If you don’t have the cash upfront for a car you might decide to get a car loan. It is well worth taking the time to compare the terms of loans offered by different financial institutions to get the best deal. If you buy a car from a car yard the car dealer might offer to arrange the finance for you. You don’t have to get the loan through the car dealer and it’s often cheaper to get a loan from your bank or credit union directly. Interest rates and related fees and charges for personal loans can vary a lot. Once again, take the time to make sure it is the best deal for you.
Choosing a policy
When you are choosing a car insurance policy it is important to understand the different types of policies available and know what sort of insurance cover you want. Always take the time to read the policy so you know what is and isn’t covered.
What kind of cover do you want?
When you register your car you must pay for third party personal insurance which covers injuries to other people if the car is in an accident. This is sometimes called a “green slip”.
In addition to this there are three common types of optional car insurance policies:
- Comprehensive insurance – If the driver of your car is covered under the policy, this policy covers damage to your own car and damage to other people’s property (usually their car) in an accident.
- Third party fire and theft insurance – This policy covers damage caused by your car to other people’s property, and limited cover for loss or damage to your car caused by theft or fire only.
- Third party property insurance – This policy only covers damage caused by your car to other people’s property. It does not cover the cost of repairs to your own car.
Keep an eye out for additional benefits such as third party policies that provide limited cover for damage to your car. This cover can be up to a limited amount, eg, $3,000 or in particular circumstances, eg, it wasn’t your fault and the other driver was uninsured. Some policies also cover towing costs and free car hire.
What won’t the policy cover?
Most policies do not cover loss or damage resulting from:
- mechanical, structural or electrical failure
depreciation (the reduction in value over time), wear and tear, and rust
lost wages or income because you cannot use your car
unauthorised modifications to the car from the maker’s specifications
and most policies will not cover loss or damage if you drove your car when it was in an unroadworthy or unsafe condition, and this contributed to the accident.
Also, your policy will not cover loss or damage if the person driving the car was:
- over the limit or under the influence of drugs
- not authorised under the policy to drive the car.
Agreed value or market value?
Your car will either be insured for:
- an agreed value (with the specific amount stated in the policy);
- or the market value of that make and model of car, based on the condition of your particular car.
Get the best deal
Once you have decided on the type of cover you want, take the time to check out different prices. The Internet and telephone call centres make this easy.
Remember to compare the cost of the premium and the amount of any excess. The excess is the amount you must pay when you make a claim on your insurance. Read more about the excess below.
What can affect the cost of your insurance?
In addition to the type of cover you choose, factors that can affect the cost of your insurance include your suburb, your car and your driving history.
Powerful cars and cars with modifications cost more to insure. So before buying a car like this decide whether it’s worth the added ongoing expense.
Remember, the more a car is worth, the more it will normally cost to insure. The person who is driving the car can affect the cost of the insurance. If you have a good driving record (rating 1) your premium (ie the cost of insurance) will be lower and if you have a bad driving record (rating 6) your premium will be higher. However, if you are a male under 25 your premiums will be more expensive due to the greater number of accidents by this group generally. Make sure you keep your rating or get a better rating if you change your insurance.
Car dealers and insurance
Sometimes car dealers also offer to arrange your insurance for you. In this situation, you deal with the car dealer as an agent rather than the insurance company. In addition to comprehensive and third party insurance the car dealer might offer you a variety of other insurance products, for example consumer credit insurance to cover your loan repayments and mechanical breakdown insurance. Decide what sort of insurance you really need and take the time to make sure you are getting the best deal. Don’t ever feel pressured into buying insurance.
Things to know about car dealers who offer you insurance:
They must be licensed to sell insurance policies [this is called an Australian financial services (AFS) licence].
To get the best deal you might need to shop around and get your car, car loan and car insurance from 3 different places.
- They must tell you how much commission they will receive from selling you the insurance. This is the amount the insurance company gives them for selling you the policy.
- They might act for one insurance company only, so they will not shop around for the best price for you.