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There are current attractive incentives on new car purchase such as 48 months at zero interest and some advertised discount and perks in addition.

My question has to do with mandatory insurance on the vehicle- if it is used for part of the year and stored for part, with fire + theft (but no liability) insurance maintained on the vehicle, will that satisfy the terms of a typical finance contract?

Toyota is of interest at the moment but if there is a general answer that would be useful.

Are there any other potential gotchas with financing as opposed to a cash transaction?

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    You might be asking the wrong question here. You might want to ask yourself "Should I pay for a brand new car that I'm going to keep in storage?" – corsiKa Apr 30 '17 at 8:27
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    @corsiKa The car is needed to be there and reliable about 6 months out of the year. Does that change the new vs. good used equation? Not much I would say. – Spehro Pefhany Apr 30 '17 at 17:25
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    So what happens in one year when your new car is now "used"? Does it suddenly become unreliable, requiring you to buy another new are? Note that the "free interest" is baked into the price of the new car. Compare the prices for 2-3 year old used cars and see if that offer still sounds attractive to you. – D Stanley May 1 '17 at 13:29
  • @DStanley Yes, I've done that. They maintain their value rather well, unfortunately. – Spehro Pefhany May 1 '17 at 15:26
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Okay, definitive answer for this particular company (Toyota Finance) is (somewhat surprisingly, and glad I asked) it must be fully insured at all times, including liability, even if being stored.

I asked at a dealership and they answered "just fire and theft (of course)" but I ended up calling their finance department and the answer was the opposite. So there you go. Thanks for the answers (and for trying to talk me out of wasting money).

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Very generally speaking if you have a loan, in which something is used as collateral, the leader will likely require you to insure that collateral.

In your case that would be a car. Yes certainly a lender will require you to insure the vehicle that they finance (Toyota or otherwise). Of course, if you purchase a vehicle for cash (which is advisable anyway), then the insurance option is somewhat yours.

Some states may require that a certain amount of coverage is carried on a registered vehicle. However, you may be able to drop the collision, rental car, and other options from your policy saving you some money.

So you buy a new car for cash ($25K or so) and store the thing. What happens if the car suffers damage during storage? Are you willing to save a few dollars to have the loss of an asset? You will have to insure the thing in some way and I bet if you buy the proper policy the amount save will be very minimal.

Sure you could drop the road side assistance, rental car, and some other options, during your storage time but that probably will not amount to a lot of money.

  • In this province the difference between fire+theft insurance and adding liability insurance (so it can be driven) is around $100/month, so about $12,000 over a 10 year lifetime. So if I insure one at a time vs. two at a time there is that difference (at a minimum). Of course the car could be fully insured and I could void the insurance policy (say by using it as a getaway car for a crime ) and it wouldn't really be insured for the lender so I'm not sure logic works here. – Spehro Pefhany May 1 '17 at 12:25
  • Your math is incorrect. Assuming that you let it sit for 6 months, it will only be 6K over 10 years. You will suffer more in depreciation in the first two years. If you are really that concerned about money buy a car that is 8 years old or so, in the long run you will save a lot more money. Plus most insurance companies require liability to have fire and theft. – Pete B. May 1 '17 at 12:28
  • Yes, that's true, as the other one is fully paid for I can do what I like with it so it's only 50% but the math still doesn't work for me- the 'free money' is worth maybe $1,500 over 48months. The problem with an older used car is the hassles with repairs and rust- if I was in Arizona an 8-year old car would be a lot more attractive. I suppose I could try to negotiate $1500 more off the cash price- someone is paying the finance costs. – Spehro Pefhany May 1 '17 at 12:37

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