What can a car finance company do if you no longer have insurance?

Question

I bought a 2004 vehicle (from CarMax) about 3 months ago. The finance company (Capital One Auto Finance) would only approve me if I started an insurance policy before I left the dealership. I did, but have since let that policy go, for different reasons. The finance company is now sending me letters to give them updated insurance info, or they "may take appropriate action to protect its interest". What exactly does that mean??? All my payments have been on time, actually 2 weeks or more early. So, what can they do if I continue not to have insurance, since my payments on the vehicle are all in order? Since guessing or assuming won't help me, sources for your answers would be helpful. Thanks.

Answer 1

They can and will ad insurance to the vehicle at your expense. Which means your payment goes up ALOT. It can be double your car car payment at times! If you don't pay that then they can and WILL repo the car. Why not just shop around for cheap full coverage insurance?

Answer 2

It means they will put "forced coverage" on your car. This is going to be way more expensive than the insurance policy you purchased through a local insurance company. If you don't pay for the forced coverage -- they can sue you -- just like they can if you don't pay for the car.

When your policy canceled, your insurance company sent a letter to your finance company letting them know the policy is no longer in force. It sounds like the finance company is giving you a chance to tell them where you got coverage before they pop you with the forced coverage.

Want to know what other action they can take?  Read the promissory note you signed when you purchased the car. That contract outlines that you are required to maintain car insurance and should tell you what they can do if you don't.

One more thing to consider -- the forced coverage the finance company puts on you -- only protects their interest in the car -- it does NOT pay you for the equity in your car (if it is a total loss) and it does NOT pay for any injury/damage that you cause to other people. Therefore, if you cause a wreck -- you will be held personally responsible for any injuries and damages you causes.

I highly recommend you get insurance back on the car.

Answer 3

What the others have mentioned is correct. You do NOT want force placed coverage. It is extremely expensive and the "coverage" is nothing like what could be provided though a company such as Allstate, Geico, Progressive and others.

Let me add this: it is illegal in almost all states to operate an uninsured motor vehicle. You can face heavy fines, license suspension or revocation, impoundment of the vehicle that possibly leads to loss of the vehicle.

Tell me...is not having insurance worth all that? If you don't intend to obtain insurance, surrender the plates and registration before the police take them.

EMT

Answer 4

They could add a very expensive insurance to your loan to cover the car in the event it is damaged in an accident.

This insurance is NOT a valid replacement for auto insurance required by law to legally operate a vehicle on the road.

--or--

They could start repo actions to take possession of the vehicle since you failed to keep the insurance active on the car.

Answer 5

If you do not provide valid insurance to them in the time requested, they will force place comprehensive & collision coverage at a rate probably higher than what you were paying for insurance including liability.  This coverage is only good for the bank & for the balance remaining on your loan & will not pay you anything.  They will add this to your monthly installments.  If you do not pay this forced placed coverage, they will repossess your vehicle.

I hope you are not driving this car without insurance, it will be VERY expensive for you if you are caught driving without insurance and/or have an accident without insurance.  Even if they force place the coverage, you still will NOT have liability which you need to have to drive.

Answer 6

Driving without insurance is a bigger problem than with the finance company. They can repo your car for failing to live up to the contract you signed, regardless of your making payments on time. Your credit will be ruined and you'll probably owe them a sum of money, especially if you are upside down on your loan.

You have to understand the finance company's position. Without insurance, you could wreck the car and simply tell them to come get it. They get a pile of junk and have to work to sue you for what you owe.

But you risk financial disaster if you have an accident, especially if you are at fault. If you cause someone to be hurt or killed, your financial life will be ruined because you will be sued for everything you now have, plus everything you'll have in the future. Driving without insurance is just plain stupid.

Good luck.