Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insuran...

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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 Chris Harrigan

UPDATED: Mar 14, 2022

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Key Takeaways

  • When you lease a car, you are essentially renting that car from a dealership for a certain number of months or miles
  • Buying a car may cost more in monthly payments, but your payments will end after you own the vehicle
  • You will have to purchase a car insurance policy when you buy or lease a vehicle

If you are trying to decide between leasing and buying a car, there are a lot of factors to consider. Analyzing the pros and cons of leasing vs. buying a car can be tricky, but it could help you make the best decision when it comes to both your future and your finances.

Typically, if you know the car you want, you have the option of leasing or purchasing the vehicle. Depending on your long-term goals and your monthly income, one option may be better for you than the other. Car insurance for leasing vs. purchasing a car will vary mainly based on the coverage you’re required to carry.

What’s the difference between leasing and buying a car?

An essential variable when discussing leasing vs. buying a car is ownership. You are renting a vehicle from a car dealership when you lease a car, and the money you pay the dealership every month is your lease payment. Leasing a vehicle means that it belongs to the dealership.

Most car leases last for a certain amount of months or years, though some lease contracts cover you for a certain number of miles.

Unlike leasing a car, you own a car when you buy it. Even if you have to make car payments on your vehicle for several months or years, your name will be on the car title. Purchasing a car from a dealership or an individual may cost more per month than leasing a car, but it depends on several factors.

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Is it cheaper to buy or lease a car?

It is often cheaper to lease a car than to buy one. Leasing a vehicle may allow you to make smaller monthly payments and enable you to drive a more expensive vehicle than the one you could purchase on your own.

However, buying a car means you will have that vehicle as an asset and that monthly car payments end once you pay the total amount for your car. If you’re interested in finding a calculator for leasing vs. buying a car, there are options online.

Keep in mind that you pay a lease every month indefinitely, while monthly payments on an owned car are often temporary.

Are there perks to leasing a car?

Some people say that there are tax benefits with leasing a car vs. buying a car. You might have heard that you don’t have to pay taxes on a vehicle when you lease it, though you would be responsible for paying taxes with a vehicle you purchased.

However, just like renting a house, the monthly payment you make on your car has taxes and other miscellaneous fees factored in. Car dealerships don’t want to lose money on lease contracts, so you will end up making smaller payments toward the car taxes each month rather than one lump sum annually.

What are the advantages and disadvantages to leasing a car?

Below is a list of advantages to leasing a vehicle.

  • A lease may include oil changes and other maintenance.
  • Your vehicle will likely be a newer model.
  • A manufacturer’s warranty will likely cover your vehicle.
  • You will drive the car during its trouble-free years.
  • You can afford to drive a nicer car than you could buy.

Read the list below to learn some disadvantages of leasing a vehicle.

  • The lease fee usually costs more than an equivalent loan when you factor in depreciation.
  • If you continue to lease, you never stop making monthly payments.
  • Lease contracts often have a specific number of miles.
  • You may have to pay wear-and-tear charges.
  • You will have to pay an early termination fee if you change your mind.
  • You cannot make changes to the car’s interior or exterior.
  • You still have to pay for things like car tires.
  • You may have to pay a fee when you turn the car in at the end of your lease.
  • You will be responsible for taxes in your monthly fees.
  • Some contracts will add fees if you regularly have children or pets in your vehicle.

Regardless of whether you purchase or lease your vehicle, you will be responsible for finding a car insurance policy that covers your car.

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How much is car insurance when you lease a car?

When you lease a car, insurance fees are the same as fees you would get if you purchased the vehicle. The only difference is that car dealerships often require individuals who lease a car to carry a full coverage car insurance policy. You can decide whether you want liability, full coverage, or something in the middle if you own your car.

The table below shows the average car insurance rates with different companies based on age and gender.

Average Annual Car Insurance Rates by Age and Gender
CompaniesAverage Annual Rates for a Married 60-Year-Old FemaleAverage Annual Rates for a Married 60-Year-Old MaleAverage Annual Rates for a Married 35-Year-Old FemaleAverage Annual Rates for a Married 35-Year-Old MaleAverage Annual Rates for a Single 25-Year-Old FemaleAverage Annual Rates for a Single Single 25-Year-Old MaleAverage Annual Rates for a Single 17-Year-Old FemaleAverage Annual Rates for a Single 17-Year-Old Male
USAA$1,449.85$1,448.98$1,551.43$1,540.32$1,988.52$2,126.14$4,807.54$5,385.61
State Farm$1,873.89$1,873.89$2,081.72$2,081.72$2,335.96$2,554.56$5,953.88$7,324.34
Progressive$1,991.49$2,048.63$2,296.90$2,175.27$2,697.73$2,758.66$8,689.95$9,625.49
American Family$1,992.92$2,014.38$2,202.70$2,224.31$2,288.65$2,694.72$5,996.50$8,130.50
Travelers$2,051.98$2,074.41$2,178.66$2,199.51$2,325.25$2,491.21$9,307.32$12,850.91
Nationwide$2,130.26$2,214.62$2,360.49$2,387.43$2,686.48$2,889.04$5,756.37$7,175.31
GEICO$2,247.06$2,283.45$2,302.89$2,312.38$2,378.89$2,262.87$5,653.55$6,278.96
Farmers$2,336.80$2,448.39$2,556.98$2,557.75$2,946.80$3,041.44$8,521.97$9,144.04
Allstate$2,913.37$2,990.64$3,156.09$3,123.01$3,424.87$3,570.93$9,282.19$10,642.53
Liberty Mutual$3,445.00$3,680.53$3,802.77$3,856.84$3,959.67$4,503.13$11,621.01$13,718.69
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If you own or lease your vehicle, the best way to find affordable car insurance is to compare quotes from multiple companies at once.

Be sure to speak to a representative from any company you’re seriously considering and ask whether you are eligible to receive any discounts on your car insurance coverage. Don’t hesitate to change car insurance companies if you find a more affordable option.