Unless you live in a major city like New York or Boston, you probably need a car to get around town! Buying a car can be a major expense depending on what you are looking for, and there’s a lot to consider. Many people decide to lease a car, but a lot of people don’t fully understand what leasing entails. That’s why we’re going to take the time today to address a question that we get asked more than you think: Do I need special insurance if I lease a car?
Before we can wrap our heads around insurance and leasing, we must first make sure that everyone is on the same page as to what leasing is. When you obtain a car you have three options. You can buy the car in cash. You can finance the car—which means you obtain a loan and pay a certain amount every month until that loan is paid off. When the loan is paid off, you own the car. Or, what we’re talking about today, you can lease the car. When you lease a vehicle you also make a monthly payment, but you are essentially paying to borrow the car. You won’t own the car after your lease is up.
Not owning the car does not mean that you can get away without having insurance for the vehicle. In the United States, to drive a vehicle, you must have some form of car insurance. Whether you own, lease or are borrowing a vehicle is irrelevant.
In fact, most dealerships have a minimum amount of coverage a person must have in order to lease a car. That means that you will likely be able to get less coverage if you owned the car, as dealerships are going to want to protect their investments. In general, dealerships will require someone who wants to lease a vehicle to have a certain amount of liability coverage, collision coverage and comprehensive coverage. If you own a car, you can usually choose to forgo collision and comprehensive coverages. Though it is a pretty big gamble since those bills can rack up quickly if you are involved in an accident.
It’s also worth considering that even though you are making a car payment every month, if you lease a car you don’t own it. Which can put you in quite a predicament if you total the car early on in your lease. That’s why many leasing companies always include gap coverage as part of your lease payments. This coverage kicks in if you can’t cover the cost of your loan and your car becomes totalled in an accident.
Getting a car is a big deal! Unfortunately, there is no one piece of advice that is going to apply to everyone. For many people, buying a car may be the right way to go. For others, leasing might make the most sense. Regardless of what you choose, it’s important to remember that you are going to need car insurance too! It’s also worth remembering that if you are considering leasing a car, you are going to need to meet a minimum amount of coverage requirements.
If you still have questions about car insurance, or want to inquire about getting a policy, we encourage you to reach out to the staff at TGS Insurance. They are experts in the auto-insurance space and are always willing to work with you to find the perfect policy for your lifestyle. Visit www.tgsinsurance.com to learn more.