How Do You Get Cheap Car Insurance for Leased Cars?

November 01, 2017

New Mercedes cars

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 cheap car insurance for leased cars. Compare.com can help.

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 the liability insurance that’s required by your state.

Collision insurance covers damage to your car caused by crashing into another vehicle or an object. Comprehensive coverage covers non-crash-related damage, such as hail, flooding, fire, falling trees or hitting a deer. 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.

How Do You Get Cheap Car Insurance for Leased Cars?

The best way to start is to compare quotes for cheap car insurance on Compare.com. 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.

  • Company A $1999
  • Company B $2721
  • Company C $1662

Cars In Parking Lot

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. With a $1,000 deductible, the rates dip:

  • Company A $1729
  • Company B $2409
  • Company C $1526

We still haven’t achieved our goal of finding really cheap auto insurance for a leased car, though. 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 $1662
  • Company B $2380
  • Company C $1404

Hmm. Sometimes that’s effective — Company C dropped its rates by more than $100 – and sometimes it’s not (Company B only knocked off $29). As you can see, it pays to shop around, compare quotes and adjust coverage levels. Looks like the cheapest car insurance for this leased vehicle and driver is about $1,400 per year. 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. These might include:

  • Affinity discounts: For members of certain groups, like college alumni, AAA, business or service organizations, military organizations or professional associations
  • Telematics discounts: They 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 or drive late at night, you’ll get dinged
  • Paperless: For getting documents electronically instead of via the mail instead of monthly
  • Full pay:Pay your premiums every 6 or 12 months, instead of monthly

Paper highlighter

Thinking long term, you can also get cheaper car insurance by improving your driving record. That means no more speeding tickets, and no more doing the California roll at stop signs. Boosting your credit score is also an effective way to save on car insurance, unless you live in one of the few states that prohibits 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.

Are there Alternatives to Leasing a Car?

Leasing a car feels like a good money move because the monthly payments are lower than loan payments for buying a car. The down payment’s typically lower, too. You’re driving a sweet new car for less — that’s a win, right? But at the end of the lease term, whether three years or longer, what do you have? Nothing. You might even owe extra money, if you’ve exceeded the mileage limit or if there’s extra wear and tear on the car.

There are a few advantages to leasing. If you work in sales and you need a car that will impress clients, leasing can be smart — and if you use the car for business, you may be able to deduct a portion of the payments on your taxes. But in general, buying a car is better. Lifehacker ran some numbers and found, in one example, that leasing a car cost $6,752 more after five years than buying (assuming the car value at the end is $7,000). In the end, just do what’s best for you — and enjoy the ride!

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You could save up to 32% by using Compare.com!

Based on a survey of 100 California Residents. Average savings determined via a comparison of their selected policy against their self-reported annual premium.