PCP car finance and insurance

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

No ifs, not buts, not coconuts. All motorists in the UK are required to have car insurance. One important thing to remember is that you need to ensure that you have suitable cover before getting behind the wheel, regardless of how you pay for your car.

Insuring a car on a PCP finance deal is different to a car you paid cash for, as you don't own the car. Keep reading and we'll take you through everything you need to do to make sure you've got the right cover.

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.

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.

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.

>> To find out all the details and decide whether you need GAP, read our comprehensive guide to GAP insurance.

Do PCP deals come with insurance?

PCP deals generally do not come with insurance. Some providers will offer insurance for 'free', but it's merely added on to your monthly costs. 

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.

If you opt for a leased car, they do include insurance for the entire length of the contract.

Search for car leasing deals

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

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 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.

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?