Higher Auto Insurance for Leased Vehicles (Pros and Cons)
Leased vehicles cost more to insure because most lease agreements require the lessee to obtain much higher limits of coverage. You need to carry at least $100K per person bodily injury liability.
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UPDATED: Jan 13, 2021
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- Is car insurance higher for leased cars? Leasing a vehicle usually costs more to insure than a vehicle you own
- Lease car insurance requirements state that when you lease a vehicle you need to carry at least $100K per person bodily injury liability coverage, $300K total bodily injury liability coverage if multiple people are injured, and$50K property damage liability coverage
- You may also be required to carry gap insurance
Leased vehicles cost more to insure than vehicles you own because most lease agreements require the lessee to obtain much higher limits of coverage along with low physical damage deductibles.
Lien holders want to make sure they are protected from any liability in the event you cause an accident.
While you will pay quite a bit more for insurance there are still many reasons why leasing a vehicle may be the right choice for you.
There are pros and cons to leasing a vehicle and we’ll explore some of them below.
Con – Insurance Coverage Will Cost More
How much more is insurance for a leased car? Most lease agreements require coverage that is significantly higher than the minimum insurance requirements for most states.
If you own your vehicle, you get to decide what level of coverage you purchase as long as you comply with state regulations. If you lease, you’re bound to follow the leaseholder’s increased requirements.
Typically, states require just liability coverage which pays for the damages you inflict on others when you’re responsible for an accident. Arizona, for example, requires liability insurance only in the amounts of 15/30/10. This list of numbers means the following:
- $15,000 – Bodily injury liability coverage to pay for the injury costs of one person in an accident
- $30,000 – Bodily injury liability coverage total for more than one person injured in an accident
- $10,000 – Property damage liability coverage to pay for the other party’s vehicle or property
Leaseholders will typically require you to carry more coverage than the state demands. This increased coverage will result in increased premium payments. The following is a list of coverages that are often required for leased vehicles:
|Required Coverage||Protection Provided|
|Increased liability coverage, typically in the amount of 100/200/50||Covers costs for damages and injuries of the other party when you are at fault in an accident|
|Comprehensive coverage (maximum $500 deductible)||Protects against losses due to fire, theft, vandalism, and collisions with animals. The deductible must be paid before insurance covers.|
|Collision coverage (maximum $500 deductible)||Pays for damages to your vehicle after a collision|
|GAP coverage||If your car is totaled, GAP will make up the difference between what your car is worth and what you owe|
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Pro – A Lease Offers Freedom and Different Ways to Save
There are still several reasons why you may want to consider leasing versus purchasing a car despite the higher rates you will pay for your insurance:
- A leased vehicle provides you with a decent tax deduction. Lease payments can usually be written off while car loan payments are not deductible
- A lease gives people the freedom to get new cars more often. Most lease agreements are for 36 months or less allowing the lessee to have a brand new car every three years
- A leased vehicle is almost always under warranty for the term of the lease saving you money in general repair costs and tune-ups
If I do decide to lease a vehicle what are some ways I can save on my insurance?
While you will have to comply with the lien holder’s requirements for insurance if you want to lease, there are still several ways you can save money on your insurance premium.
Following is a list of ways you can lower your rates even with a leased vehicle:
- Investigate insurance rates by vehicle – Four-door sedans are viewed as more conservative vehicles and cost less to insure than two-door sportier cars
- Bundle policies – Consider using the same insurance provider as you are currently using for your homeowner’s or life insurance. By bundling insurance policies with the same company you can often save yourself a lot of money
- Look for safety features – Insurance providers often give discounts for added safety features such as anti-lock brakes and anti-theft devices
- Drive few miles – Car insurance companies often charge less for cars that are driven fewer than the stated number of miles annually. For leased vehicles, you often cannot go over a certain mileage anyway so you may be eligible for a low-mileage discount
- Park in a garage – If you have access to a garage or even a driveway you will save more money compared to parking your car on the street
- Pay your premiums up front – If you can manage to pay your premium each year in one lump sum you will save more money than paying in monthly or bi-monthly installments
- Take a class – Some insurance companies offer discounts if you agree to take a safe driving course
- Improve your credit score – Get your credit rating in check. This means staying up to date on debt payments. Most insurance companies now use credit scores as a means of determining who is a higher or lower risk factor to insure
When determining if you will lease or purchase a vehicle you need to weigh the pros of leasing versus the cons of insuring a leased car. There are many ways you can save even when you must operate within the terms of your lease agreement.
It is best to get started by shopping around and getting quotes from several insurance providers even before visiting the car dealerships. By doing a little legwork you can save yourself a bundle of money in the long run.
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