Leased cars tend to be more expensive to insure compared to fully owned vehicles because while you are leasing a car, you do not own it. Since you are not the full owner of the vehicle, if damages occur, you will be responsible for paying the company that gave you the lease for your vehicle. Companies that allow their automobiles to be leased are in the business to make money, so they charge a rate that will entice people to take out a lease.
However, they will make you sign a contract stating that you (as the leaseholder) will be completely responsible for reimbursement in the event that any damages occur to the vehicle. In other words, you need to get exceptional insurance to cover your leased car. The most common type of coverage for leaseholders to purchase is called GAP car insurance coverage (Read: “What is gap car insurance?” for more information). A gap insurance policy pays for the unpaid balance on your lease if your vehicle is totaled. Without it, you would be responsible for paying a large sum of money out of pocket to replace the car.
Why would a leased car cost more money to insure than a fully owned vehicle?
The reason that leased cars (on average) cost more money to insure is because they are new. Since most people take out leases on new cars, the value of the vehicle is higher than a used or older car. Additionally, in order to protect yourself from having to pay for damages to your leased vehicle, you will want to get the most thorough insurance coverage possible.
Examples of some recommended coverage to purchase for a leased vehicle include:
- Gap insurance – Protection so that you don’t end up paying the full unpaid lease balance if your vehicle is totaled.
- Comprehensive insurance – Covers any damages resulting from events other than collision.
- Collision insurance – Coverage for any damages to your leased car as a result of a collision.
- PLPD insurance – Public liability and property damage are always required in the United States; each state has different minimum requirements.
Is it better to lease a car instead of buying new?
Most people wonder whether leasing a car is a better idea in comparison to buying a new one. In regards to saving money on insurance, it is usually a better idea to go with a new one – if “insurance” is the deciding factor. However, there are a lot of advantages and disadvantages that you will want to take into consideration before making a decision one way or the other. For example, lease terms can last less than 3 years, making the thought of driving a new vehicle every few years very appealing.
However, if you do buy a vehicle new, you will not have to purchase gap coverage to go along with it – saving you money on insurance. Additionally, if you pick out a safe car to insure, the cost of your insurance will go down as your vehicle ages. If you have been driving it for 5 years, the value depreciates, and your car insurance rates may actually decline – which some people really like.
Always check the available insurance options
If you really want to figure out what your best options for saving money are in regards to leased vs. new cars, you should get a quote for each. To get a quote, just type in your zip code at the top of the page and see which companies are offering great rates in your area. After you have followed through and checked out their quotes, you can compare the pricing for a new vehicle vs. one that would be leased. Whether you decide to ride around in a leased car or new car, make sure you make it a priority to get a top-notch insurance policy!