If you’re in the market for new wheels, but you’re trying to decide whether you should lease or buy, the first consideration is probably cost. And of course, when you figure up the cost of a car, the monthly payment isn’t your only consideration. You’ll also have to consider other potential costs, like additional mileage if you go over on your lease, and of course, car insurance.
Usually, insurance on a leased car is actually more expensive than insurance on a financed car. This isn’t always the case, but usually, if all else is equal, you’d pay less if you bought/were buying the car from a lender. Here’s why.
Requirements For A Leased Car Are Usually Higher
The more interest another party has in your vehicle, the higher your insurance requirements are likely to be. If you buy a vehicle outright, you can usually just get the state minimum insurance. If you buy a vehicle with a loan, your lender may require higher than the minimum coverage. Leasing a car usually has the highest requirements of all.
For example, you’ll probably have to up your liability car insurance limits considerably. This coverage is what the insurance company will pay another driver if you cause an accident—it covers their repairs and medical bills.
When you lease a car, they may require coverage up to $100,000 for medical expenses for one person, with a cap of $300,00 for the accident, and $50,000 for property damage.
Generally speaking, this is well above most state minimums, and therefore will cost you a great deal more.
In addition to higher liability limits, you’ll usually be required to purchase comprehensive coverage, collision, and gap insurance as well. These are usually optional as far as legal requirements go, but the leasing company can require that the car be covered to this extent before you sign the contract.
Calculate All Costs
If you’re getting a new vehicle, leasing can at first seem like an attractive, lower-cost option. But don’t assume that your insurance payments are going to stay the same as they were before you leased. They very likely will not, and if you started out with a liability-only policy, you could be spending thousands more annually on insurance alone.
Make sure to factor this in when you’re looking at those attractive low monthly payments that leasing a car can offer you. You’re also locked into a lease (and the attendant insurance) in a way that you aren’t locked into a car you buy outright.
Then again, if money is no object and you’re interested in leasing simply because you enjoy having a new vehicle every three years as hassle-free as possible, go for it.
If you can afford it, buying a car outright is usually the best option, because you can tailor your insurance to what you actually need to have covered. If you have cash on hand to make emergency repairs, for example, you can usually choose a cheaper plan with a high deductible, because you don’t have to depend on filing a claim for every little dent and scrape the way you might if you didn’t have a financial safety net.
Whatever you decide to do, make sure to find out ahead of time what coverage you’ll be required to get and do some comparison shopping with various insurance companies to make sure that you’re getting the best deal, as well. Not all companies use the same formula for deciding your rates, and there’s likely one out there that can offer you a significant discount over what their competitors offer.