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How much is Car Insurance for a Leased Car?

Car insurance rates for leasing a car will always be higher than purchasing auto insurance for a financed vehicle or one you own outright. The reason for this has everything to do with the auto insurance requirements of your car leasing agreement and not state laws.

If the title of the car is in your name (whether you own it free and clear or finance the purchase with an auto loan) then you have the choice of what type of car insurance to buy. The only requirement is you comply with the laws of your state. The difference with leasing a car however the title is not in your name as the auto leasing company retains title to the car.

How this poses a more expensive cost to auto insurance is you are subject to the minimum car insurance requirements set by the leasing company and they will want a very comprehensive policy which contains far more coverage than minimum state requirements.

How much more car insurance do you need for a leased car?

This depends on the car insurance laws of your state but you can assume the leasing company is certainly going to require a lot more auto insurance coverage than they lobby as “reasonable” amounts to your state representatives. A good example is to look at Florida’s car insurance requirements:

In Florida you are required to have $10,000 liability and $10,000 property damage coverage however if you lease a car the finance company will require at least $100,000 in liability coverage.

Why? Even though lease documents are crafted well enough for the lessor to avoid almost any liability during your lease there is still a chance someone could break this shield and sue the car leasing company direct (since they legally own the vehicle). The wonderful thing about this for big business is the lessor actually incurs no additional cost for obtaining higher car insurance coverage as you have to pay for it.

How much does it cost for car insurance of a leased car?

Auto insurance premiums for leased vehicles depend on a number of factors including your driving record, type of vehicle, where you live and more. Your risk profile is the same regardless if you purchase or lease a car. Why you pay higher car insurance premiums for a leased vehicle is you have to abide by the minimum car insurance requirements of the leasing company which are always higher than state requirements.

Why do People lease cars if auto insurance rates are higher?

Most drivers secure much more insurance coverage than state minimum requirements anyway so while it is true that auto insurance is more expensive for a leased car its also not uncommon for many drivers to have the same policy coverage already. Plus there are many advantages for leasing a vehicle including:

  • Tax Deduction: Auto lease payments are generally tax deductible whereas an auto loan payment is not. This can be a deciding factor for persons who are self employed
  • New Car Fever: Most lease terms are around 36 months so its an easy way for many drivers to always stay in a new car and not worry about the hassles of trying to sell a used car.
  • Always in Warranty: This is a big factor for many drivers since you never have to worry about repair costs as most lease deals have a pretty comprehensive warranty for the term of the lease

Leasing a car certainly has many advantages and the cost of having to purchase additional car insurance is really not that big enough to deter many people. You should however always understand the types of auto insurance available, what auto insurance discounts are around and how policy deductibles work before buying any car insurance policy.

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