Auto Insurance When Leasing a CarPosted on Mar 21, 2017
When it comes time to get a new vehicle, you may decide to lease it since it provides an excellent way to get yourself into a brand new model that is more affordable. However, it’s important that you understand the process of leasing a car and insuring a leased vehicle before you make that commitment.
How Does a Car Lease Work?
When you lease a car, you’re typically paying to “borrow” the car for a certain length of time. You don’t own the vehicle; the leasing company does. You could equate a car lease to a long-term car rental.
As you drive the car and add miles to it, its value naturally decreases. This depreciation is paid for in your lease, which also includes taxes and lease fees.
During your lease period, the leasing company requires that you have sufficient insurance coverage. This is because laws of each state may not just place liability on you but on the actual owner of the car (the leasing company). If you injure someone in an accident that you cause, this individual can turn around and sue the leasing company.
Leasing and Auto Insurance
You may think that when you lease a car that you won’t need auto insurance. That’s not the case. Regardless of whether you buy or lease, you still need auto insurance coverage. The bank or leasing company will require that you at least have comprehensive and collision coverage as well as any state-mandated coverage like liability.
“Do I need gap insurance on a leased car?” “What is gap insurance and what does it cover?” These are common questions people ask themselves.
Gap insurance provides extra coverage for your leased vehicle on top of your standard auto policy. This way, if your leased car is totaled in an accident or stolen, this extra protection will fill in the gap between how much money is still owed on your lease and the amount your auto insurance provider would usually pay for a comprehensive or collision claim. In some cases, when you lease a car, this ‘gap’ insurance is typically rolled into your monthly payments. You may also be able to purchase lease gap insurance from your auto insurance company. There may be a significant price differential for gap insurance between the leasing company and your auto insurance company. It pays to find this out in advance of signing a car lease agreement.
Car leasing provides you with an affordable and convenient way to get a nice car. However, you still can’t skimp on your auto insurance coverage. By doing a little shopping around and comparing quotes, you can save some money on your car insurance.