Buying Vs. Leasing a Car: How it Affects Insurance
When it comes to getting a new car, you have two main options – buying and leasing. Both sides of the coin come with pros and cons, and of course your insurance may be something that is on your mind when you’re making the decision as well. When choosing whether to buy or lease, there are a few main factors to take into consideration.
The Cost of Insurance
Fortunately, all other things being equal, there is no impact on your car insurance rates whether your car is purchased or leased. If you are looking at the exact same car, simply deciding whether to sign loan documents or a lease agreement, the insurance rate will remain the same since the car itself and factors related to your driving record are the basis for the rate. How you get the car doesn’t impact your rates.
One thing to note about leasing is that it is usually on a brand new car. If you are looking at leasing new versus buying used, you are likely to see a difference in the kind of rates you’re being quoted. That has more to do with depreciation on an older car than to do with the lease or purchase option. And of course, if you are looking at several different models on lease or buying options, the differences between those cars will affect your rates as well.
Do Insurance Companies Need to Know?
Since it doesn’t affect your rates, you might think the insurance company doesn’t need to know if you leased or purchased. But since either the lessee or the lender on the lease or purchase respectively have an interest in the vehicle to protect.
That means that they will require you to add them on the insurance policy so that in the case of a claim they will be paid out the portion they are owed on the vehicle.
Leasing Versus Buying
The decision to lease versus buy is a complex one, and which is right depends on the driver’s needs and habits. Monthly payments on leased vehicles can be quite low for those with good credit, which makes them appealing to those looking to reduce monthly costs. But leases also come with early termination penalties, restrictions on how many kilometers per year you can drive, and may have other fees associated with them.
Buying new cars allow the driver to gain an interest in the vehicle, eventually pay it off and have it as an asset. Of course, a low interest rate is important for those who are looking to have the vehicle be an asset, otherwise you run the risk of going upside down – owing more than the car is worth - as depreciation kicks in.
Making the decision to lease or buy is a personal one, and all of the factors should be considered carefully before making the decision. Of course, getting insurance quotes should be part of your decision when it comes to choosing the right vehicle for you, but won’t impact your choices as far as a lease or purchase.
Getting Insurance on a New Leased or Purchased Vehicle
Most insurance companies extend coverage to currently insured drivers for a certain time period after the purchase of a new car. That applies whether you lease or purchase the car. It allows you to make a purchase or sign a lease when insurance companies may be closed such as evenings or weekends. The company from which you are obtaining the vehicle may request that you provide proof of insurance prior to completing the agreement.
You should notify your insurance company as soon as possible whether you choose to lease or purchase. Even though you have a grace period on the car, it isn’t free insurance. You will be expected to pay for coverage from the date of purchase or lease, so there is no benefit to waiting, and it ensures your insurance company has all the required information in the event of a claim.
Obtaining an insurance policy on your car whether it is leased or purchased follows the same procedure. There is no difference besides the addition of the lessee or the lender to the policy, and all of your coverage and options remain the same.
No matter what you decide, when looking at getting a new car, you should take the time to obtain car insurance quotes on the models you are comparing, and then update your insurance as soon as possible after you finalize the deal. Your new investment needs to be protected, so make your insurance company the first call after you drive off the lot.