UPDATED: Mar 13, 2020
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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 insurance premiums to drive that leased vehicle. The answer is – maybe. It depends on several factors that we will discuss here. You might not have to pay more for your insurance at all – you might pay less, but figuring that out starts with understanding the relationship between leasing and insurance rates.
Advantages of Leasing a Vehicle
Before we get to the insurance part, let’s go over the benefits (and disadvantages) of leasing a vehicle. You may be already 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. Leasing has advantages like low (or no) down payment, better vehicle, and better warranty coverage but you also don’t own the car and you aren’t able to drive as much as you want since most lease agreements have a maximum mileage you can’t go over per year – at least not without an additional charge.
Required Car Insurance for Leased Vehicles
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 are dead 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.
But even if that’s the case, it is still going to cost you. 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 (or gap) insurance is so-called because it covers the “gap” that happens when (“if” is probably more appropriate) you total your leased vehicle, and your insurance doesn’t cover the amount of the car’s value including account depreciation.
Cost of Car Insurance on Leased Cars
It is tough to estimate how much you might have to pay for car insurance on a leased vehicle. 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 leasing and not the least – the insurance company that you are using (or whether you are getting “convenience” insurance through the lessor.
You can expect to pay anywhere between $1800 a year and $3200 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.
So, the bottom line here is that yes, car insurance is going to be quite a bit higher if you want to lease a car. There are 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, but the insurance premiums are almost always going to be lower than leasing and of course, buying a car for cash and getting your own insurance on it could be even less expensive.