PCP car finance and insurance

  • PCP finance: tell insurer you don't own the car
  • Insurance can cost you more with financed car
  • Some finance offers include free car insurance

The last thing you want to worry about when purchasing a shiny new car on finance is insurance. However, you need to check you've got suitable cover before collecting the keys and driving off, to make sure you're properly covered, should the worst happen. 

Keep reading and we'll take you through everything you need to do to make sure you've got the right cover. Insuring a car on finance, or one you're leasing, is different to a car you paid cash for, as you don't own the car, so read on for more information. 

In the meantime, if you're shopping for a new car, check out the best PCP finance deals available now. We've rounded up the best offers available whether you're shopping on a shoestring or have more to spend:

Alternatively, if you're looking to buy your next car with a loan, visit the Parkers car finance calculator to see how much you can afford to borrow.

Car finance: who owns the vehicle?

If you take out a Personal Contract Purchase (PCP) deal through the dealership then the lending company remains the owner of the car until the balance is paid in full or you come to the end of the contract. Decide to make the optional final payment when the contract ends and the car is yours, as you've effectively paid off the entire loan.

One of the most common questions asked when looking at insurance is who the legal owner of the car is when you take out a PCP deal. The answer is almost always the finance company, not you. You are the registered keeper of the car but not the legal owner. This is the same with leasing.

Looking to to learn more about car finance? Take a look at the links below:

In the UK there are separate concepts of ‘Owner’ and ‘Keeper’, and some insurance companies will not insure a car that is paid for through PCP, while others may put the premium up as a result.

But as PCP accounts for such a large chunk of car sales these days, this is rapidly changing. Again, it's the same story with leasing. So, if one company won't insure you, there should be dozens of others that will.

Who owns your car?

It's important when you take out your insurance policy that you have clearly stated who the owner of the car is to avoid any issues if you need to make a claim. 

Car finance insurance cover: shop around for the best deal

Most comparison sites don’t take into account if the car is legally owned by you and 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 if this happens is to put in a couple of calls to the companies themselves. It may be that the online system can't cater for financed or leased cars, but the company does provide it, so it's worth making the call.

Give the insurance company a call the check whether you are able to buy a car using PCP

It is important when asked either online or over the phone to get the ownership details right. If you have an accident or damage the car and you've said you are the owner when you're not, this could invalidate your insurance, leaving you with no cover at all.

Car finance deals with free insurance

It's sometimes possible to get free insurance thrown in with a car finance deal, or get a lease that includes insurance for the entire length of the contract.

You're likely to have to meet certain conditions – usually age and driving experience – but these can often save you hundreds, if not thousands on insurance. So it's worth comparing the cost of these with alternatives that don't include insurance, to see which is most cost-effective for you.

PCP finance and insurance

In PCP terms, it's small cars that are most likely to be available with free insurance, with models such as the SEAT Ibiza, Vauxhall Corsa and VW Polo periodically coming with insurance.

PCP finance: do I need GAP insurance?

Guaranteed Asset Protection (GAP) insurance works differently to normal insurance. Rather than covering the current value of the car in the event it's written off or stolen – typically its current value – GAP may cover the difference between how much your insurer would pay out and the car's list price or the remaining balance on the finance.

To find out all the details and decide whether you need GAP, have a look at our comprehensive guide to GAP insurance.

Want to know more about PCP? Check out the articles below: