Is Auto Insurance Higher For A Leased Car?

Auto insurance for a leased car can cost mre because leased vehicles require higher coverage limits, which raise your auto insurance rates. Your driving record, credit history, and the kind of vehicle you're trying to lease will also contribute to your personal car insurance rates for a leased car. To find the cheapest auto insurance for leased cars, comparison shop online.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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Reviewed by Leslie Kasperowicz
Former Farmers Insurance CSR

UPDATED: Dec 30, 2020

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What You Should Know

  • Auto insurance for a leased vehicle will be more expensive than insurance for a purchased vehicle.
  • Leasing a car has costly pitfalls you should avoid including maintenance and extended mileage costs.
  • It is cheaper to find your own insurance coverage rather than use the insurance from a leasing company.

If you are thinking about leasing a car, you are part of a growing group of Americans. Leasing is more popular than ever, but you might be wondering if you are going to have to pay higher auto insurance for a leased car.

The answer is — maybe.

However, affordable auto insurance for a leased car depends on several factors that we will discuss here. In fact, you might not have to pay more for your insurance at all.

Figuring out lease car insurance requirements starts with understanding auto insurance and the relationship between leasing and insurance rates.

Before we get started, click here now to get free auto insurance quotes for leased cars from the top insurance providers in your area.

How does auto insurance for a lease car lease work?

Some people might think of a car lease as a really long car rental, but that isn’t a perfect analogy.

Instead, it’s more appropriate to think of a car lease as a way of paying to use a vehicle. To make the distinction clear, if you were to buy a vehicle outright, you would likely put money down for an initial payment and then take on a car loan to pay off the rest of the cost.

When you lease a vehicle, you don’t need to put money down. Instead, a third-party leasing company will purchase the vehicle and will allow you to use the vehicle for a monthly rate.

When you purchase a vehicle, after the loan is repaid, the car is yours.  When you lease a vehicle, at the end of the lease, the car is returned to the leasing company.

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Should I lease or buy my car?

Before we get to the lease car insurance part, let’s go over the benefits (and disadvantages) of leasing a vehicle.

You may already be aware of the advantages — after all, you are considering leasing a car — but you may not be aware of everything that goes with a vehicle lease.

The advantages of leasing a vehicle are:

  • Low (or no) down payment.
  • You get a newer and more reliable vehicle for the term of the lease.
  • You enjoy better warranty coverage.

However, leasing a has a few important disadvantages:

  • You are restricted on mileage.
  • You won’t own the car at the end of the lease.
  • You can be charged for any additional miles if you go over the limitations and this can be expensive.
  • You are still on the hook for any regular maintenance costs.

When it comes down to the numbers, in most instances, it’s usually better for you to own your car outright rather than lease.

However, for people who own their own businesses, leasing a vehicle can be advantageous, but you should speak to your accountant before making that decision.

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Required Auto Insurance for Leased Cars

The question of whether or not car insurance costs more for a leased vehicle is twofold. Both ways, the answer is yes — if you lease a car you are going to have to pay more in insurance.

If you think that it is already included in your lease payment, you’re wrong. In fact, if you choose to go with the “convenience” insurance that the lessor offers, you are going to pay a lot more. You should get your own insurance and save some money.

To get a sense of how much you might pay in insurance, check out the table below.

Average Annual Classic Car Insurance Rates by State
StatesAverage Annual Liability Insurance RatesAverage Annual Comprehensive Insurance RatesAverage Annual Collision Insurance RatesAverage Annual Full Coverage Insurance Rates
North Dakota$178.91$138.62$146.45$463.98
Iowa$179.51$110.12$131.85$421.48
South Dakota$180.13$154.87$125.15$460.15
Wyoming$192.62$148.54$167.30$508.46
Maine$203.32$62.99$155.99$422.29
Vermont$205.87$75.29$177.25$458.41
Idaho$206.57$69.93$131.43$407.93
Kansas$214.94$144.82$158.00$517.76
North Carolina$215.65$81.65$176.15$473.45
Nebraska$218.78$137.55$142.28$498.61
Wisconsin$224.62$82.09$135.60$442.31
Indiana$229.61$73.24$150.17$453.02
Montana$231.77$127.15$159.19$518.11
Arkansas$236.48$114.25$193.08$543.80
Alabama$236.53$93.79$190.78$521.09
Ohio$238.27$72.97$161.90$473.14
New Hampshire$240.34$66.46$184.45$491.25
Tennessee$248.35$89.07$185.44$522.86
Missouri$249.53$108.76$165.17$523.46
Virginia$255.37$81.92$168.31$505.60
Illinois$268.03$76.88$185.83$530.74
Minnesota$274.09$110.56$140.64$525.29
Hawaii$275.12$60.94$187.90$523.97
Mississippi$276.30$126.20$193.93$596.43
Oklahoma$276.61$135.50$191.08$603.19
New Mexico$292.82$103.54$166.19$562.55
California$293.80$60.32$237.93$592.05
West Virginia$295.10$122.57$197.80$615.47
Utah$298.52$65.70$159.54$523.76
Pennsylvania$299.44$86.53$196.34$582.31
Arizona$305.26$111.67$166.78$583.71
Colorado$312.02$104.77$172.20$588.98
South Carolina$316.25$108.56$159.04$583.86
Texas$317.25$123.85$224.69$665.80
Kentucky$317.53$84.83$160.75$563.11
Alaska$323.81$82.36$210.49$616.65
Georgia$334.43$95.51$199.10$629.04
Oregon$350.48$56.32$136.10$542.90
Washington$358.00$63.83$159.44$581.28
Massachusetts$363.62$80.98$232.97$677.57
Maryland$365.84$91.63$212.39$669.87
District of Columbia$377.29$139.94$281.20$798.44
Connecticut$390.56$78.97$221.11$690.64
Nevada$408.94$70.58$182.32$661.83
Rhode Island$455.88$79.31$246.91$782.10
Louisiana$465.50$129.10$248.62$843.22
Michigan$477.19$92.91$248.30$818.40
Delaware$479.58$73.49$191.26$744.34
New York$482.71$102.67$231.01$816.40
Florida$514.58$69.92$169.78$754.28
New Jersey$521.74$78.81$229.12$829.67
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However, your leased insurance costs might be higher due to the requirement that you buy auto insurance for a leased car that meets higher minimal coverage requirements.

Is it more expensive to get auto insurance for a leased car?

In every instance, leasing a car is still going to cost you more for insurance.

Leased vehicles not only require more insurance coverage, but they also require higher limits. For example, you might need a $100K policy for liability in addition to having to carry collision and comprehensive to lease a vehicle.

This is wholly based on the leasing company. They will tell you what insurance they require for you to lease the vehicle from them and then you need to get that insurance coverage before you can drive off the lot.

Some insurance is probably included with your monthly lease payment. GAP insurance covers the “gap” that occurs if you total your leased vehicle and your insurance doesn’t cover the amount of the car’s value including account depreciation.

GAP insurance for a leased car is not meant to help you cover your costs and liability. Instead, it is to ensure the leasing company can cover its costs on a vehicle.

If you are taking on a lease, aside from insurance costs, you should become familiar with a number of fees and charges that come with your lease agreement.

According to Car and Driver Magazine, costs like the finance factor can increase your lease cost by as much as $100 per month.

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Cost of Auto Insurance on Leased Cars

It is tough to estimate how much you might have to pay for car insurance on a leased vehicle because lease car insurance requirements can vary.

There are so many factors to take into consideration — your driving record, your past history leasing vehicles, your credit rating, the car you’re leasing, the coverage required by the lessor, and, last but not least, the insurance company that you are using.

You can expect to pay anywhere between $1,800 a year and $3,200 a year for all of the car insurance that you need to maintain to be able to lease a vehicle.

This is a very rough estimate, and if you want a more accurate one, you will have to talk to your leasing company, find out what insurance is required, and then go out and get some actual insurance quotes.

Ways to Save When Getting Insurance with a Leased Vehicle

Even though the amount of insurance required for a leased vehicle is going to cost you some money, it doesn’t mean that you cannot save money on your car insurance.

There are certain things that you can do (that are the same with any car that you have) like getting anti-theft devices, maintaining a good driving record, keeping your credit score high, and asking how you can get discounts on your coverage.

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How to Get Auto Insurance for a Leased Car

Any insurance company will provide you a quote for your leased car. Simply obtain the minimum insurance coverage requirements from your leasing company and call four or five insurance providers to see what rate you can obtain.

Remember, the leasing company will provide you a quote for the costliest insurance.

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Car Subscription Services

Car subscription services have become a popular option for people looking to drive luxury vehicles for a limited time.

Car subscriptions are offered by some high-end automakers and dealers. They provide access to vehicles for a monthly fee which usually includes maintenance, insurance coverage, and roadside assistance.

However, car subscription services are likely the most expensive way to own a vehicle.

The Bottom Line: Is Auto Insurance Higher for a Leased Car

So, the bottom line here is that yes, auto insurance for a leased car is going to be quite a bit higher than insurance for a purchased car.

There are also a lot more disadvantages that come with leasing a car than the advantages that you get. Basically, if you have money to throw away and you can’t live without driving a brand new car every couple of years, leasing might be for you.

If you are like the rest of us, you might want to consider a different option. Often, financed vehicles also require collision and comprehensive coverage.

However, the insurance premiums are almost always going to be lower than your lease payments, and buying a car for cash and getting your own insurance on it could be even less expensive.

Whether you lease or own, it’s up to you to shop around for the best insurance quotes. Click here now to get a free quote in just seconds and compare auto insurance rates for leased cars.

References:

  1. https://www.caranddriver.com/shopping-advice/a15356888/the-terms-you-need-to-understand-before-leasing-a-new-car/

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