Blog / Car Insurance
Buying Car Insurance from Your Car Dealer Could Cost You
While buying a new car is an exciting prospect, it can also be daunting. Not only do you have to find the right car, but also you will need to negotiate the price, and on top of that arrange insurance, financing, registration, and bid for a COE.
Little wonder the majority of buyers leave most of it for the dealer to sort out.
But do you get the best value by doing so?
This is where things get tricky.
There’s nothing to say you must get the COE, car insurance or financing through a dealer, for instance, but there is convenience in doing so. You’ll pay the same for your COE as all the successful bidders in any round, so there may be little advantage in doing that yourself.
But your dealer is not necessarily going to offer the best deals for car financing or motor insurance.
You do have the right to shop around. However, there will be incentives – particularly for the dealer – to get you to insure and finance your new car through them.
Many car companies have their own car financing arms and in such cases the car company is competing with other lenders for your business. They may offer competitive rates.
In the case of insurance, that is much less likely – the car dealer simply acts as an agent and takes a commission from an insurance company they always work with for making the sale.
That commission may go to the dealer or to the salesperson or both, so there is a strong motivation for the salesperson to sell you the bundle.
Also, because the dealer is not an insurance specialist, they’re probably selling you a one-size-fits-all policy that includes features that you may not need, and that you don’t need to pay for. On top of that you have no idea how reliable the insurance company is – does it have a good reputation when it comes to making claims?
No obligation to buy motor insurance from your car dealer
So, what can you do?
Firstly, get a quote for the insurance policy you want before you even begin to negotiate the deal. You can do that online here with just a few personal details and information about the car. When it comes to purchasing the policy, the process is just as easy, and you can get policy documents by email within minutes.
There’s a good chance the salesperson will offer bigger discounts to sell you the whole package – if you know what your best deal is without the package, you at least stand to make an informed decision and you can negotiate from a stronger position.
It may be that the savings made by rejecting the apparently cheaper package deal and arranging your own insurance and/or finance makes it worthwhile. This comes down to your skills at these sorts of negotiations – though you should be aware this is the skillset of car salespeople, and they’re likely to be personally rewarded financially for selling you the package, so they’re highly motivated!
But, as with so many important financial decisions, you should know your rights: You’re under no obligation to accept bundled insurance or financing, and if you can do a better deal without accepting the bundle offered by the dealer, you absolutely should do so.
Related blog article: What is a Certificate of Entitlement (COE)?