Are leased vehicles more expensive to insure?
Auto leasing has become a popular way to purchase new vehicles. Drivers can benefit from lower monthly payments, lower down payment requirements, extended warranties and more. However alongside the benefits of leasing does come higher auto insurance requirements.
How much is car insurance for a leased vehicle?
This depends on the type of vehicle you lease and while the actual cost of car insurance for a leased vehicle is not any greater than a vehicle financed or owned outright the car leasing company will demand higher auto insurance coverage before executing a lease.
“It is this required auto insurance coverage by car leasing companies which makes auto insurance more expensive for leased cars – and not just higher rates based on how the vehicle is financed”
All states have minimum car insurance requirements for typical vehicles but these requirements do not factor in how the car is financed. State car insurance laws are simply created to form a minimum level of insurance so all drivers have some protection in the event of an accident regardless of who was at fault. These minimum requirements are often calculated based on the average liability cost in a car accident or the average cost of a vehicle but never incorporate punitive damages, medical care, loss of wages and many other factors. As a rule of thumb you should always buy much more car insurance than state minimum requirements and understand these requirements often only provide coverage to damages for other people’s property and/or injuries. Almost all drivers who have just a bare minimum policy to meet state laws are extremely underinsured and risking their financial well-being every time they operate a vehicle.
When leasing a car however the leasing company retains the title to the vehicle during the term of the lease so they have every right to exercise control of how much car insurance you need. There is not a single leasing company who wants you to only have bare minimum coverage in a car accident as they also have potential exposure in a car accident, so if they decide to extend you the privilege of leasing a vehicle you can bet they will require sufficient auto insurance in place.
How much car insurance do I need for a leased vehicle?
How much car insurance is required when leasing a vehicle will depend on a number of things but for the most part you will need at least 100/300/100 in liability insurance and comprehensive and collision coverage. Depending on the details of your lease you may also be required to purchase GAP insurance to protect the principal balance of your lease in the event of a total loss accident. Compare this to minimum state requirements such as Florida where drivers only need $10,000 in liability insurance to drive legally and its easy to see you need much more car insurance for leasing a vehicle. The good news however is that many drivers already carry this level of coverage and almost all average car insurance rates published are based on groups of drivers with this type of auto insurance coverage. Auto insurance for a leased car is certainly a more expensive requirement than if you own a vehicle outright or financed a car however its relatively the same cost as most people pay anyway – you simply will not have a choice to lower your auto insurance policy coverage if times get tough without risking breaking the terms of the lease.
Should I lease or buy a car?
Whenever you are considering buying or leasing a new car its important to speak with your tax professional, consider your personal reasons for choosing and always speak with an auto insurance company about the cost of insuring a leased vehicle. For some drivers the difference in car insurance cost may not be much at all but for others the increased cost of car insurance can sometimes be greater than expected.
Start a car insurance comparison search today and learn about the cost of car insurance for a leased car, compare car insurance quotes and find out how much your car insurance will cost before walking into a dealership.