Does having a lien on your car affect your insurance?
Will my car insurance be higher if my car has a lien on it? I’m considering buying a new car, but I can’t afford to buy one outright. Will this affect the cost of my insurance?
Liz Jenson · Answered on Jan 26, 2023
Reviewed by Shannon Martin, Licensed Insurance Agent.
Unfortunately, having a lien on your car can affect your car insurance. However, the scope of this effect will be determined by your lienholder.
Drivers who buy cars with a lien will often be required to purchase additional insurance by the lienholder on top of the state minimum. Lienholders will often require coverage that protects the vehicle in order to keep the car safe. Remember, until you pay off your lien, your lienholder has a legal and financial interest in your car. As such, they want it to be protected—and have the power to enforce it however they see fit.
Luckily, there are still a few ways to keep your rates at bay while having a lien on your car:
- Keep a clean driving record
- Avoid reckless driving and abrupt braking to improve fuel economy
- Follow a basic car maintenance schedule
Once you’ve paid off the lien, you may drop some or all of the extra coverage required by your lienholder. This means that, on average, driving a car with a lien will cost you more in insurance than driving a car without a lien. However, it also means that you can remove the lien from your title and lower your insurance costs once you pay off your car!
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