Car insurance companies consider your age, driving history, geographic location, type of vehicle, and a several other factors when underwriting a new policy. One factor they don’t question is whether you intend to lease or own your vehicle.
If you are wondering whether the intent to lease or own a car affects your insurance rate, the simple answer is no. But there are a couple of factors to consider when it comes to insuring a leased vehicle versus insuring a vehicle you own.
Leasing Company Requirements
When leasing a vehicle, the company you lease from is the title holder to the vehicle. They will want to make sure the vehicle is completely protected and may require you to keep a certain level of coverage. The insurance quote won’t differ based on whether you are buying or leasing but may vary on what components are included.
Typically, a dealer will require you to obtain substantial liability coverage and additional policy endorsements when leasing a vehicle. You can’t be stingy with comprehensive and collision coverage when it comes to this financial liability.
For Leased Vehicles
The value of your car begins to depreciate the minute you drive off the lot, but the amount you owe to the leasing company remains. Insurance companies will only cover the current value of the car in the event of a total loss. This means that there could be a substantial difference between the amount of money an insurer is required to give you for a vehicle, that has been written off, and what is still owed to the dealership.
When leasing a new vehicle, an insurance product to consider is gap coverage. It can help protect you financially. Gap coverage alleviates the amount of money between the current value of the car and the balance owed on the lease agreement, after insurance has been paid. It literally covers the gap.
Whether it is required or not, gap insurance is highly recommended when leasing a new vehicle. While it can add to your overall insurance costs, gap insurance can save you from a financial nightmare.
For Financing a Vehicle
When financing a new vehicle, the lender — instead of the leasing company — may require or advise you to carry gap insurance. If you got into an accident and totalled your new car, you could owe your lender a considerable amount of money. However, if you are close to finishing paying off your vehicle or have paid it off, then you wouldn’t need gap insurance.
An alternative to this, is a waiver of depreciation. The policy endorsement remains in effect for a set amount of time, usually between one to two years. The insurance company will ignore depreciation and pay the insurer the original value of the vehicle in the event of a loss.
Reducing Insurance Rates
Leasing or owning a vehicle won’t lower your insurance. Here are some factors that can affect your auto insurance rate:
- Reduce your commute: Take public transit or car pool to reduce the kilometers in your commute.
- Keep a good driving record: Keeping a good driving record can help lower your premiums.
- Choice of vehicle: Some vehicles are cheaper to insure like the Hyundai Elantra, Toyota Corolla and Honda Civic.
Whether you decide to outright buy, finance or lease your next vehicle, you’ll want to make sure you are getting the best insurance rate. Rates.ca can help you compare and save on car insurance.