Do I have to buy insurance from the car dealership's agent?

You probably shouldn't buy insurance at the car dealership, but not for the reason you think.

Is there anything wrong with buying car insurance from the insurance agent at the dealership?

No, there's nothing inherently wrong with buying insurance from the agent the dealer has a relationship with. As long as they are a licensed insurance agent (you can ask), they'll be able to set you up with a policy before you drive your new car off the lot. However, waiting until you're at the dealership to buy a policy is not a great idea because you probably pay more than you should.

Why shouldn't I buy insurance for my new car at the dealership?

Insurance companies charge people they think are responsible less for car insurance. One measure of responsibility they use is whether you get a quote for insurance before you actually need it, instead of waiting until the last moment. This is usually called an "advanced shopping discount" or an "early shopper discount."

If you wait to get an insurance quote until you're ready to buy your car and head home, you almost certainly won't be eligible for an early shopper discount.

What you should do instead is get some quotes from an insurance agent or directly from a few insurance companies a week or so in advance of buying your car. They'll set up a quote for you, and usually, you'll lock your discount in. Even if you don't know exactly which car you'll buy, they can give you the insurance prices for a few different cars you may be considering.

Once you know which car you'll buy, you should call to buy your insurance and just set the start date for the day you pick up the car. You won't pay anything for the time between when you buy your insurance and the date the insurance starts. And you may lock in another, related discount some companies offer - an early purchase discount.

How big is an early shopper discount for car insurance?

Advanced shopping discounts can be in the 10% range if you've gotten your quote seven or more days in advance of your policy starting. The exact amount depends on which insurance company you buy from and the state you live in. Shopping early could save you $60-$300 when you buy your policy.

If I buy car insurance from the dealership's agent, can I switch easily later?

Yes, you can cancel your policy at any time, or wait for the renewal to switch. Some insurance carriers do charge a cancellation fee, often $25 or $50. The fee should be listed in your policy paperwork, or you can call your insurance company to ask. Paying the fee may be worth it, though, if you find a significantly more affordable policy from another carrier. Just make sure the coverages, limits, and deductibles are really the same, and that you don't leave any gap in coverage between the old policy and the new policy.

If you'd like more information, read our guide to buying car insurance for first-time car buyers.