multiple auto insurance companies to choose from, and you don’t have to go with the first company you find. You can request insurance quotes from multiple companies, compare premiums and coverage options, as well as look for safe driver’s discounts and bundles. Our trusted partner allows you to view and compare auto insurance offers online.
Remember, the type of vehicle you’re financing also plays a part in your insurance costs, so you should compare the cost of insuring different makes and models.
If you’ve already got your car and you’re simply trying to save some cash each month, you can still shop around for better rates. You can switch auto insurance companies in the middle of the policy term, but depending on the language in your policy and the company you’re working with, you may be expected to pay an early cancellation fee (or maybe you’ll get money back if you prepaid!).
You should always be looking for the best deals, especially toward the end of your current insurance policy term. However, there are also possible savings in the form of loyalty rewards – the longer you stick with the same company, the more savings might open up. Always be shopping and asking about possible discounts for being a loyal customer; the worst they can say is no!
Looking for Your Next Car?
If your current vehicle is getting too expensive to insure, it might be time to trade it in for something else. As a bad credit borrower, you may have run into some issues getting approved for an auto loan. Additionally, you may be paying more for insurance because of your poor credit score.
However, car shopping doesn’t have to be difficult when you have less than perfect credit, and we want to help make it a little easier.
Here at Auto Credit Express, we match borrowers to dealerships that have bad credit lending options, at no cost. To get started and get car shopping, complete our free auto loan request form and we’ll look for a dealer in your area that has the resources to help you get your next car loan.