Is It Smart To Purchase Comprehensive Insurance For A Car I Want To Sell Via Hire Purchase?

Dear Insurance Info,

I bought a car for hire purchase. I have found a driver to drive the car and I already paid for the 3rd party liability insurance. However, since the driver would be responsible for maintenance and repairs, I was wondering if it is smart to purchase comprehensive insurance for a car I want to sell via hire purchase. Wouldn’t that be an unnecessary expense that cuts into my profit?

Regards,

Emma

Dear Emma,

Thank you for taking out the time to write. First let me explain what hire purchase is for my readers. Hire purchase, also known as installment plan in the US, is an arrangement a buying expensive goods (car in this case), where the buyer makes payment for the value of the car plus interest over a period of time. For instance, if I buy a car for N2,000,000 and I sell it via hire purchase for N3,000,000. The buyer would have to pay me back weekly or monthly over 2 to 3 years. Upon completion of the payment, the vehicle becomes the property of the buyer.

Now to answer your question. Is it smart to purchase comprehensive car insurance for a car you want to sell via hire purchase? My father’s favorite quote was “penny wise, pound foolish”. It is used in situation where people go about saving pennies which end up costing them pounds. Don’t forget that until the vehicle is paid off in 2 or 3 years, the vehicle still belongs to you. Which means that if it is stolen or lost to fire for instance, you would have lost your investment. You may want to go after the driver, but have you even been to court in Nigeria? You could be going to court for years!

Recommended: Why You Should Get Excess Buy Back

I would advise you to please ensure you fully insure the vehicle. This would save you a lot of money in the event that you lose the vehicle. Moreover, insurance premium are not too steep so it shouldn’t eat much into your profit margin.

Please be wary of the people that will tell you that it is best to put a car tracker on the vehicle. I have already rebutted that in an article I wrote a while back; 5 reasons why car insurance is better than car tracker.

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