All motorists in the UK are legally required to insure their car, but that’s all straightforward when you pay for the car outright. What about when you finance the car? It’s important to remember that while some PCP deals come with insurance, most of them don’t, so this remains something you need to sort yourself.
Thankfully, best car finance is easy, but there are a few considerations to make as well. What you need to get fully representative insurance cover is knowing what your car is worth – the insurer will ask – and you can visit a site like Parkers to get a detailed valuation, you’ll be able to get that information.
PCP insurance: who owns the vehicle?
If you take out a Personal Contract Purchase (PCP) agreement, the lending company remains the owner of the car until the balance is paid in full. This is usually the car manufacturer, and the car is only yours if you make the optional final payment at the end of the contract – when you’ve effectively paid off the entire loan.
This is one of the most common questions asked when looking at insurance. The legal owner of the car when you take out a PCP deal is therefore almost always the finance company, not you. You are the registered keeper of the car but not the legal owner.
Be aware there are separate concepts of ‘owner’ and ‘keeper’ in the UK, and some insurance companies will not insure a car that is paid for through PCP. Some may put the premium up as a result.
That may sound like a complication, but as PCP contracts account for such a large chunk of car sales these days, this approach is rapidly changing. Therefore, if one company won’t insure you, there are plenty of alternative companies that will.
Just make sure when you take out your insurance policy that you have clearly stated who the owner of the car is to avoid any issues further down the line. If you need to make a claim due to an accident, or the car has been damaged, your insurance could be invalidated if they discover you’re not the owner, leaving you with no cover at all.
Do PCP deals come with insurance?
PCP deals generally do not come with insurance, but it is possible to find them.
Peugeot’s Just Add Fuel scheme, for example, bundles up a car’s finance cost, car tax, servicing, roadside assistance, and insurance, into one monthly payment.
Cars that are leased are in a similar position. Volvo’s Care by Volvo scheme can include insurance bundled into the monthly price, while a few third-party companies also offer insurance deals.
PCP with free insurance
Sometimes it’s possible to get free insurance thrown in with a car finance deal.
You’ll likely have to meet certain conditions – usually age and driving experience – but these can often save you hundreds, if not thousands per year.
Your best bet of finding these offers is with smaller cars, but it’s worth comparing the cost of these with alternatives that don’t include it, to see which is most cost-effective for you.
PCP insurance cover: shop around for the best deal
It’s worth noting that a lot of comparison sites don’t take into account the car’s legal ownership, while some do not even ask the question when you fill in the online forms.
This presents a problem should you then go on to the insurer’s site and have to fill in further forms. That means you could find that they either won’t cover you or the premium has increased because you are not the legal owner of the car.
The general advice for this is to phone in. It may be that the online system isn’t catered for financed cars yet, even if the company does provide it, so it’s worth making the call.
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