Being a parent is a lot of work, and we always want the best for our children. It’s only natural to want to save them money so they can get a leg up and start a successful professional life.

In addition, when our children have just received their driver’s licence, we have a quick thought about their car insurance; we may think that if we buy a vehicle in our name and list our child as the main driver of that vehicle on our own car insurance policy, it will save them money. This idea isn’t completely wrong, but it isn’t ideal. Here’s why:

Above all, we want to keep our children safe, so we tend to gravitate toward newer vehicles. However, car brands have been working hard for many years to improve the safety of their models.

Today, you can easily buy a ten-year-old vehicle that is very safe. It is important to know that not having to finance means less obligation for insurance guarantees and, consequently, a more flexible premium. This idea is even more appealing when you consider that it costs more to insure a young driver with collision coverage.

Of course, for an insurer, the risk is that a young driver with little driving experience is more likely to be involved in an accident than an experienced person. This is where having a non-financed vehicle makes sense, because the creditor who owns the loan will require that the vehicle be fully insured.

The important thing to remember is that a vehicle without financing offers freedom of choice in terms of possible coverage and thus more flexibility in the resulting premium. But is there a real difference between the premium you will pay on your own insurance policy and the one your child would pay? The answer to this question is vague, since the premium will depend on each individual’s record, but overall, the difference is often not that much!

We live in a society where credit rating is king, whether it is to be eligible for a loan or to get a better insurance premium. So, helping your child buy a vehicle in their name (without financing) will allow them to take out an insurance policy in their own name, which will help them develop a good credit rating more quickly. In addition, since the child will have insurance liabilities more rapidly, they will have access to better premiums more rapidly as well.

Easy access to financing to buy or lease a new vehicle is a double-edged sword.

In the last few years, the automotive market has made it much easier to buy a car with second and third chance financing. Even though they are not recommended (see our article on this subject), these options exist to make it easier to buy.

This way, a person in their early twenties who has just started working can more easily obtain a recent vehicle. A young driver who already has some insurance history will have a much more attractive premium than someone who has always been on their parents’ insurance policy.

Finally, you should know that actuaries are busy calculating statistics on every vehicle model. When we look at these statistics, we see that certain vehicles and types of vehicles stand out from the rest in terms of their claims rate. Depending on the choice of vehicle itself, or the type of user it attracts, an insurance premium can vary significantly.

Here is a summary of the ideal situation to benefit a young driver:

  • Even if it’s a first vehicle, register it in the young driver’s name.
  • Choose a low-priced vehicle and buy it without financing to avoid the need for additional collision coverage.
  • Add comprehensive coverage depending on their needs.
  • Call your insurance broker to have the potential insurance premium evaluated before finalizing the purchase of the vehicle.
  • Buy a vehicle that fits your budget and purchase insurance you can afford to avoid cancellation for non-payment at all costs.