Lacie Glover, Author at Financial Avenue

Amid a pandemic, it’s no time to pay for things you don’t need, and that includes car insurance for an idle vehicle.

You might be thinking about how to ditch your auto policy if you own a car you never drive — and whether it makes more sense to cancel the policy or suspend it temporarily.

Putting your car insurance on hold can be a good way to save money if you have an out-of-use vehicle. But it’s not as easy as halting your Netflix subscription. In addition, your options may be limited depending on why you’re taking a hiatus from driving the vehicle or whether you have a car loan. If you still use the car at all, you’ll want to keep it insured to stay legal and financially protected.

If you’re experiencing financial hardship because you lost work due to the coronavirus, insurers and other financial institutions are likely to be lenient.

Where it concerns your auto insurance, there are five main options to explore:

Request a coronavirus-related payment delay or plan.
Suspend your coverage.
Cancel your policy.
Reduce your coverage.
Remove yourself from a policy.

Coronavirus-related payment delays or plans

Many auto and home insurers are willing to work with customers financially affected by the coronavirus. Depending on your auto insurer, payment assistance can take many forms:

Pausing cancellations due to nonpayment of premiums.
Special payment plans, including delayed payments, for coronavirus-related financial hardship.
Custom payment options on a case-by-case basis.

No matter who provides your auto coverage, the best thing to do is alert the company before your bills are late — here is a list of financial institutions’ contact information you may need.

Suspending your auto insurance coverage

Pros	Cons
You won’t pay for insurance while your car is out of use You likely won’t have a coverage lapse, something that could increase your future rates	The vehicle won’t be covered if anyone wants to drive it The vehicle won’t have insurance against nondriving problems like fire, animal damage, vandalism or theft Drivers with car loans typically are ineligible

Suspending coverage essentially pauses your policy but doesn’t cancel it. That way, you can probably prevent your hiatus from being called an insurance lapse, which would likely result in higher rates later. Confirm this with your insurer beforehand.

Companies don’t always let customers suspend coverage, or might allow it only in certain situations. If you anticipate being out of work due to coronavirus for longer than your insurer’s available grace period or payment plan terms, the company may suggest this option. However, pausing coverage will leave you uninsured while you’re looking for work.

Only use this option if you have alternate transportation available. You may need to file an “affidavit of non-use” from your state’s department of motor vehicles to halt state-required auto coverage. This document officially lets the state know that you won’t operate your car for a given time.

Suspending your policy probably isn’t an option if you have a car loan. Lenders generally require that you maintain coverage for problems such as theft and vandalism.

Canceling your policy

Pros	Cons
You won’t pay for insurance while your car is out of use You can cancel your car insurance regardless of your insurer	The vehicle won’t be covered if anyone wants to drive it The vehicle won’t have insurance against nondriving problems like fire, animal damage, vandalism or theft You’ll have a coverage lapse, which could increase your future rates Drivers with car loans typically are ineligible

You could consider canceling your auto coverage and getting a new policy when you’re ready to drive the car again. However, like suspension, cancellation probably won’t work if you have a car loan. Your lender likely will want at least some insurance on the vehicle.

Contact your DMV if you’re thinking about canceling. Similar to a suspension, your state may require you to submit an affidavit of non-use to officially take the car off the road and drop state-required insurance.

The biggest downside to canceling is that it creates a lapse in your insurance history. Continuously insured customers generally get better rates than drivers who have coverage gaps, who are typically labeled “high-risk drivers.”

Reducing your coverage

Pros	Cons
You won’t pay for unneeded insurance while your car is out of use You won’t have a coverage lapse, something that could increase your future rates If you keep comprehensive, your car will be covered for nondriving problems like fire, animal damage, vandalism and theft	The vehicle might not be usable if anyone wants to drive, depending on how much you scale back coverage You’ll have to pay for the insurance you keep You’ll likely have to keep certain coverages if you have car loan

Cutting back coverage is a good alternative if you’re not eligible for suspension and don’t want to cancel your policy.

To start, you can reduce your auto insurance to the coverage required by your state. Almost every state requires liability insurance, and others mandate uninsured/underinsured motorist coverage, personal injury protection and/or medical payments coverage.

Consider keeping comprehensive insurance (or adding it) if you are storing the vehicle while you don’t drive it, in case it suffers damage while stored. Comprehensive pays to replace your car if it’s stolen, and it covers nondriving problems such as vandalism and damage from falling objects.

Ordinarily, you must buy comprehensive along with collision coverage, but your insurer may make an exception and let you keep a comprehensive-only policy, sometimes known as “car storage insurance,” if you’re storing your car long term. If you have a car loan, your lender may require you to keep both comprehensive and collision coverage.

If your insurer allows you to keep comprehensive and drop everything else, including liability insurance, contact your DMV. You may need to file an affidavit of non-use because your car would no longer have enough insurance for anyone to drive it legally.

Removing yourself from the policy

Pros	Cons
The vehicle will be covered for nondriving issues like fire, animal damage, vandalism and theft The vehicle will still have the insurance needed to drive it legally You likely won’t have a coverage lapse, something that could increase your future rates	You’ll have to pay for insurance while you’re away You’ll have to add yourself back on the policy once you’re home for at least 30 days

Instead of changing your coverage, you may be able to remove yourself from a family car insurance policy temporarily. This option is worth exploring if you’re going away but others in your household will be driving the car.

This option can save you money if you’re a riskier driver than the others on your policy because taking yourself off reduces the odds of a crash. However, if it won’t save you money, there’s little benefit to removing yourself, and it’s probably more convenient to stay on the policy. If you’re not going away and continue to live with other drivers insured on the policy, this may not be an option. Many companies require all drivers listed at the same address to be included on a policy, or else be specifically “excluded.”

Removing yourself from the policy is not the same as being an excluded driver. If you’re simply not listed on the policy, you can still drive the car. Excluded drivers aren’t supposed to drive the car, and may be required to prove they have other insurance in order to be excluded.

There’s no single insurance option that works best for everyone. If you decide to keep your coverage, a solid payment history should help you get competitive rates down the road.

The article How to Reduce Your Car Insurance Costs During Coronavirus Pandemic originally appeared on NerdWallet.

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Car owners with poor credit can pay hundreds — if not thousands — more to drive than those with good credit. This plays out in two important ways: higher rates on car loans and, in most states, higher insurance premiums. In fact, having bad credit can raise your insurance quote even higher than if you’d had an accident.

To see how much poor credit can cost car owners, NerdWallet looked at auto loan terms and insurance quotes for drivers in different credit tiers.

Credit and car loans

Drivers with blemished credit often choose a cheaper car than they could otherwise afford. However, they’ll still pay more to own it — especially if they finance the purchase. Good credit is generally considered 690 to 719, while bad credit is below 630. In a slightly different system, prime credit is 661 to 780 and subprime credit is 501 to 600.

For used car loans in the last quarter of 2017, prime credit buyers received an average rate of 5.48%, according to credit reporting agency Experian. The average rate was much higher, 16.27%, for subprime borrowers.

Say a buyer purchases a used car with a loan of $21,000 — just under the average amount financed on used car purchases, according to Edmunds. Using the average rates above, here’s about how much each borrower would pay on a 48-month loan:

Prime: $488 per month and $2,433 in total interest
Subprime: $598 per month and $7,706 in total interest

In this example, the cost of poor credit is $110 per month, and $5,273 over the life of the 48-month loan.

The trap of taking a longer loan

To get a lower monthly payment, buyers increasingly accept loans with longer terms — about 42 percent take out loans for six years or more, according to the Consumer Financial Protection Bureau.

While there’s merit in making sure bills fit your budget, this dramatically increases the cost of a car.

With the loan extended to 72 months, the total cost of poor credit becomes $8,335, or $116 per month over six years.

A different score for insurance

The credit scores lenders use to determine loan terms are not the same score auto insurers use to set your premium.

A credit-based insurance score is used to predict your likelihood of filing a claim in the next few years, says Lamont Boyd, insurance industry director of scores and analytics at FICO. Insurers can use this and other scoring models to help set rates in all states except California, Hawaii and Massachusetts, where the practice is banned.

NerdWallet looked at quotes in the rest of the country for drivers with clean records and either “good” or “poor” credit, as reported to the insurer. We averaged rates from 10 ZIP codes in each state and then ranked the difference in price by state.

We also compared quotes for drivers with good credit and one accident versus similar drivers with poor credit and no accidents, and found poor-credit quotes were often higher. In all but two states, drivers can find quotes at least $500 cheaper per year for good credit and one accident compared with poor credit and no accidents.

Insurance costs vary widely

In Michigan, home to some of the highest car insurance rates in the country, we found that someone with poor credit can pay an average of $464 more per month than someone with good credit and the same driving record. The next-highest average price increase was $185 per month in Kentucky. As in many states, in both Michigan and Kentucky average rates for poor credit more than doubled.

On the opposite end of this spectrum is North Carolina, where good drivers with poor credit pay, on average, $20 more per month for insurance than those with good credit. Iowa was the next cheapest for motorists with poor credit, at an average increased cost of $37 per month.

Avoid paying up

To get the best rate possible, before heading to a dealership, check your credit scores and get preapproved for an auto loan. You can still get financed on the spot, but “now you have this pretty strong negotiating chip to help you get an even better rate from the dealer,” says Delvin Davis, senior research analyst at the Center for Responsible Lending.

And even with splotchy credit, you could still save by shopping around for car insurance quotes. In New York, for example, we found a $1,219 (per year) difference between the lowest and second-lowest quotes for poor credit — and a $5,689 difference between the highest and lowest.

You can also improve both your credit and credit-based insurance score by:

Paying all your bills on time
Keeping credit card balances below 30% of the limit

This article was written by NerdWallet and was originally published by The Associated Press.

The article Good Driver, Bad Credit: What Makes Your Car Costs So High originally appeared on NerdWallet.

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