Car Finance with Insurance vs Car Finance without Insurance

The Autedia website receives thousands of monthly visits for car finance with insurance deals. These internet searches demonstrate that drivers have more than one idea of how car finance with insurance works.

This article lists the types of car finance and insurance offers available. We also dispel the myths that these deals come with free insurance.

No, you can’t buy a car on finance with FREE insurance.

One-third of this page’s enquiries are for a cheap car on finance with FREE insurance.

Unfortunately, there is no such thing as a FREE lunch, and that old adage applies to car insurance.

The cheapest way to get car finance and insurance are to buy them separately, using an online car finance broker to find a loan and a price comparison site for the insurance.

Still, there are several options where you can get the finance with insurance included. Our site stats show that nearly half of these searches come from young and new drivers, and it isn’t easy to qualify for the insurance offered on such deals without a black box.

Yes, companies like Stoneacre offer an ‘All-inclusive’ service, a pay monthly motoring package on both new and used cars and a wide range of cars for first-time drivers with free insurance. This service includes one year of insurance, three years of servicing, three years of road tax, a three-year guarantee, and three years of roadside assistance.

With a used car, your finance payments will be lower, but servicing will likely become more important and possibly more expensive. However, for most, this deal probably won’t be worth it. Keep in mind that the insurance offered only lasts one year, so you will need to add a monthly insurance bill to the remaining contract!

Arguably, a far more sensible option would be to take out a traditional Hire Purchase agreement on a high-quality used car and source your own insurance. If you go with an all-inclusive deal, you’ll pay considerably more for servicing, road tax, and breakdown cover (after the first year), with an average service costing approx. The cost difference does not usually favour the driver, £100, road tax sometimes costing £0 depending on the car you buy, and breakdown cover available from just a few pounds a month.

Car finance with inclusive insurance deals is typically only available with PCP finance on a new car. They’re not available on used vehicles.

A finance/insurance deal is for three years and comprises the following:

• PCP finance
• Car tax
• Breakdown cover
• Servicing
• Driver insurance

Pros:

• It’s convenient, as it’s a direct payment to cover all your driving needs (except fuel).
• Usually comes with a brand-new car, so you have the latest safety tech and gadgets.
• It can be worth it for those already facing exorbitant insurance fees.

Cons:

• Considerably more expensive than sourcing insurance separately.
• Insurance deals are often only offered for part of the contract.
• It usually comes with black box telematics insurance.

Several providers can offer finance deals with insurance, including:

Car Manufacturers/ Brand Dealers

• Citroen Simply Drive car finance and insurance (new cars).
• DS Simply Drive car finance and insurance (new cars)
• Peugeot Just Add Fuel, car finance and insurance (new cars)
• Many dealers also offer optional insurance to match your requirements. (Seat, BMW, Vauxhall, and others) (new and used cars)

Independent Dealers

• Offering car finance with insurance on used cars, such as Stoneacre.

Insurance Brokers

• Marmalade Add Fuel and Go Car Finance with insurance. (Marmalade) New cars. Currently not available.

Car Leasing

• Standard car leasing deals and leasing agreements don’t typically come with vehicle insurance. However, it is possible to opt for insured leases that include this cover.

Can I get manufacturer car finance and insurance deals?

Many manufacturers via brand dealerships can sell you a new or approved used car (up to three years old) on PCP finance with a driver’s insurance policy.

Finance
The dealer arranges the finance through the manufacturer’s recommended finance company. However, don’t just assume the APR (interest rate) on offer from the dealer is the best you can get. Before making your final decision, we advise you to compare that offer with an online car finance broker with access to a wide panel of lenders.

Insurance
The manufacturer uses a third-party insurer to underwrite the insurance. These insurance policies can be flexible to suit the customer’s specific needs. Still, the insurance won’t be cheap, nor will the car it comes with.

Can I get car finance and insurance deals from an independent dealer?

A few independent used car dealers say they offer older cars with insurance, but we cannot see sufficient transparency to comment. However, we can say the insurance element of the deal will likely not be free or the cheapest option available.

When you think about a new car finance and insurance deal for young drivers, you might think these free insurance deals differ from the usual car finance for young drivers options. The truth is that these new cars with free insurance are just PCP deals!

With PCP, there’s a deposit, monthly payments, and an agreed value for the car. You hand it back after your contract is up unless you want to pay a couple of thousand pounds to keep it – which is rarely worth it.

With so-called free insurance, the ‘cheaper monthly payment’ aspect of the PCP disappears, as your monthly fee will be pretty high.

You could look for the best PCP deals with no deposit and source insurance separately.

Pros:

• Cheaper monthly payments compared to a traditional hire purchase
• You can hand the car back or use the positive equity to get a new deal

Cons:

• The balloon payment required to own the vehicle can cost thousands
• Your payments won’t grant you equity in the car

Things like the car tax, breakdown cover, and warranty work out the same whether you go for the finance with insurance or a basic PCP deal.

Now let us review the list and compare the two options in detail:

Term length

With PCP, you have flexibility on the length of the PCP contract you choose. PCP agreements typically last between 2 and 4 years, and exchanging the vehicle during the contract is relatively straightforward.

PCP/Insurance usually has a three-year fixed term, and it is less clear-cut to exchange the vehicle during the contract.

Car tax

With PCP, many new cars don’t even require road tax; these include:

Vehicles with zero road tax

• Volkswagen Golf.
• Ford Fiesta.
• Nissan Qashqai.
• Toyota Aygo.
• BMW 3 Series.
• Vauxhall Corsa.
• MG ZS EV.
• Fiat 500 Electric.

With PCP/Insurance, if the car requires road tax, the first year is provided with the vehicle. You’ll still need to apply to tax the car for years two and three – and you’ll receive payment from the manufacturer to cover the costs!

Breakdown cover

With PCP, car manufacturers provide roadside assistance when you buy a new car. We are talking about the likes of the AA and RAC here. Some get the first year free, while others will last the warranty term.

PCP/Insurance breakdown cover is typically the same as for a PCP without Insurance.

Servicing

PCP does not include routine servicing, but a similar plan to the one included in the finance/insurance package will cost approx. £25/month (priced April 2023).

PCP/Insurance includes a once-a-year service, typically excluding wear items such as tyres, brakes, clutches, and windscreen wipers.

Peugeot – Just Add Fuel

This deal comes with three years of insurance, car tax, warranty, roadside assistance, and routine servicing.

Example:

Imagine you’re looking for cars with free insurance. You put down a £1000 deposit and accept the lowest annual mileage option, less than 7000 miles. The cheapest possible deal on a Peugeot car is £397.56pm. It’s worth noting that your postcode can also affect the premium price on offer.

Just Add Fuel requires the following drivers to have a black box:

• Drivers aged between 18 and 20
• Drivers who have less than two years of no-claims bonus

The insurance has restrictions that make qualifying difficult for drivers with these circumstances.

Experienced drivers with a high No Claims Bonus are favoured.

Simply Drive from Citroen and DS

More or less identical to the insurance offered above by Peugeot.

Marmalade ‘Add Fuel and Go’

Marmalade’s ‘Add Fuel and Go’ car finance and insurance offer doesn’t come straight from a manufacturer. Even so, it does include new cars with insurance for first-time drivers.

Most cars come with one-year free insurance. However, you must insure the car separately for the rest of your contract. You’ll have to contact Marmalade to get a direct quote.

It’s worth noting that you might not even get accepted for Marmalade insurance. If you do, it will come with black box telematics.

You can usually save money by finding a separate cheap insurance deal. The ‘free insurance’ is just added to your monthly payments!

Road tax is often cited as being included in this deal, but if it’s not free, it can be very cheap for brand-new cars.

For the inexperienced young driver, it’s worth remembering that paying road tax is much simpler than finding an insurance deal. Log in online, enter your registration number, and pay. You can also choose to split your road tax payments over 12 months.

That’s why free road tax is not a particularly enticing offer.

Free MOTs and services are often advertised with free car insurance finance deals. But this might not be as helpful as it sounds!

If you’re buying a brand-new car, you won’t need to get an MOT for three years anyway, so this would be free either way.

Servicing is a little different. We recommend that you follow the manufacturer’s advice and service your car regularly. This is typically once a year (or every 12,000 miles).

The average service cost is approx—£ 150. If you’re a young driver financing a new car, it’s unlikely that you’ll need to pay for serious repairs during this time. As such, the servicing included in your deal will only save you a couple hundred pounds over the contract term.

Rates from 8.9% APR. Representative APR 19.9%

The main attraction of car finance with insurance deals is that you don’t have to worry about paying for insurance, which can be incredibly expensive, especially for a young driver. However, saying that these deals offer free car insurance is slightly misleading.

While it might look like you’re getting a brand-new car on finance with free insurance, you’ll be paying for that premium somewhere, often on the car’s purchase price.

For example

18-year-old Tommy decides to buy a new car with ‘free’ insurance.

He finds the following deal for a Peugeot 108:

Tommy has £900 to put down as a deposit. The remaining payments will be £400 monthly, including his insurance, warranty, tax, and services for three years.

(Note: many deals only include insurance cover for one year!)

Is this deal worth the money?

Taking out a PCP deal on the same car would cost Tommy approx—£ 185 per month. Tommy can then shop around for a quote for the cheapest insurance premium available. By adding his parent as a named driver, he can get insurance of £1300 per year – £108 per month.

This brings his total new car payment to £293.

To save money through the new car finance with free insurance deal, he would need to spend approx—£ 1284 on servicing and road tax. In reality, he doesn’t have to pay any road tax on his 108, an MOT won’t be due for three years, and the average service will cost Tommy £100-150 per year.

Getting car finance and insurance separately could save Tommy over £1000 a year.

If you’re determined to get a new car, money isn’t an issue, and you want to get on the road as soon as possible, an inclusive car insurance deal might be worthwhile.

However, be aware that you are paying for convenience. If you were to look elsewhere, you could save money.

Car finance, including insurance, might also be helpful to young drivers who are only offered black box insurance deals – and their premiums are sky-high as is. However, remember that you must still be vetted when applying for a car with an insurance deal like Just Add Fuel.

It’s not merely paying and getting the insurance. You might be rejected or even charged a higher premium.

Rates from 8.9% APR. Representative APR 19.9%

Each insurance company has different eligibility conditions, and with this type of deal, you’re typically stuck with one choice – you can’t shop around.

Also, your insurance acceptance will depend entirely on your postcode, job, and driving history. You might be declined for insurance and need to go elsewhere to find the cheapest car insurance for young drivers with no black box.

Below is a typical list of the insurance restrictions of current providers that offer car finance with insurance:

Drivers from age 21 to a maximum age of 75

• You’ll need black box insurance with less than two years full driving licence.
• You’ll also need black box insurance if you have less than two years of No Claims Bonus.
• A good credit score is usually required to qualify for a PCP deal.

Drivers aged between 18 – 20

• Black box insurance only
• Prices will vary according to age, postcode, and annual mileage. (Hmmm, so much for free insurance.)
• There is also a limit on the number of driving convictions (penalty points on your driving licence) you can have and the number of times you have made a claim.
• All drivers must meet the eligibility criteria; there are likely more than we know.
• You’re unlikely to meet the credit requirements needed for PCP car finance.
• You may need to apply for joint or guarantor car finance to qualify.

If you decide to buy a new car with a free insurance deal, you’ll almost certainly need to have a black box fitted to your vehicle.

A black box is a form of telematics that tracks how safely you drive. It does have benefits and can encourage young drivers to make smarter driving decisions while making their insurance much cheaper.

However, many freedom-hungry young drivers don’t want a black box monitoring their driving. When searching for your insurance deal, you’ll be able to find providers that don’t require a black box. The premium may be higher, but at least you have the choice.