Is auto insurance higher for a leased car?

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 “Is lease insurance more expensive?”

The answer is — maybe.

When leasing a car, insurance cost can rise, but 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.

So, how much is insurance on a leased car? 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 leased car work?

Some people might think of a car lease as a really long car rental, but that isn’t a perfect analogy. Just like how you need insurance to rent a car, you also need to show proof of insurance when leasing a vehicle. This shows that you are covered and can prove financial responsibility should an accident occur.

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. That’s usually how financing a new vehicle works. (read our “How much does auto insurance cost on a leased car?” for more information)

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. You make a monthly payment throughout the duration of your lease agreement and then return it back once it is over.

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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 a Leased Car

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

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 lease insurance more expensive?

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 coverage 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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Leasing a Car Insurance Costs

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 Auto Insurance for a Leased Car

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.

Read more: Why is auto insurance more expensive than the value of my car?

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: Auto Insurance for a Leased Car

So, the bottom line here is that yes, an auto insurance rate 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.

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