PCP car finance and insurance

  • Tell insurer you don't own the car
  • Insurance can cost you more with a financed car
  • What about GAP insurance?

As health and home insurance grows increasingly complex, there is at least something reassuringly simple about car insurance. No matter what the situation, all motorists in the UK are legally required to insure their car.

One important thing to remember is that while some PCP deals come with insurance, most don't. So it is something you need to sort yourself.

Insuring a car on PCP is easy. But, you need to inform the insurance company that you don't legally own the car.

Of course, there are a few other considerations to make as well. Keep reading to find out everything you need to know about insuring a car with a PCP contract.

PCP insurance: who owns the vehicle?

If you take out a Personal Contract Purchase (PCP) agreement, the lending company (usually the car manufacturer), remains the owner of the car until the balance is paid in full. 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.

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 contracts account for such a large chunk of car sales, this is rapidly changing. So, if one company won't insure you, there are dozens of others that will.

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. If you have an accident or damage the car and you've said you're the owner when you're not, this could invalidate your insurance, leaving you with no cover at all.

Want to learn more about car finance?

>> How does PCP work?
>> What is Hire Purchase?
>> How to voluntarily terminate your car finance early
>> 0% car finance: what is it? Plus full list of 2020 deals
>> How does leasing work?
>> Car leasing with insurance thrown-in

PCP GAP insurance

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

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.

>> Comprehensive guide to GAP insurance.

Do PCP deals come with insurance?

PCP deals generally do not come with insurance.

There are deals like Peugeot's Just Add Fuel too. These types of agreement include a car's finance cost, car tax, servicing, roadside assistance, and insurance, in one monthly payment.

>> Search for car leasing deals

Cars that are leased are in a similar position. Volvo's latest Care by Volvo scheme can include insurance bundled into the price. While a few third-party companies also offer insurance deals.

>> How to find lease deals with insurance

PCP with free insurance

It's sometimes possible to get free insurance thrown in with a car finance deal.

You'll likely 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.

Small cars are most likely to be available with free insurance. Models like the SEAT IbizaVauxhall Corsa and VW Polo periodically come with free insurance.

PCP insurance cover: shop around for the best deal

A lot of 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 phone in. It may be that the online system can't cater for financed cars, but the company does provide it, so it's worth making the call.

Further reading

>> Best cars for £90 per month
>> Best cars for £100 per month
>> Best cars for £150 per month
>> Best cars for £200 per month
>> Best cars for £300 per month

>> Best cars for £400 per month
>> Best cars for £500 per month
>> Deal Watch: top cash, finance and leasing offers