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In most states, auto insurance is required before a vehicle can be driven — whether it's new or used. If you have existing insurance, a used car can be added to your policy, or you can purchase a new policy entirely. Not only is it necessary to drive, but some lenders or dealers may require proof of insurance before selling you a car. Some private sellers, however, may be more lenient.

The cost of auto insurance for used cars can vary based on several factors, such as your car's make and model, age, location and more. To get a good estimate of your premiums, it's always best to get multiple online car insurance quotes.

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When Do You Need Car Insurance Before Buying a Used Car?

When you need to buy insurance for a used car will depend on who you are purchasing the used car from. Auto loan lenders or dealers will require you to have the state’s minimum insurance when buying a used car from them. On the other hand, private sellers, such as a neighbor or someone online, may not require it. However, without proof of insurance, you will not legally be able to drive your new purchase.

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It’s important to shop around by gathering multiple quotes from different lenders to find the best car insurance for used cars. This way, you can get a good idea of the average cost based on your circumstances and choose the best offer that fits your budget.

Borrowing Money for a Used Car

Most lenders require proof of insurance before granting you an auto loan to purchase a new or used car. After all, lenders will take on the most risk of paying for your vehicle, which is why they want to protect their investment with auto insurance. In particular, financers may require coverages such as liability, collision and comprehensive.

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    Liability Coverage

    If you cause an accident and another driver is injured or their car is damaged, liability coverage will pay for their expenses. It won't pay for your medical expenses or repairs to your vehicle.

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    Collision Coverage

    Collision coverage will help pay for your repair bills in the event of an accident involving your vehicle, whether caused by you or someone else.

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    Comprehensive Coverage

    Damage to your car from something other than an accident, such as vandalism or animal damage, is covered by comprehensive insurance, which can help pay for repairs or a new vehicle.

Buying a Used Car From a Dealer

If you intend to buy a used car from a dealer, keep in mind that they will not sell to you if you don’t have proof of insurance. While you can present an existing policy to your dealer, you may need to wait until the next business day to add a used vehicle to your policy.

Buying a Used Car From a Private Seller

Buying a used vehicle from a private seller does not require insurance, but driving the car home does. Additionally, if you plan to get a car from a private seller with the help of an auto loan, your lender may require proof of insurance before loaning you the money.

Do You Need a Separate Policy for a Used Car?

You do not need separate insurance for a used car — if you have an existing policy, you can add your newly-purchased vehicle to it. The grace period for adding a vehicle can range from a week to a month, depending on the provider.

If you’re ready to add your newly-purchased used car, all you need to do is contact your provider and give them the necessary information. From there, they will update your policy’s rate. To get an idea of how much you might pay, you may get an estimate online using our car insurance calculator.

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How Much Is Used Car Insurance?

It is often cheaper to buy insurance for used cars than new ones, but this will still depend on many factors. Insurers base their premiums on your car’s make and model, age, gender, where you live, the state’s minimum requirement, your driving history and more.

Some car makes and models are cheaper than most. For instance, when looking at used car insurance, the cost of a policy for a 10-year-old Ford F-150 is $1,048 per year on average, while a new one can cost an average of $1,269 annually — a difference of $221.

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Understanding the reasons why your car insurance is so expensive can help you make appropriate adjustments where possible when calculating your annual rates.

Is Car Insurance for New Cars and Used Cars Different?

Car insurance policies do not differ based on whether you have a new or used car. Instead, they differ based on cost, how much and what kind of coverage you have. Additionally, insurance for used cars is generally cheaper, as you may not require the same level of coverage compared to a new car, or insurers may offer a more affordable premium depending on your car’s make and model.

Knowing the best rates for your insurance can help you decide if you want to keep certain coverages for your used car. Some reasons you may get lower coverage include:

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    Your Car’s Actual Cash Value (ACV) Is Lower Than the Coverage

    If the cost to replace your car minus depreciation, or its actual cash value (ACV), is lower than your coverage, then dropping collision insurance or comprehensive insurance may be a good idea.

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    You Can Afford to Pay Out of Pocket

    Depending on the state of your used car, you may be able to afford repairs out of pocket. If this is the case, dropping collision or comprehensive insurance for a smaller premium may be a good idea.

Frequently Asked Questions

Buying insurance for a used car can be a confusing topic for some, as insurance is often associated with new vehicles. But if you're looking to buy a used car, knowing the answers to some of the most frequently asked questions can help you move through the car-buying process smoothly.

About Mark Fitzpatrick

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Mark Fitzpatrick is a senior content director at MoneyGeek with over five years of experience analyzing the insurance market, conducting original research and creating content that can be personalized for every buyer. He has been quoted on insurance topics in several publications, including CNBC, NBC News and Mashable.

Mark earned a master’s degree in Economics and International Relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his economics and insurance knowledge to bring transparency around financial topics and help others feel confident in their money moves.