How much is car insurance for a leased car?

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Tonya Sisler has a Bachelor’s Degree from the University of South Carolina in Journalism and has worked for 15+ years in management. She has also completed a proofreading certification and is currently a professional writer.

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Brad Larson has been in the insurance industry for more than a dozen years. He started out as a claims adjuster for a national carrier. He has since switched to the agency side of the business. Brad is licensed in all P&C lines.

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Reviewed by Brad Larsen
Licensed Auto Insurance Agent

UPDATED: Mar 13, 2020

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In a nutshell...

  • Even if you are leasing your car, you must car insurance coverage
  • Auto insurance premiums for leased vehicles depend on a number of factors
  • You should 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

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.

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.

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

Depending on the car insurance laws of your state, 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.

Even though lease documents are crafted well enough for the lessor to avoid almost any liability, there is still a chance someone could break this shield and sue the car leasing company direct (since they legally own the vehicle).

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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

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, so while it is true that auto insurance is more expensive for a leased car, it’s also not uncommon for many drivers to have the same policy coverage already.

Plus there are many advantages of 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

You should 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.

Ready to compare car insurance quotes? Simply enter your zip code below and start comparing quotes for FREE!

References:

  1. https://www.statefarm.com/insurance/auto/coverage-options/liability-coverage
  2. https://www.allstate.com/tools-and-resources/car-insurance/property-damage-liability-insurance.aspx
  3. https://www.nationwide.com/how-much-is-car-insurance.jsp

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