­­­­­Do you need insurance before buying a used car?

If you're shopping for a used car, you're smart about your spending. After all, pre-owned vehicles are less expensive than new ones. Plus, your used car won't lose value the moment you drive it off the lot as a brand new car would.

But there's a catch -- a used car may be cheaper, but the used car insurance cost may not be. Fortunately, a used car insurance calculator can help you compare rates so you don't buy a car with a sky-high premium.

Do you need insurance to buy a used car?

If you're shopping for a used vehicle, a common question you might have is, "How does insurance work when buying a used car?" The answer is, insuring a used car works just like insuring a new car.

All states, except for New Hampshire and Virginia, require you to have car insurance, regardless of whether your car is new or used. Even in New Hampshire and Virginia, you'll be financially liable if you're involved in an accident.

Car repairs are expensive. If you haven't gotten a quote lately on how much it costs to replace or repair a bumper, you may be in for some sticker shock. Having to pay out-of-pocket in case of an accident may cost you far more than the annual used car insurance premium.

Luckily, buying used car insurance is a quick and simple process. But before you buy that pre-owned model you have your eye on, you might wonder, "what kind of insurance should I get for a used car?" It's important to know what kind of car insurance coverage you need, plus how much it's going to cost you and when to buy car insurance for a used car.

Compare insurance rates for used cars

Car insurance rates are personalized to each driver based on different factors, like location, credit score and claim history. In addition, the year, make and model of your vehicle will determine how much you pay for coverage.

If you're in the market for a used car, it's a good idea to shop for car insurance as you search for your vehicle. You don't want to purchase a vehicle only to learn you can't afford the car insurance premium. Once you've settled on a few contenders, you should compare car insurance rates to see what the cost of car insurance coverage is so you can account for it in your budget.

To give you an idea of what you might pay for coverage, we've included a variety of used car insurance rates by the model in the table below.

These rates reflect a full coverage policy with 100/300/50 in personal liability coverage and a $500 deductible for collision and comprehensive insurance. Even if the specific car you're considering isn't listed, this data should give you a ballpark range for your rate based on the vehicle's year and make:

As you can see, the make, model and year of your vehicle will have a big impact on the used car insurance cost.

For example, a 2019 Mercedes Maybach S650 retails for around $157,000 according to KBB.com and has a steep average insurance premium of $4,110. On the other hand, the average cost of car insurance for a 2007 Dodge Caravan SE, with a retail price of less than $4,000, will cost just $937 to insure with a full coverage policy.

Keep in mind that if your car has aftermarket parts, like custom rims or an upgraded stereo system, it's possible that the used car insurance cost could be even higher. Typically, used cars that come with all the bells and whistles are more expensive to insure, because those things are often expensive to repair or replace in the event of a claim.

Used car insurance calculator

To find average rates for over 3,500 used car models from 2006 to 2020, use our handy used car insurance calculator.

Choose the year of the car, your state, plus the make and model of the vehicle you are thinking of buying to find out how much, on average, you can expect to pay for auto insurance coverage. On the results page, you can add more cars to compare to determine the used car insurance cost for other vehicles you have on your shortlist.

Full coverage is recommended for vehicles 2011 or newer, so only full coverage (comprehensive and collision plus liability) rates are shown for these years. If you choose 2010 or older as the year, you will see rates for both full coverage and liability only on the vehicle. Remember, if you carry liability only, your vehicle isn't covered by your car insurance policy in any way if it is damaged.

Once you have made your final choice, or if you're deadlocked between a couple of vehicles, it's time to get personalized car insurance quotes by providing the vehicle identification number, or the make and model, to insurance companies. That way, you'll know the exact amount you will need to budget for your car insurance portion of your monthly vehicle expenses.

While our used car insurance calculator is a great tool to help you research car insurance rates, getting quotes from individual insurance carriers is key. It allows you to see your estimated rate that reflects your annual mileage, discounts and deductibles. You'll also have the opportunity to add endorsements, or optional policies, which will cause your premium to increase.

How much used car insurance do you need?

As mentioned, your state has minimum liability insurance requirements. You may see the minimum coverage referred to as a set of numbers, such as 15/40/25 liability insurance.

It means you must have coverage that includes $15,000 per person in bodily injury coverage, $40,000 per accident in bodily injury coverage, and $25,000 in property damage limits.

If you can't find your state's insurance requirements, don't worry. Most car insurance providers will know what you need when you enter your state or ZIP code for a quote.

Here's what liability insurance covers in more detail:

• Per-person bodily injury: Covers medical expenses and lost wages of people you injured with your car, as well as your legal fees. It includes pedestrians, the occupants of other vehicles and any individuals in your car you're not related to. The amount specified is the maximum per person.
• Per accident bodily injury limit: Liability insurance sets a maximum amount your insurer will pay out in bodily injury claims per accident. In a 15/40/25 policy, the "40" figure limits medical bills and injury claims to a total of $40,000 for all injured parties. You'll be responsible for anything over the limit.
• Property damage: Covers the cost of repairs or replacement of property you damaged with your vehicle. It can include other vehicles, fences, or buildings.

Although your state has minimum requirements, it's up to you to decide if the coverage is enough. You may want to buy a higher amount of coverage to protect yourself from out-of-pocket costs. Here's why:

• You rear-end a vehicle.
• Three passengers are injured.
• They each need X-rays and medical care, costing $15,000 each.
• The vehicle you rear-ended needs $7,500 in repairs.
• You also collided with a wall to avoid the accident, which needs another $5,000 in repairs.
• In a 15/40/25 policy, $15,000 per person in medical bills is within the limits of your policy of $15,000 per person. But -- three parties were injured for a total of $45,000. That's $5,000 over the $40,000 your policy will cover. You'll be personally responsible for the extra $5,000 yourself.
• As for the property damage to the wall and vehicle of $12,500, it's covered as part of the $25,000 in property damage limits.

Keep in mind that liability insurance will help pay for any injuries and damages you caused to others, their vehicles and property if you're responsible for the accident, but it won't cover you or your car.

Depending on your used vehicle's value, you may want to add additional coverage to protect your car. Comprehensive insurance and collision coverage are two ways you can protect yourself -- and your vehicle. Consider them as used car repair insurance for certain scenarios.

Comprehensive vs. collision insurance on a used car

Comprehensive insurance pays for damage to your car due to flooding, fire, vandalism and hail, and pays out the actual cash value of your car if it's stolen. Collision insurance covers damage to your car from accidents when you hit, or are hit, by another vehicle or object.

Comprehensive and collision insurance are often purchased together to expand on your protections. They're not mandatory unless you plan on financing your vehicle with an auto loan. Are they worth the extra expense? If your car is less than 10 years old, or worth more than $3,000, it's wise to get these optional coverages.

How to insure a used car when you already have insurance?

If you already have car insurance, insuring a new-to-you used car is pretty simple. You'll need to contact the company you're covered with and let them know you'd like to insure a different vehicle. The representative will ask you about the vehicle to tell you if there's a price difference.

You will also be given the option to choose your coverage for the used vehicle. For example, if the vehicle is financed, you'll want to purchase a full coverage policy, even if your existing vehicle is only insured with minimum coverage. You can add endorsements, choose your coverage limits and set your deductibles.

When you insure the used car, you should keep your existing vehicle on the policy, assuming you are holding onto it. If you're selling the vehicle, an agent can help you remove the car from the policy. One thing to consider is that many insurance companies offer a discount if you insure two or more cars on your policy, whether they are new or used.

How does insurance work when you buy a used car and you don't have coverage?

If you intend to purchase a used car and you don't already have car insurance, the process is a little longer. Before you even buy the car, it's important to shop around and compare providers, then get a few insurance quotes to make sure you're able to afford the insurance premium. Remember that used car insurance rates by model can vary significantly.

Once you know which used cars you're interested in and which insurance company you're going to use, you have a few options. If you know exactly which vehicle you're going to buy, and you have the VIN number, you can purchase a policy at home before you visit the dealership. You can also purchase a policy at the dealership if you're still deciding on a specific vehicle.

Most major insurance companies make it easy to purchase a policy online, which is the most common way to purchase coverage. Here are the steps to follow if you don't already have car insurance:

• Provide your vehicle information: When you apply for coverage, you'll need to input the car's VIN number, make, model, year, package options and mileage. Besides your vehicle's information, you will also need to enter personal details about where you live, whether the car will be parked on the street or in a garage, and the number of miles you anticipate driving per year.
• Choose your coverages: Select any additional coverage besides liability insurance. You may want to add roadside assistance coverage, collision, or comprehensive coverage.
• Decide on a deductible: The deductible is the amount you'd pay out-of-pocket if you were in a car accident before the insurance kicks in. A typical car insurance deductible is $500 or $1,000. The higher the deductible, the cheaper your used cars insurance will be. If you bump up your deductible to save on your monthly premium, make sure you can afford to pay the higher deductible if you're in an accident.
• Purchase the policy: Once you complete the application and see your final rate, you can purchase a policy through the online checkout. Once you submit the insurance binder and proof of coverage to the dealership, you can then safely drive away with your car.

How long do you have to get insurance after buying a used car?

Are you asking yourself, "do I need insurance before I buy a used car?" The timing gets tricky. You'll need to have some type of car insurance when you purchase a used car.

If you have existing coverage, your policy may offer a grace period that will automatically cover the used car until you can officially add it to the policy. If you don't already have insurance, however, most car dealerships will require you to get a policy before the transaction can take place. They need to verify that your policy is current and that it meets the state's minimum coverage requirements.

Can I drive a used car home without insurance?

If you're buying a used car from a dealer, you'll need to have insurance before you're allowed to drive away. Private sellers may not have that requirement, but driving an uninsured vehicle could land you in hot water. There are a couple of options.

If it's your first car, doing your homework ahead of time by having a saved policy quote could come in handy. This is where a used car insurance calculator comes in handy.

Most online insurers will provide instant coverage once you pay for the policy. All you'd need to do is log back in to access your quote, enter the missing details such as VIN and price paid for the car, pay your premium, show the dealer, and you'd be ready to go.

Do you need proof of insurance to buy a used car?

Every driver will need to show valid proof of insurance in order to buy a used car. That means you must have an active policy at the time of the vehicle purchase. You won't be able to drive the vehicle home and purchase a policy later that day. It's a liability for a dealer to let you drive away in a vehicle that is uninsured, not to mention, it's against the law.

If you don't already have a car insurance policy, you'll need to purchase coverage for the vehicle before you visit the dealership, or at the dealership before the transaction can take place. If you already have coverage, make sure to bring your proof of insurance when you purchase the vehicle.

Even if you have an active policy but can't provide acceptable proof, you'll likely get turned away until you have the right documents.

Is there a grace period for car insurance when buying a used car?

The bottom line is, you can't drive a car without insurance. If you get pulled over, you'll be in legal trouble. There may be a used car insurance grace period. If you already own a vehicle, you could contact the insurance provider ahead of time to let them know you'll be purchasing a car shortly.

Every state has different rules, but most will allow you to apply an existing vehicle policy towards your newly-purchased car for a grace period between seven to 30 days.

Contact your auto insurer as soon as you're the owner of the vehicle to make changes to your current policy. Don't assume the car or extra coverages will be added automatically -- it's your responsibility to notify your insurer about the car and clarify what coverages you want.

You'll have to register the vehicle in the state you live in within 15 to 45 days, depending on your state, but won't be able to without the vehicle being insured.

Tips on how to buy coverage to save money

There are a few things you can do to buy coverage and save money on car insurance for used car models. They include:

• Look for discounts: Most car insurers have a variety of discounts based on your work or lifestyle, such as student, hybrid vehicle, low-mileage, safe driver and military service discounts.
• Prepay your premium: You could save money if you pay six months or one year in advance.
• Sign up for autopay: If you link a bank account number and sign up for electronic statements and automatic payments, most car insurers will throw in a small discount.
• Bundle your policies: Loyalty comes with perks. If you already have other coverages such as homeowners or renters insurance with a particular insurer, you may receive a discount on all your policies when you sign up for used car insurance.
• Pick a higher deductible: The deductible is the amount of money you'd have to pay out of pocket in case of an accident before your insurance starts paying. You could save money on your monthly premiums if your deductible is higher. But be sure you can afford the amount you raise your deductible to. You could take the savings on your monthly premiums and put it away in a savings account each month towards the amount of the deductible. That way, you've got the money saved up for a higher deductible if you're involved in an accident.

What's happening in the used car market?

If you've been keeping a pulse on the used car marketplace, you probably know that demand is high and inventory is low. It's important to know what factors are driving the current market because they could impact your shopping journey.

"The microchip shortage that is affecting new vehicle production has gotten to the point where inventory is so low new car shoppers are resorting to buying used cars," says Ivan Drury, senior manager of insights at Edmunds.

"This also has rental car agencies buying used vehicles to maintain daily demand, and holding onto their fleet of vehicles for longer than normal, which is reducing the supply of used cars for sale."

Drury adds, "There is also increased additional demand for personal transportation of all kinds due to concerns over personal safety when it comes to public transport or ridesharing, especially as the economy is opened and some workers might be going back to in-person office settings."

So, when is the used car market expected to stabilize?

According to Nick Woolard, lead industry analyst at TrueCar, "It's hard to say how long prices will remain elevated at the current levels. New vehicle production is expected to begin recovering toward the end of this year but it will take some time for the overall car market to adjust to the new equilibrium."

Other industry experts echo Woolard's statement. "I honestly don't see an end to the current market demand," says Zoriy Birenboym, CEO of eAutoLease.com. "In addition to the chip shortage, government sanctions are involved and we're simultaneously seeing a big push towards electric vehicles. It's a perfect storm of factors that may keep the market high for quite some time."

Should you buy a used car while the market is high?

Purchasing a used car is much more difficult when prices are historically high and there are fewer vehicles for sale. However, that doesn't necessarily mean you should put your used car search on hold. It just means that you need to be extra diligent while shopping to find a good deal.

"If you're a new car shopper looking at used cars, really focus on those Certified Pre-Owned (CPO) vehicles as they'll provide the most comparable amenities, warranty and possibly incentives," says Drury. "When it comes to age and mileage, buy what is most comfortable to you or get quotes for an extended warranty either through a third party or from the dealer."

Drury notes that SUVs and pickups are the most sought-after vehicles right now, whether you're buying new or used. Choosing a sedan can help you save money on the vehicle itself, and also on gas.

If you're looking to get rid of your current vehicle, now is a great time to trade it in. "Trade-in values have increased just as sharply as used values, so you don't want to leave any money on the table," says Drury.

Rather than purchasing a brand new car, many drivers are taking the lease route. Leasing allows you to pay less and drive a newer vehicle with a short-term commitment, so you aren't stuck paying more for a vehicle that you don't love.

Frequently asked questions on used car insurance