Finding cheap car insurance can be difficult and often time consuming. Consumers often have questions about how leasing versus buying their car can affect car insurance rates. Before a person begins the process of shopping for car insurance and requesting online car insurance quotes, it is important to understand how leasing a car can affect car insurance rate.
Leasing a car is often preferable to purchasing for drivers who like to drive new cars every two to three years. In many ways, finding cheap car insurance for a leased vehicle is similar to the process for owned vehicles. The driver is still responsible for state required liability insurance as if he or she owned the car. Where insurance needs for leased vehicles differs are in the realms of comprehensive and GAP insurance.
In addition to the mandatory liability insurance coverage required, in some form, by each state, dealers and lenders of leased cars also require the driver to have collision and comprehensive insurance. Lenders require comprehensive insurance in order to protect their asset in case of an accident, theft, or vandalism. Collision insurance financially protects the car's driver in the case of an accident.
The combination of liability, collision, comprehensive auto insurance is often referred to as full auto insurance. However, this is a misnomer. Even though the driver of a leased car does not bear the cost of depreciation, the vehicle still loses value over time. If the car is stolen or an accident occurs where the car is totaled, insurance providers calculate the value at the time of loss without consideration for the amount the driver still owes on the lease.
For this reason, many dealerships and lenders write GAP insurance requirements into the lease agreement. GAP insurance, or Guaranteed Auto Protection insurance, covers the amount between what the lessee still owes on the car lease and what the auto insurance company determines is the value of the car in the event of a loss. Often referred to in the lease as a GAP waiver, this type of insurance protects the consumer from owing money to the dealership or lender in case of loss.
Ultimately, leasing a vehicle gives the consumer fewer insurance options than he or she has when purchasing. Because the car is still owned by the dealership or lender, these parties can place requirements on the type and amount of insurance that the driver must carry on a leased vehicle. Depending on the lease provisions, requirements for comprehensive and GAP insurance can raise insurance rates when compared to purchasing a car outright. However, by shopping around and requesting online car insurance quotes, even drivers who lease their vehicles can find cheap car insurance.