Some Lenders Require You To Keep A $500 Deductible or Less.

cccs car for blogWHY DO SOME LENDERS REQUIRE YOU TO KEEP A $500 DEDUCTIBLE OR LESS WHEN FINANCING A VEHICLE?

When you finance a vehicle, it does not belong to you, it belongs to the lender until it is paid in full. Therefore the lender, bank, credit union, and so on, need to make sure that this vehicle is going to be fixed if in an accident. If you have a $1000 deductible or higher, it is a concern to the lender that you may not have those funds available if an accident were to occur. If you do not have the money for your deductible and the car you are financing does not get fixed, there is a good chance you may stop making the car payments. Your vehicle is the collateral and a damaged vehicle would not be a very good asset to the finance company should they repossess it.

As a consumer, we know that usually the higher deductible, the lower the premium. Usually a higher deductable isn’t a great deal of savings, but every dollar counts. We are hoping an accident does not occur and that we never have to pay our deductible, but we should have that money saved back just in case.

Not every lender requires this and it is at the bank’s discretion if you decide you do not want to have to change to a $500 deductible. This is also a question you want to ask the lending company before you apply for a vehicle loan. This information may not be told to you until you are signing the final documents. It is up to you whether it matters that you keep a $500 deductible during the duration of the loan or if you are firm on a higher deductible.

Written by Beth Mincks, Consumer Credit Counseling Service.