Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 28, 2020

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Here's what you need to know...

  • There are many benefits to leasing a vehicle
  • Leased vehicles are required by state law and their leasing agreements to have comprehensive, collision, and usually liability insurance
  • Leased vehicles must also have GAP insurance
  • However, most of the time, GAP insurance is rolled into the leasing agreement and not purchased or paid for outside of the leasing contract.


Getting a new car is an exciting time in life. Whether you are buying or leasing a vehicle, there are many things you should understand and be prepared for.

One of those things is insurance. People buying or leasing a car are required to have certain types and amounts of insurance, according to the laws of their state and their loan or leasing agreements.

Utilizing an online shopping tool that compares different policies and rates can help you to save money on car insurance.

Find affordable car insurance now by using our tool above! Enter your zip code above to compare FREE quotes!

Table of Contents

Leasing Has Its Benefits

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Many drivers prefer to lease their vehicles as opposed to buying them. Leasing is a good fit for people in certain situations.

The benefits of leasing a vehicle include:

  • Monthly payments that are lower
  • Less money required as a down payment
  • The ability to drive a better and newer car for less money every month
  • A factory warranty that covers most repairs
  • Being able to drive a new car ever couple of years
  • No need to worry about a trade-in or its value when the lease period is up
  • Not being stuck with an investment that will quickly depreciate

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Steps to Leasing a Vehicle

  • Become familiar with leasing – Leasing is similar to renting a car, but for a longer period. Before making a decision to lease learn its pros, cons, and other details
  • Decide what you need in a leasing deal – Not all lease agreements are the same. You should look for a deal that suits your lifestyle and needs. This includes the leasing term, down payment, mileage, and insurance. Most experts recommend no more than a three-year lease period so that the vehicle will always be covered under the manufacturer warranty
  • Estimate your payments – You can use a lease payment calculator and an online insurance comparison tool to help figure out what your leasing expenses will be. You do not want to get into a lease that you cannot afford and insurance costs should be calculated into your budget
  • Look for deals – Most carmakers will, from time to time, offer discounted leasing rates. Drivers who wish to lease might be able to save a significant amount of money if they can find or wait for a good deal. However, they should always check the fine print
  • Decide on the make and model of car you want to lease – This may change from your original desires as you learn of different leasing specials or more about a vehicle
  • Use the Internet for quotes – Just as you can use an online comparison tool to shop for the best rates on car insurance, you can also shop online for the best leasing quotes
  • Visit the Dealership – Once you have decided on a car and located it, it’s time to take a trip to the dealership. Meet with the sales person and don’t be afraid to take him or her for a “test drive”
  • Get the best price – Use the other quotes you have received to negotiate the lowest possible leasing price you can at the dealership
  • Sign on the dotted line – The last step to your leasing process is to sign all of the leasing documents and contracts. Pay special attention to what it says about payments, mileage, timeframe, and insurance. Be sure you have insurance on the vehicle before you drive it off the lot, as insurance is a requirement for driving in all states

Insurance on Leased Vehicles

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When it comes to insurance on a leased vehicle, some aspects are the same and some are different from a car that is bought.

It is important to first understand that insurance is a requirement in all states for all vehicles, whether they are leased or owned.

When leasing, your bank or other leasing entity will require you to purchase both collision and comprehensive auto coverage, plus any other mandatory coverage required by the state, most commonly liability insurance.

  • Collision coverage provides for costs incurred when the vehicle is in an accident with another car or object.
  • Comprehensive coverage covers other types of losses, such as theft, fire, or a run in with wildlife.
  • Liability is coverage that pays in the event that you are at-fault for an accident.

What is GAP Insurance?

Another type of insurance that your leasing company might require is called GAP insurance.

This type of insurance is important to have in the event that your car is in an accident and deemed totaled by the insurance company.

In some cases, the figure is less than what is owed on the lease, which leaves a GAP, or an amount still owing when all is said and done.

This leaves you to fill in this gap with your own money, which is why some drivers need GAP insurance. This could leave you liable for thousands of dollars.

The insurance company will pay you what they believe the cash value of the car is.

Most of the time, you do not have a choice as to whether or not you want to purchase GAP insurance.

In order to protect themselves, the majority of leasing companies will roll the price of GAP insurance into the leasing payments.

Usually, the leasing company has purchased a master policy for GAP insurance on all of their leased vehicles and you pay for this GAP waiver.

You should always check your leasing contract and with the dealership when you lease the car to verify how this is handled and that you will not have to purchase a separate GAP insurance policy.

It is important that you have the right types and right amounts of insurance coverage, including GAP insurance, when you are leasing a vehicle.

To get the best rates on car insurance, use an online car insurance comparison tool.

Start comparing car insurance rates now by entering your zip code in our FREE tool below!

References:

  1. http://www.edmunds.com/car-buying/should-you-lease-or-buy-your-car.html
  2. http://www.edmunds.com/car-leasing/10-steps-to-leasing-a-new-car.html
  3. https://www.progressive.com/auto/discounts/compare-car-insurance-rates/
  4. https://www.allstate.com/tools-and-resources/car-insurance/new-used-or-leased.aspx
  5. http://www.iii.org/article/can-i-drive-legally-without-insurance
  6. http://www.iii.org/article/insuring-leased-car
  7. http://www.investopedia.com/terms/c/collision-insurance.asp
  8. https://www.nationwide.com/car-insurance-policy.jsp
  9. http://www.iii.org/article/what-gap-insurance