How Do You Get Cheap Car Insurance for Leased Cars?
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Financial experts and car lovers can argue all day about the pros and cons of leasing a car.
It’s a waste of money. But the monthly payments are low! Keeping a vehicle for a long time is the smart thing to do. But it’s so much more fun to always drive a new car!
The one thing they can agree on is that it’s a challenge to obtain a cheap car insurance insurance policy for leased cars. Compare.com can help.
- When you lease your car, you may be required by your leasing company to carry the same full-coverage insurance as you would for a car you’re financing through a bank or lending institution.
- Guaranteed Asset Protection (GAP) Insurance covers the difference between the actual cost value and what you still owe on the lease if the vehicle is deemed a total loss. Some leasing companies require you carry GAP insurance to protect their investment.
- You can reduce the insurance premium for your leased vehicle by searching around for the best rates and asking about discounts you may qualify for.
Why is it Hard to Find Cheap Car Insurance for Leased Vehicles?
When you’re leasing a car, you’re just borrowing it from the dealer. And at the end of the lease term, the dealer wants that car back in perfect shape — not banged, bashed, scraped, or dented. That’s why the dealer or the bank financing the lease requires you to buy collision and comprehensive coverage, in addition to a set amount of liability insurance, typically an amount that is significantly higher than your state’s minimum requirements.
Collision insurance covers damage to your car caused by crashing into another vehicle or an object, or when your vehicle is damaged in a hit-and-run accident. Comprehensive coverage covers non-crash-related damage, such as hail, flooding, fire, falling trees or hitting an animal. Unlike liability, comprehensive and collision are optional coverages — unless you’re driving a leased car, or you have an auto loan.
Not only are you paying for all this coverage, but you’re probably also paying extra in your lease for something called gap insurance. If your leased car is totaled in an accident, the amount your insurance company is willing to pay for it probably won’t equal the full value of the vehicle. Gap insurance covers the difference. “Generally, the auto dealer buys a master policy from an insurance company to cover all the cars it leases and charges you for a ‘gap waiver,’” the Insurance Information Institute explains.
To add just one more expense, many lease agreements say you can’t use aftermarket parts for repairs, because that can decrease the value of the car. Most cheap car insurance policies won’t pay for OEM (original equipment manufacturer) parts, however, so you may need to pony up the extra money required to replace the damaged parts with OEM parts.
How to Get Car Insurance for Leased Cars
Actually obtaining insurance for your leased vehicle is simple. Here are the general steps you should take.
- Determine the insurance requirements: The first step is to ask your leasing company exactly what the insurance requirements are. Although they will require comprehensive, collision, and gap coverage, determining the required coverage level will make sure you honor the terms of the lease.
- Consider your insurance preferences: The minimum requirements are just that, minimum requirements. You have the option to purchase a higher level of car insurance if it works for you.
- Shop around: When you are getting car insurance, you should never skip shopping around. This is one of the best ways to ensure you’re getting the best rate without sacrificing quality coverage.
- Ask for proof of insurance: After you sign up for your insurance policy, ask your insurer for proof of insurance paperwork. In many cases, you can obtain this information online. But if you have any questions, reach out to your insurance company’s customer service team or your independent insurance agent.
- Provide proof of insurance to the lessor: The leasing company will require proof of insurance. In some cases, you’ll have to provide this information to the dealership ahead of signing your lease agreement.
Most leasing companies require proof of insurance before you drive off the lot. With that, you’ll need to set up your insurance policy and set the start date for when you plan to pick up the vehicle.
Get Cheap Car Insurance Quotes
Get Cheap Car Insurance Quotes
How do You Get Cheap Car Insurance for Leased Cars?
Compare Auto Insurance Rates
As we mentioned previously, comparing car insurance rates from different companies is one the best ways to get more affordable insurance. That’s because depending on where you go companies will have different methods to set their rates.
We ran the numbers for a 32-year-old female driver with a leased 2017 Nissan Altima, with basic $25K/$50K/$25K liability coverage and a $500 deductible to showcase how rates can change in different scenarios.
- Company A – $1,999
- Company B – $2,721
- Company C – $1,662
Raise Your Deductible
One of the most effective ways to save money on your insurance is to raise your deductible. Your deductible is the amount you contribute toward repairs when you make a collision or comprehensive claim. The higher your deductible, the lower your premiums.
When raising the deductible to $1,000 instead of the previous $500 deductible, the rates dip:
- Company A – From $1,999 to $1,729
- Company B – From $2,721 to $2,409
- Company C – From $1,662 to $1,526
Drop Certain Coverages
While rates have decreased, there’s still more you can do to find cheaper rates for a leased vehicle. What if our example driver decides to drop towing coverage and rental car coverage (when your insurance company pays for a rental car when yours is being repaired after a crash)?
- Company A – From $1,729 to $1,662
- Company B – From $2,409 to $2,380
- Company C – From $1,526 to $1,404
As you can see, there are things you can do to drop your rates. But, one of the biggest lessons in this is that shopping around can save you big time. The difference between Company B and Company C is almost $1,000. That’s a major savings!
Now is there anything else you can do?
What are Some Tricks to Get Cheap Car Insurance for Leased Vehicles?
Once you get a good quote from an insurance company, you can ask if that insurer offers extra discounts. The right discount can save up up to 40% on your premium. These might include:
- Affinity discounts: This discount is for members of certain groups, like college alumni, AAA, business or service organizations, military organizations or professional associations.
- Telematics discounts: Joining a telematics program will reward drivers with savings on premiums — usually anywhere from 10 to 30 percent — when they prove they’re good drivers by letting insurers monitor their driving. Most drivers don’t see the maximum savings from telematics programs, however. If you brake too hard, accelerate too fast, drive late at night, put excess mileage on your car, the telematics program could actually end up costing you more for your premium. It’s important to ask your insurer if the data collected can be held against you and increase your rate, or if it’ll just make you ineligible for additional savings if the data isn’t favorable.
- Paperless billing: You can save by getting your insurance documents sent electronically instead of through the mail. Not only does this help save the environment, but you can save on your insurance.
- Full pay: Pay your premiums every 6 or 12 months, instead of monthly to get a discount on your premium.
- Good student discounts: If you are currently in school and earning good grades (typically a B average), some insurance companies will offer a break on your rates.
- Automatic payment options: You can save by opting to have your premiums directly debited from your checking account or automatically charged to your credit card.
- Bundling discounts: If you are planning to purchase renter’s or homeowner’s insurance, bundling your policies can lead to a discount.
- Anti-theft discount: Does your leased vehicle have anti-theft features? If so, you could enjoy insurance savings.
Thinking long term, you can also get cheaper car insurance by improving your driving record and even enrolling in an approved driver education course.
Boosting your credit score is also an effective way to save on car insurance, unless you live in one of the few states that prohibit insurers from considering customers’ credit history.
The good news is that making your car lease payments on time does have a positive effect on your credit. But if you miss lease payments your credit score could suffer.
Frequently Asked Questions About Car Insurance for a Leased Vehicle
Is leasing a car more expensive to insure?
In most cases, leasing a car makes your insurance bill a bit more expensive. That’s because most leasing companies require drivers to carry increased liability and property damage limits as well as comprehensive and collision insurance. Plus, you might even be required to carry gap insurance. These extensive insurance requirements often mean a higher rate than if you owned your vehicle outright.
The extra insurance requirements make sure that the leasing company’s vehicle is returned without any dings or dents. Instead, your extensive car insurance policy should cover those repairs.
Is insurance lower on a leased car?
No, insurance is typically not lower on a leased car. Most drivers with a lease will pay more for car insurance.
Do you automatically have insurance if you lease a car?
No, car insurance is not included in a car lease. The lessee, the driver, is required to buy their own car insurance. But the insurance policy must meet the requirements of the lessor.
What are the state insurance requirements for a leased vehicle?
States will set a minimum insurance requirement for all vehicles which is typically just liability coverage. The finance company for your lease will let you know what additional insurance requirements they have. These insurance requirements are usually spelled out as a part of your signed lease agreement. With that, you’ll be legally obligated to carry the level of insurance they require.
Why is my car insurance payment more than my car’s lease payment?
Depending on the cost of your car lease, you might find that the required insurance costs more than the lease on a monthly basis. This isn’t always the case, but it can happen. When considering a car lease, think about how both the insurance cost and monthly lease payments will factor into your budget.
Drivers of leased vehicles often face higher costs for car insurance. Ultimately, there’s no way to get around the more extensive car insurance requirements. But even still, you don’t have to overpay for car insurance!
The most effective way to tap into the lowest possible rates is to shop around. Compare.com makes it easy to get quotes from multiple providers. With that, you can make sure you are tapping into the best available rate for your unique situation.
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