Used Car Insurance

You do not need full coverage insurance on a used car unless the vehicle is leased or financed. Even though no state requires full coverage insurance, is still recommended for a used car if you cannot afford to repair or replace the car after an accident or other unexpected event. Full coverage is not an official type of insurance, but it usually refers to a policy that includes collision and comprehensive coverage in addition to the state's minimum required car insurance.

When deciding if you should buy full coverage insurance for a used car, consider the car's value, your savings, and where you live. For example, dropping full coverage could be worth it if you have an emergency fund that could comfortably cover the cost of repairs or a new car. But even if you could cover the loss yourself, it's wise to keep full coverage if your car is particularly valuable or you are especially likely to file a collision or comprehensive claim.

A general rule of thumb is to drop full coverage when the combined collision and comprehensive premium equals 10% of your car's value. But a lot depends on your own financial situation and vehicle.

Yes, you can put gap insurance on a used car if it is only a few years old. Many gap insurance providers only write policies for cars that are less than three years old, though some will only insure the original owner or leaseholder of the vehicle.

Gap Insurance Providers for Used Cars

• AAA
• Allstate
• American Family

Gap insurance is designed to protect you when you owe more on a loan or lease than a car is actually worth. If your used car does not qualify for gap insurance, you do still have some options.

Gap Insurance Alternatives for Used Cars

You may be able to get loan/lease payoff coverage instead of gap insurance. Loan/lease payoff coverage is only offered by certain companies, including Progressive and Esurance, and usually has less strict eligibility requirements. However, it does only cover up to 25% of your vehicle's value.

The best option, however, is to get a full coverage policy, including collision insurance and comprehensive insurance, so you know you will at least be reimbursed for your used car's actual cash value in the event of a serious accident.

Additionally, you should regularly check both your loan amount and your car's estimated cash value using resources like Kelley Blue Book. Once you owe less than your car is worth, you'll know you're financially safe if a serious accident occurs.

To learn more, check out WalletHub's guide to gap insurance.

What Is A Used Car Warranty?

A used car warranty is an extended warranty that drivers can purchase to cover repairs to the major mechanical components of a used vehicle, such as the engine and transmission. The best used car warranty companies are Carchex, Toco Warranty, and autopom!, based on WalletHub's analysis of 11 major providers.

6 Best Used Car Warranty Companies

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You need proof of car insurance before you can drive a newly-purchased used car off the lot, if you're buying from a dealership. If you're planning to add the used car to an existing insurance policy, your vehicle may be covered for as long as 30 days, depending on your insurer. And if you're purchasing the car from a private seller, you may not be required to show proof of insurance at all.

Company & State Rules for Used Car Grace Periods

The grace period for adding a new car to an insurance policy varies by insurer. Some companies, like Nationwide, provide a grace period of 10 days, while Progressive, Geico, and Farmers provide a grace period of 30 days. In most cases, your policy term will transfer to a new vehicle, so you won't have to start over with a new six-month or one-year policy. 

Before purchasing a used car, make sure you contact your insurance company so that you understand their grace period. If you miss a deadline, you could end up unintentionally driving without insurance, which could result in stiff penalties.

However, it's important to recognize that not all state laws allow this grace period for used car purchases and car insurance. Some states, like New York, do not allow any grace period for car insurance.

Checking your state laws and insurance company rules before purchasing a used car will help you better understand the regulations that apply to your particular case.

You should get gap insurance on a used car if you owe more on your loan or lease than the used vehicle is worth. For example, if you have a long-term loan/lease or you made a down payment that was significantly less than the car's actual cash value, gap insurance may be a good idea.

You Should Get Gap Insurance on a Used Car When:

• You do not have enough savings to pay off your loan or lease if the car is stolen or totaled.
• You made a small down payment.
• You have a long-term loan of four years or more.
• You are a single-car household and rely on the vehicle heavily.
• Your loan includes negative equity from a previous vehicle loan.
• You drive more miles than average, which can reduce the vehicle's value faster.

Gap insurance for a used car can be harder to find since most gap coverage providers will only insure the original owner or leaseholder of the vehicle. Some insurance companies offer loan/lease payoff coverage as an alternative to gap insurance. Loan/lease payoff typically has broader eligibility requirements, making it easier for used cars to qualify.

To learn more, check out WalletHub's guide to gap insurance.

Yes, you need insurance before you buy a used car from a dealership, or else you will not be allowed to drive it off the lot. You technically don't have to show proof of insurance if you're purchasing the car outright from a private seller, but you would be risking serious consequences if you choose to drive uninsured.

If you already have car insurance, your insurer likely has a grace period during which your newly purchased used car will be covered, which gives you time to officially add the vehicle to your policy. This grace period typically ranges from 7 to 10 days, so check your state's laws and insurer's rules in order to make sure you're following the guidelines.

If you don't have an existing policy, you should get quotes prior to purchasing your car. Even without a specific vehicle identification number (VIN), you can give your personal information to an insurance agent and then officially activate your policy once you know the car's details. However, if you're buying the car on the weekend when most insurance offices are closed, you will have to either wait to drive your new car or purchase the policy online while you're at the dealership.

Yes, you can get a warranty on a used car after purchasing the vehicle if you get the warranty from a third-party extended warranty company. Extended warranty companies like Carchex, Toco Warranty, and autopom! offer used car warranties for previously purchased cars that meet age and mileage eligibility requirements. On the other hand, most dealerships only sell used car warranties on the day you buy the vehicle.

Used car warranties from third-party companies are a way to get coverage if your vehicle's original factory warranty has expired. However, it's important to note that used car warranties are not worth their cost for most drivers, especially when compared to alternatives like mechanical breakdown insurance.

To learn more, check out WalletHub's complete guide to the best used car warranty companies.

No, you do not need insurance to buy a car, but you will need insurance to drive the car home. Most dealerships require proof of insurance before allowing you to leave with a car, since almost every state requires drivers to have car insurance coverage whenever they are behind the wheel.

If you currently have a car insurance policy, most insurers will cover a new car up to your existing policy limits for 7-30 days. However, state laws and company policies differ, so you should ideally communicate with your insurer before you go car shopping. And if you're leasing or financing a car, be sure to check the lender's or lessor's insurance requirements, since you might need to adjust your policy details accordingly.

On the other hand, if you are purchasing a car and do not have an existing auto insurance policy, it's best to buy insurance before going to the dealership or private seller. If you know the exact car you'll be purchasing, you can ask the seller for the vehicle identification number (VIN) in advance and use the VIN to purchase a policy tailored to that car. Otherwise, you can get insurance quotes for multiple car models beforehand and buy a policy before you actually drive off the lot.

A warranty on a used car costs anywhere from $1,000 to $5,000, depending on factors like the car's condition and mileage. In general, used car warranties cost more than regular extended warranties because used cars have more miles than new cars and are more likely to experience mechanical problems.

A used car warranty pays for repairs to a car's major systems if they break down. In most cases, used cars only qualify for extended warranties that cover the vehicle's basic components, like the engine and transmission, rather than all of the parts and systems. But coverage options usually depend on the car's mileage. Some extended warranty providers will cover vehicles with as many as 250,000 miles, while others have lower mileage caps.

When you're shopping for a used car warranty, you should get quotes from multiple companies in order to make sure that you're getting the best deal. If you're struggling to find an affordable plan, you should see if your car insurance company offers mechanical breakdown insurance (MBI), which provides similar coverage to an extended warranty but only costs an average of $100 per year. However, keep in mind that you may not be able to purchase MBI if your car is too old or has too many miles. 

To learn more, check out WalletHub's guide to the best used car warranties.