Insurance Savings

Leasing a Car:
Save A Little Here...
Don't Save a Little There

Millions of people each year take advantage of lower monthly car payments by leasing their vehicle rather than purchasing it. The process of leasing the car can be confusing enough with concepts like early termination costs, extra-mileage charges, and fees for wear and tear, but getting auto insurance for that leased car can make leasing a car an even bigger enigma. It is important that you understand the costs in insuring a leased vehicle before you sign on the dotted line.

Almost all car companies require that you purchase more than the minimum insurance required by your state on your leased vehicle. Plus you will, at a minimum, have to purchase collision and comprehensive coverage. This way the car will be covered should you become the victim of fire, theft, vandals, or other things that could damage your car besides a collision. Some leases require other coverage like uninsured motorist coverage. Plus the lease may even dictate the minimum deductible allowed in your policy.

Another item to check out in the fine print of your lease contract is if your lease includes gap insurance. This is an important insurance to have with a lease vehicle, as it will cover the difference between the market value of the car and the amount you still owe on it should you have an accident that totals the auto. Sometimes the difference is is the thousands of dollars, because cars depreciate quickly. A car loses between 20 and 30 percent of its value the moment you drive it off the dealership lot. On a $20,000 car, it could mean you would end up paying up to $4,000 if the car is totalled soon after you obtain it should you not have gap insurance.

Gap insurance coverage covered by the lease may also be subject to the amount of collision and comprehensive coverage that you have on the car, so make sure you have a good understanding of this portion of your leasing contract. You could face having to pay a significant amount of money to the lienholder if you are in violation of this portion of the contract. Most leases also require that you continue to make your payments until you receive the money from your insurance company and are able to pay off the lienholder.

If your car does sustain damage but is not totaled out, then you also need to be careful of who does your repairs. Your insurer may offer you a discount if you use their mechanic, but make sure that the repairs satisfy the terms of your lease. For example, make sure that the paint matches or that the parts replaced are original manufacturer parts. If not, you could end up paying out significant penalties when you turn your car in at the end of the lease. Be careful here, too, as many auto insurance policies have clauses about what types of parts have to be used for repairs, and the may not have to pay for the manufacturer parts at all.

It is very important that you weight the saving from leasing a vehicle against the cost of your auto insurance. Make sure you know what you have to purchase in auto insurance prior to getting your lease. Many car companies will let you know ahead of time what you will need for a particular car, so take the information to a broker and obtain an accurate estimate before signing your lease. Make sure it is a payment you can afford. After all, there is no use in obtaining a car you cannot drive, because you do not have auto insurance on it.

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