When you are purchasing your new car you may be considering a car insurance down payment, or you may want to do this as a financial plan. In either case, there are advantages and disadvantages, so here is a short discussion about the pros and cons of purchasing insurance in monthly payments.
You can usually choose to pay only the first few hundred dollars of your car insurance down payment at the start of each term. Although costly, paying all of your monthly premium up front comes with significant savings. And, you’ll also save money overall on the cost of the insurance policy. If your new car has an expensive insurance deductible, the down payment could save you a good deal of money. This would make your monthly premium much cheaper than if you paid it as full-payment on a standard policy at the end of the year.
However, there’s always the risk that the payment could go unpaid. Your policy will have a penalty if you’re late on a payment. If you’re unable to make the down payment or there’s a financial emergency, you may have to take out a loan to make up the difference between your monthly payment and the cost of your insurance. While this method doesn’t come without risks, you can usually avoid the extra expenses associated with a loan. It’s generally less expensive than a car loan, and in most cases you can pay off the loan in a shorter period of time.
If your vehicle isn’t covered by your existing insurance policy, then paying the full cost upfront on your monthly payment will make sense. Many policies also allow you to add collision coverage, which will cover your vehicle in the event of a wreck. Again, it makes sense to purchase these options when you can get the same or better coverage for a lower cost.
Of course, some people are more concerned with the convenience of paying their monthly payment and aren’t concerned about paying a substantial down payment at all. If you can afford to take your car to the dealership, it may be easier to get a better price from your current insurance company than buying your new vehicle and driving it yourself.
If you have a brand new car, it may not be wise to put down any money towards the purchase. Just because the car is a new one, doesn’t mean it needs as much insurance as a used vehicle. New cars often have more safety features than older vehicles that have been used in the past.
On the other hand, if you have a second or third hand car that you’re considering selling, paying a small down payment on that vehicle might be a good idea. By doing so, you’ll be able to sell it in a short period of time at a better price.
Either way, keep in mind that the decision to make a monthly payment or to pay down payment will have a big impact on your monthly premium. The best choice will depend upon the type of insurance you need. As with everything else you buy, it’s important to compare different policies before deciding which is right for your family and your financial situation.
To help you make sure you’re getting the best deal, check online to find out how much insurance companies charge for various types of coverage. You may be surprised at how much they charge for liability insurance, and for the types of coverage available on your car that you may not even consider.
As you’re shopping around for a policy, remember that the amount of your monthly payment will depend on how much coverage you need. as well as how much risk you feel you are taking.
You can either pay for the vehicle outright and pay nothing towards the vehicle, or you can make sure you have the monthly payment in case your car is damaged, or stolen. In either case, having the right amount of coverage can reduce the cost of the premiums.