Is It More Expensive to Insure a Leased Car?

Does It Cost More to Insure a Leased Car?

Yes, it may be more expensive to insure a leased car—but your premiums will ultimately depend on several factors.

When obtaining auto insurance, you won't be charged more for leasing a car instead of buying it. However, leasing companies typically have stricter insurance requirements because they own the vehicle outright—a lender also technically owns a financed car until you pay off the loan, but you build equity in the vehicle over time as you pay down your loan balance.

As a result, insurance coverage on a leased vehicle is typically more expensive than a policy for a vehicle you've financed with an auto loan. That said, lease payments are typically lower than auto loan payments, so leasing may still be a more affordable option in the short term. Unlike an auto loan, however, a lease term won't automatically end with you taking ownership of the vehicle.

Learn more: Is It Better to Lease or Buy a Car?

What Insurance Do You Need for a Leased Car?

You'll typically need a full coverage auto insurance policy for a leased car. Full coverage is a term for a robust policy that offers liability, comprehensive and collision insurance. The car leasing company may also require coverage limits that exceed the minimum insurance requirements in your state.

Here's a more detailed breakdown of the coverages you may be required to get if you're leasing a car:

• Liability coverage: Covers medical expenses for bodily injuries sustained in an accident where you're at fault, as well as damage to another person's property. Most states have a minimum requirement for liability coverage, but lenders don't usually require more than that. Leasing companies, on the other hand, may call for higher limits, which can increase your rates.
• Collision coverage: Pays for damage to your car caused in an accident with another vehicle or object. Collision coverage is also typically required if you finance a vehicle, but a leasing company may additionally require a low deductible, which can increase your premium.
• Comprehensive coverage: Pays for damages to your car caused by things like theft, weather, vandalism, fire, animals and other acts of nature. Like collision coverage, you'll typically need comprehensive coverage on a financed vehicle, but a leasing company may require a low deductible.
• Gap insurance: Because new vehicles depreciate quickly once you drive them off the lot, leasing companies may require gap insurance to help recoup the vehicle's full value in the event that it gets totaled. With an auto loan, gap insurance is optional.

Depending on where you live, you may also need to have medical payments coverage, personal injury protection or uninsured motorist coverage. However, potential requirements for these types of coverage are determined by the state you live in, not your leasing company or lender.

Learn more: Is Insurance Different for a Leased Car?

Factors That Affect Car Insurance Rates

There are many factors that determine auto insurance rates. Here's a quick breakdown of the factors that go into determining the premium you're charged.

Learn more: Why Is My Car Insurance So High?

How to Save Money on Car Insurance

While there are some things about your insurance policy that you can't control, there are some steps you can take to save some money.

1. Shop Around

Each insurer has its own approach to pricing insurance policies, so it's crucial that you get a quote from several different carriers to determine which one offers the best deal. Just make sure you're comparing the same coverage levels for each insurance carrier.

2. Select the Right Coverage

Knowing how much coverage you need can be difficult. You want to protect yourself from a potential financial loss, but you don't want to pay for more than you need. Consider your financial situation and comfort level with risk to get an idea of the types of coverage, amounts and deductibles. You may also consider consulting with an insurance agent to get expert advice.

3. Bundle Your Policy

Many insurance carriers offer discounts if you get coverage for multiple vehicles or bundle your auto insurance policy with other types of insurance, such as life, homeowners, renters, motorcycle or umbrella insurance.

4. Look for Other Discounts

Depending on the carrier, you may also qualify for discounts if you have a good driving record, you belong to a certain organization or work for a specific employer, you make full payments instead of monthly installments or you take a defensive driving course. Check with each insurer to get a full list of available discounts.

5. Improve Your Credit

Depending on what state you live in, insurance companies may use credit-based insurance scores as one factor when setting your rates. While good credit won't necessarily get you better premiums on its own, it could keep an insurer from hiking your rates.

Learn more: How to Lower Your Car Insurance

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The Bottom Line

Because most leasing companies will require you to purchase more coverage on an auto insurance policy, insuring a leased car is often more expensive than insuring a car you own outright.

But you might still be able to bring your rate down to a number you can live with, particularly by shopping around for rates. Improving your credit could be one way to do just that. Experian lets you check your FICO^® Score^☉ and credit report for free. Taking steps to improve your credit could be the first step toward a better insurance rate.