Insuring a Leased Vehicle

Car leasing is fast becoming a less-popular option for many drivers today due to the typically higher costs of the entire process over buying a car outright. Some automakers also, are shutting down their lease programs. Chrysler, for example announced the halt of their leasing program back in July of 2008 due to the high expense and lack of sufficient return for them.

Other automakers and lenders are still offering car leasing programs, however, and if that is your intent, you can still find a way - if your credit is sufficient - to lease the car of your choice. But what are these ‘extra expenses’ that come with automobile leasing? One of them is the car insurance.

Pay to play…their way

When you lease a vehicle you are not actually taking ownership of it, you are borrowing it. Therefore it stands to reason that the leasing company is going to want you to take as good care of it as possible and take all measures necessary to make sure that you can return the car in the same condition that they gave it to you with only ‘reasonable’ wear and tear. Part of that care is going to include insurance on the car, and not just state minimums as usually allowed when you buy a car. Increased limits on your liability and comprehensive coverage to makedouble sure that if the car is in a wreck, all damage will be handled.

In addition to the increased limits for liability, insurance companies may also demand that you carry gap insurance. If you get into an auto accident and total your vehicle, your comprehensive insurance coverage will only pay you what the car is currently valued at…not what you owe on it or the remaining terms of your lease. So if your car is valued at $6,000, but by completing the terms of your lease the bank would have gotten another $2,000 from you, where’s that money going to come from but your pocket? This is where gap insurance steps in…it fills in the void left by comprehensive coverage versus the remaining payments due on the car. Be sure to shop around for the best premium when looking for gap insurance coverage, because it can range from wildly expensive to very cheap depending on which company you choose.

And if you do get into an accident in your vehicle and the car is totaled, you need to be careful with the repairs that are made. Your contract likely insists that you return the vehicle “in similar condition” that it was when you checked it out. That means that if you get less-than perfect repairs done on the car, the paint doesn’t match, or something doesn’t work right, you could find yourself slapped with fees and fines at the expiration of your lease when you return the vehicle.

So in addition now, to the added expense of financing a car lease due to rising prices, remember you will also have to face significantly higher insurance premiums than required by car buyers as well.