Whether you’re leasing a car or financing a car, one thing will not change: you need car insurance coverage.
A leased car requires at least the state minimum amount of insurance coverage (or financial responsibility) to stay legal, so leasing companies might even require higher than the state minimum, which is the lessee’s responsibility. The lienholder wants to make sure that their investment is protected in case the vehicle is significantly damaged or completely totaled, so most auto loan finance companies will not allow you to purchase liability-only coverage.
This means you will have to shop for low auto insurance rates just like you would for a car you purchase. Your lender should explain to you what insurance is required and what is included in the contract. Then, you can determine what you need (including optional coverage) and find the best insurance for you.
A common feature of a lease is built-in GAP coverage, or Guaranteed Auto Protection. This protects you from having to pay the difference in current market value compared to what you owe on the car in case the leased car is stolen or destroyed before your payments are completed, or if the estimated value turns out to be less than expected at the beginning of the term.
Whether looking to lease or buy a new car, it’s important to consider the financial implications of your decision. Leases can have significantly lower short-term costs but gradually build to a higher long-term cost. Buying is generally just the opposite, offering high short-term costs. Regardless of your personal decision, all drivers should consider how they treat their vehicle, their travel needs, credit, and driving history before determining the best financial option for them.