Six Things You Should Know About a Car Lease & Insurance

New Range Rover For Lease!

Who doesn't love driving a brand new car? The new car smell alone is enough for me to want to buy a new one! A car lease may be a good option if you want to preserve your cash. With interest rates so low, leasing has becoming a more economical thing to do than buy an expensive car outright.

Another great thing about leasing a vehicle is that once the lease is over, you can just hand over the keys to your dealer, minus any overages. It is sometimes a big pain to sell your car once you're done with it.

Below are six things you should know about a car lease and car insurance. The name of the game is to save money by getting the best lease and cheapest insurance possible.

Facts About Insurance For Leased Cars

Leasing a car is a convenient way to get more car for less money. But that doesn’t mean you can skimp on auto insurance – in fact, a lease may require you to buy more even coverage. Since the leasing company owns the vehicle, it wants to protect its investment in case you’re in an accident or your car is stolen.

Before you lease your next car, here are a few things to know about car insurance for leased cars.

1. Coverage is mandatory

Before you drive off the lot in your new car, make sure you’re covered. If you don’t already have car lease insurance to transfer to the new vehicle, you’ll need to buy it before you leave the dealership or leasing office.

Most states require some minimum level of liability insurance, and your leasing company may require more than state-minimum levels. Find out more with AllState, one of the best auto insurance companies online with the lowest rates.

2. Your limits may be higher

Leasing companies often require high liability insurance limits for your leased car. Some may require you carry a lower deductible too, or make you put money in reserve for the duration of the lease if your deductible is higher.

3. Collision and comprehensive may be required

In addition to the basic liability insurance for leased cars that is mandated by most states, you may be required to carry collision or comprehensive car insurance, too.

Collision insurance pays for damage to your vehicle if you hit someone’s car, another vehicle hits you or your vehicle rolls over, regardless of who is at fault.

Comprehensive coverage helps pay for damage to your vehicle from events other than a car accident, like theft, vandalism, and certain natural disasters.

4. You’ll need to pay for original replacement parts

Some leasing companies stipulate in the lease agreement that if any repairs are made as a result of a comprehensive or collision claim, you must use only Original Equipment Manufacturer (OEM) parts, which are often more expensive than after-market parts.

Fortunately, there is a low-cost option available with most car lease insurance policies that covers the difference between the cost of factory parts and generic parts.

5. Gap insurance can protect you

Gap insurance provides extra protection in addition to your basic car insurance for leased cars. If your leased vehicle is stolen or totaled in an accident, this optional coverage fills in the gap between the lease amount still due on the vehicle and what your insurance company would pay for a regular collision or comprehensive claim. Learn more about gap coverage and how it could protect you.

6. There are still ways to save on your car insurance

If you insure multiple vehicles with the same company, or if you bundle your car and homeowner’s insurance, you may qualify for substantial discounts on automobile insurance.

If your driving record is clean of any accidents, or if your new vehicle comes equipped with an anti-theft device or passenger restraint system, you could save even more depending on where you live and on your insurer.

A car lease will allow you to buy more car than you can afford. But a car lease will likely result in higher insurance premiums.

Related: Options For Getting Out Of A Car Lease

Car Insurance Recommendation

The best place to get affordable car insurance is with Allstate. With Allstate, you’re in good hands. Getting a quote is free and easy. Make sure you have the best auto insurance possible to protect yourself and your family. 

Every year, there are hundreds of thousands of accidents on the road. You need great auto insurance to protect your finances as well.

Related post: Your Homeowners Insurance Policy Likely Needs Updating

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36 thoughts on “Six Things You Should Know About a Car Lease & Insurance”

  1. rachel frampton

    I’ve been planning to buy auto insurance since I’ll buy an SUV within this year. I’m glad you shared this by the way; at least now I am aware that there are low-cost options for most of the car lease insurance. I’d also keep in mind, to keep up my good driving record because according to you, this may after the car insurance’s price.

  2. Alice Carroll

    It’s interesting to know about that clause regarding original equipment manufacturers. I will have to keep that in mind when reviewing which things are covered by insurance if I need auto repairs. It’s my first time owning a car and I’m still getting used to it so it’s always scary to think about dealing with potential breakdowns.

  3. Can an insurance company refuse to insure because a lease and registration is in dealership name. My insurance company is refusing after insuring me for two years.

  4. Kate Welling

    It’s great to know that there is insurance for leasing a car. I am going to look for a place to give me insurance because I want to lease a car. It would be nice to get this coverage.

  5. Mia Stewart

    I like how the article explains that often leasing companies require more than the state-minimum levels of auto insurance for your leased car. My husband and I currently have just the basic insurance required at the moment but we are considering leasing a car. Thank you for informing us that we may need to get a different auto insurance plan if we lease a car.

  6. My good friend is trying to find some car insurance since she has never had any before. I was not very good at giving advice on this subject so I thought I would browse around for information. It is comforting to read that she will be able to save on car insurance since there are so many ways to do so.

  7. I purchased a used car last year 2015 and have a loan on it. Now if i wanted to lease a car how do i pay off my loan on the car. Does the dealer i am leasing from pay it off theb leases the car to thierr dealership?
    Do i have to put a downpayment to least the car? I am looking into the tbree year leasing of a new car every three years with 10,000 miles per year.

  8. My leased car was in an accident and my insurance wouldn’t cover the cost of OEM so I had to fork out $1500 for the repairs. What am I doing wrong? I think I need better insurance coverage but when I speak with insurance agents, they don’t seem to know about OEM.

  9. I have a lease in my husband’s name. Lease is up and want to buy, but he refuses to stay on car due to dementia. The dealership is stating I have to have purchase since his lease, but any loan will have to be in his name. I do not know what to do.

  10. I like that you point out that gap insurance can protect you if your car gets stolen or totaled. My parent’s bought a new car a couple months ago, but it was totaled in an accident a week after getting it. Because they had bought the gap insurance they were able to buy another car fairly quickly.

  11. I’m new at looking into lease a car. I’m just confused about the insurance and leasing options. Could you give me info please?

  12. If you do not drive long distances, like me (10 mile commute) , and want to keep your payments low, with little or no money down then leasing is definitely a great option. Many people lease to keep payments low and don’t realize that the cheapest lease payment is for 10,500 or 12,000 miles per year. So at the time that they return the lease they have thousands in mile overages. But you can lease with up to 20,000 miles per year (at a cost of course). Also look out for rebates and REQUEST them! You can get a killer lease when rebates are good !

  13. I have leased around 15 cars in my lifetime and have never once regretted it. I especially appreciate the reliability and satisfaction of driving a new car every three years. I think it makes sense for a lot of reasons. Monthly Car Lease gives you some good info and a starting place for negotiating the lease with your dealer.

  14. David Larson

    Hi Admin

    I need a little Help/Guidance as i guess you have some great experience/expert in this field..

    I have a friend who is 25 and lives in New Orleans. He currently pays $240 a month with Allstate for MINIMUM coverage car insurance.

    He has previously tried to find better rates, without success. He is financially burdened by this bullshit, and Louisiana has some of the highest car insurance rates in the country. Currently Driving a Cheap fuel efficient 2003 corolla.

    Anyways, he wants to start searching again for cheaper insurance, but don’t know where to start, looking for any advice on this.

    He is also considering more drastic options like trying to get a rate for somewhere He doesnt live (for example, many people who move to new orleans keep their insurance in their old home state and save TONS)like his friend who moved here from OK, and pays 1/3 what he probably would here.

    Any help is appreciated, all his money is just going down the drain and has for the 6 years since he has been driving.


  15. My car lease ends at the end of October. We are going to return the car, with around 4,000 miles under what we paid for. Small dent on back rear tire well. Looks like residual may be around $500 higher than estimated value. My question: what do we need to do to spend the least amount of money to give this car back, and to lose the least amount of money? Thanks!

  16. Leasing isn’t for everyone, but it has been good for me. I’m currently saving up to buy a used car after this lease (my 3rd one) but the payments are much lower than purchasing and it has been a nice way to build up my credit. When I first started leasing I did so because I could afford either car payments or repairs but not really both and needed something that could drive in the mountains (I live in Colorado). The roads I drive on have fatal accidents somewhat regularly and I’ve now learned that it REALLY matters what you drive. My last (leased) car saved my a$$ more than once when driving safely wasn’t enough.

    In addition, if you’re working 60 hours a week and use your car to get to jobs then having reliable transportation is a must. Plus, honestly, I grew up in poverty and it’s nice to have one nice thing that isn’t broken.

    I don’t know about other dealerships, but mine allows me to use the money I’ve paid into the lease towards buying the car OR towards buying/leasing a different car. If I want to change dealerships then mileage and dings matter but I turned in my last car with a huge dent in it, dirty, missing stuff, and they didn’t charge me for anything. I’m being careful with this one though, so that I have the option of changing dealerships if I want to without paying anything.

    Like I said, it’s not for everyone, but it was/is for me, and gives me wiggle room to save up to purchase a car.

    1. Thanks for sharing your thoughts Kim. As I’ve grown older, I’ve come to cherish the idea of leasing more as I no longer have the patience or the time to buy and sell my cars on Craigslist. Leasing allows one to just turn in the keys, which is great! I still drive a 14 year old car now, but I’m considering putting a lease on my company.

  17. What if I don’t get the required insurance? What will happen? (I have insurance, just not at the super high levels the lease requires)

    1. Edward Sparacio

      I leased and and drove off the dealership’s lot with my 2017 Maxima S. Little did I know that for the past 6 months I only had liability insurance. I asked Progressive to give me full coverage at the time of purchase and took it for granted I had it and received a great price. Three weeks ago I was rear ended and my car was totaled. The person who hit me in the rear had full coverage through Geico and they are supposedly paying for the total loss and a rent a car. They say I may have to pay out of pocket. I had GAP insurance but heard it’s invalid for thopse without collision coverage. What am I to expect?

  18. I didn’t realize that insurance was required for leasing. It’s not something I’ve considered but it looks like it’s not a bad idea. This might lead me to look into some leasing options for the future as our current car is in need of replacing.

    1. Make sure you take it upon yourself to look into additional coverage! No one informed me of GAP coverage and I have never had to file an insurance claim before in my life. I have always had Full Coverage but no one informed me when I leased my brand new car that any additional coverage would be needed. The dealership, lease company as well as my car insurance company all made it very easy to get into my lease and informed me “I was all set”. But I wasn’t fine. I totaled my car and have 20 days to pay the leasing company the remaining $4000 plus I have no vehicle currently

  19. The lease payment may be lower, however it is a very expensive way to have a car. It is very similar to renting. You pay a premium to not owning it. The least expensive way to acquire a car is to pay cash. At the end of a lease you generally have no equity, but you paid for all the depreciation during the term as well as interest at usually a higher rate.

    1. From a cash flow stand point, I see it differently. I pay less than you every month and get more features. Also, cars are depreciating assets. Wise financial types know that you should never own a depreciating asset; rather, you want to own appreciating assets.

  20. Sunil from The Extra Money Blog

    i have never leased a car. i haven’t done a lease vs buy analysis in a while, and am curious what your or anyone else’s thoughts on it are today? it used to not make sense for me to lease, but car prices have changed significantly since i last revisited. your thoughts?

    as far as expenses, i would think additional dings and dongs to the vehicle.

    1. Leasing a car is for the rich. Leasing costs the most, and takes the least time to sell b/c you just hand back the keys. The rich don’t have time for the negotiation process of re-selling.

      Nobody should lease, unless they are making at least 20X the value of the car annually imo. Then, it’s like who cares if you lose several thousand bucks.

      1. Leasing is great if your are like me who gets bored of driving the same car for more than a couple of years. Especially on higher end cars like BMW and Mercedes where the cost of fixing and maintaining the vehicle is high, the vehicle is under warranty for the time I drive it and especially in the case of BMW the oil changes and maintenance is free.

        If you do lease just make sure you do research so you don’t get screwed by the dealer. Know what the Cap cost is, the residue for your particular model, and the money factor. Check KKB and research how many cars in your area sold at what price so you know how
        low to shoot for when negotiating the cap cost.

        One thing I recommend is always taking the tire insurance when you lease. The wear and tear insurance is not so important provided you are careful with your new car. I think the tire insurance is a must if you drive a lot. It adds 20-30 dollars on your monthly paymentt but its definitely worth it if u get a nail or a flat.

        I have already had to change two tires on my car and its only the end of the first year of my lease. A run flat tire on a Bmw costs 300-400 each, but I had the replacements for free because of the insurance.

      2. Just the opposite. The rich can afford to buy cars and pay cash. Leasing makes practical sense for those who don’t have time for car repairs and the maintenance worries associated with aging cars. It is also for people who cannot afford to relinquish tens of thousands of dollars worth of cash all at once.

      3. that’s the biggest bunch of BS ive ever heard. I just leased a 2016 chev Malibu for zero down and $227 a month for 24 months. To purchase this $26,000 car for even a 4 year loan, the monthly payment would have been $500 a month. Ive bought and sold enuf cars to know that unless you try and sell your old car yourself (which isn’t easy or hassle free)……..the dealerships rip you off right and left in the negotiation process when trading in a car and you generally don’t end up with much value in the trade in. Its a clean clear no BS deal just to be leasing a car with one transaction involved. My 2 cents…………

        1. HI mark,

          I am looking into leasing as well. How does insurance work for a lease? do you pay the one that they offer there, or you can get your own? (sorry for the noob question).

          1. I have the same question. I’ve never leased before, but I need a car and can’t afford to buy one outright.

            1. You can get the one they offer or shop around for the best on you can find. Since you need full coverage it will not be cheap. I got a very bad deal on my car lease but a fairly good deal on my insurance given the fact that I was a young male with serveral traffic violations and speeding tickets. Most friends my age in my area were paying about $300 a month whereas I paid $165 month. Please do your research and read the lease agreement before you sign! They have fees for mileage over a certain amount and fees at the end for wear and tear as well as a disposition fee of a couple hundred dollars. Leasing is very expensive when you look at the big picture.

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