When you drive a car, you need insurance coverage on it, whether that vehicle is a purchase, rental or lease. For one thing, it's the law. But for another, you'll want to make sure you're at least protected if you cause damage to someone else's property. But if you're leasing a car, you may get a little confused as to whether you're responsible for maintaining coverage or the leasing company will handle it. Although financial institutions will certainly want to safeguard their own investment, you'll still be responsible for carrying insurance on the car you're driving, just as you would if you'd purchased or rented it.
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What Insurance Do I Need When Leasing a Car?
When you lease a car, you may notice that the leasing company mentions something called gap coverage on the contracts you sign. This serves to protect the leasing company if your insurance doesn't cover the full value of the car in the event of a totaled accident. This insurance in no way covers you, however. If you're pulled over or get in an accident after driving the car off the lot, you will be expected to present proof of insurance and pay out of pocket for anything that isn't insured. Minimum insurance requirements vary from one state to the next, but the minimums are fairly low, compared to what you'll realistically need if you get into an accident.
How Expensive Is It to Lease a Car?
If you look at the lifetime cost of leasing versus buying, you'll likely be surprised. If you lease, you'll pay an average of $330 a month, which equals $11,880 over a three-year lease. If you average that monthly amount out over six years, and add interest, you'll pay $27,836, compared to $33,682 to buy new. Buying used is the cheapest option at an average of $24,966 for a six-year period. However, this doesn't take into account the money you'd spend on maintenance and repairs during that time.
Do You Have to Get Insurance on a Leased Car?
Nothing about a leased vehicle exempts you from carrying the same insurance you would for a car you owned or financed. You'll face the same loss if you total the leased car, and you'll be required to meet state laws. If anything, you can expect to be even more accountable for paying insurance, since your leasing company may require proof that you have it before turning it over to you. This means in addition to the liability insurance state law requires you to hold, you'll also likely need to carry comprehensive coverage, which will repair your car in the event of a collision.
Car Leasing With Insurance and No Deposit
One of the biggest issues with buying or leasing a car can be the down payment. Most people don't have thousands of extra dollars in the bank. For that reason, some leasing companies offer no-down-payment leasing options, although the cost you would have spent on the down payment is usually rolled into your payments, with interest. You'll still need insurance in this case. In fact, if your credit rating is low, the leasing agent may make doubly sure you have insurance before signing the car over to you.
Although you are obligated by law to get insurance, you're only required to get liability insurance. While it can be tempting to save money by only spending money to pay for the minimum required, this may not be in your best interest. Consider how you would feel about paying thousands of dollars out of pocket to repair a car you don't even own. You'll also likely find that the coverage you need won't cost that much more each year, making it well worth the peace of mind it will bring you.