If you want a car with modern safety features but a new car is out of your price range, leasing a vehicle is an option. Leasing has gained popularity in recent years as car prices have increased, and more than 25% of all car sales in the last year were leased vehicles. While it’s common for leased vehicles to have a mileage limit—a limit to the number of miles you can drive per year—that isn’t a concern for many drivers who are still working from home.
If you lease a car, you’ll be required to meet your state and your dealership or leasing company’s minimum requirements for car insurance. Most dealerships require that you carry full coverage auto insurance while leasing one of their vehicles. Full coverage car insurance is pricier than liability-only insurance, but you can still find affordable car insurance for your leased vehicle. Learn the details around car insurance for leased vehicles and how to save money on comprehensive coverage.
What Is Car Leasing?
Leasing a car means making monthly payments to drive a car for a set period. Leasing is usually cheaper than financing a car, but the driver must return the car at the end of the leasing period. If you decide to lease a car, you can lease it directly from the dealership, or a leasing company can buy the car from the dealer and lease it to you.
What Type of Insurance Do You Need for a Leased Car?
While your state might only require a minimum amount of liability coverage, your dealership or leasing company will require full coverage auto insurance and could ask you to raise your liability limits. While insurance guidelines vary for each company, you’ll need to meet your company’s insurance requirements during your entire leasing period. Canceling insurance on a leased car is unadvisable, as it could lead to your vehicle being repossessed.
What’s considered full coverage insurance varies by state and company. In general, if you get into an accident with your leased vehicle, the dealership or leasing company wants you to have the requisite insurance needed to restore the car to its pre-crash state. This usually requires both comprehensive and collision auto insurance.
- Collision insurance: Collision insurance generally pays for damage your car sustains from crashing into an object or flipping over. It typically reimburses you for the damages done to your vehicle apart from your deductible. The average cost for collision insurance is $290 per year.
- Comprehensive coverage: Comprehensive coverage generally covers any damage to your car that isn’t caused by collisions. It’s usually cheaper than collision coverage, and drivers usually pay an average of $134 per year for comprehensive insurance.
(Please note: your specific coverage will depend on the terms of your policy.)
Is Car Insurance Higher on a Leased Car?
If your dealership or leasing company requires more comprehensive insurance than you’re used to buying, by comparison, the cost of your insurance will increase during your leasing period. For example, if you’re used to only paying the fee for liability insurance, then you’ll need to pay more to insure your leased vehicle.
You might also be paying for gap coverage through your monthly lease payments even if it’s not explicitly stated in your agreement. A new car’s value depreciates almost immediately after it comes off the lot, so if you damage your leased vehicle in an accident, there could be a difference between the amount you owe the dealer vs. the amount you’re reimbursed by insurance. The difference between the amount your insurance company pays and the car’s original value on the lot is known as “the gap.” The cost of gap insurance is usually bundled into your lease payments, but if your leased car is damaged, you usually won’t have to pay the gap amount. Check with your dealership when leasing a car for the specifics around gap coverage.
If you’re leasing a vehicle and looking for car insurance, consider The General’s affordable rates. For nearly 60 years, The General has been providing quality coverage and five-star customer service to everyday Americans. Get a free car insurance quote for your leased vehicle in two minutes or less, and ride with The General today.