Insurance Requirements For A Leased Car
When you lease a car, coverage is mandatory you cant drive off the lot without it. Because auto insurance requirements are set at the state level, the amount of coverage you need depends on the state where your car will be registered. Your leasing company might have certain insurance coverage that it requires as well, and certain models will be more expensive to insure than others.
Moreover, you must list the leasing company as an additional insured and loss payee. This means that the lessor, because it is the owner of the vehicle, gets any insurance company payout for damages to the insured vehicle.
It Is Possible To Save On Leased Car Insurance
You can get discounts on insurance on leased cars if you bundle your car insurance with your homeowners insurance. Also, you qualify for a lower premium if you have a clean driving license or if your car comes equipped with safety features like a passenger restraint system and anti-theft device. You may also save on your leased car insurance if you go for the cheapest auto insurance companies in your state. If you are a new driver, you can save on your insurance costs by looking for an insurance provider offering car insurance for a new driver.
Do You Have To Have Full Coverage Auto Insurance To Lease A Car
The short answer is yes. Leasing or financing a vehicle requires you to buy full coverage car insurance. Full coverage auto insurance is more expensive than liability-only coverage, but you can still find cheap auto insurance for leased cars if you are willing to shop around.
More than a quarter of new car sales reported in the last year were leased vehicles.
Most dealerships require it as part of the contract. Auto leasing insurance requirements have become increasingly important to understand as leasing has gained popularity in recent years.
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What Happens If My Vehicle Is Stolen
You must notify the Police and then Arval within 24 hours. Arvals Accident Management provider will monitor the progress directly with the police. After 21 days if the vehicle hasnt been recovered, or has been recovered but has been deemed a total loss, then the vehicle lease will be terminated at Arval and your monthly rental liability will cease for any future rentals. At this point, Arval will invoice the relevant Customer Incident Charge to you.
If there has been an act, omission or negligence by you or your driver which contributed to, or resulted in the theft of the vehicle then the termination costs will be borne by you. If at a later point the vehicle is recovered and sold or any monies are received, these will be credited back to you up to the value of the charge you received.
Should I Lease Or Finance A Car
Even though both leasing and financing include making monthly payments to get behind the wheel of a new car, there are some major differences between the two methods.
Financing a car means making a down payment and paying an auto loan off until you have full ownership of the car. Leasing a vehicle is similar to paying rent on an apartment. You agree to use the leased vehicle for a set amount of time and pay the leasing company however much your car depreciates over the time period.
While leasing a vehicle is a somewhat straightforward process, there are some upsides and downsides to pursuing this option.
|Pros of a Car Lease||Cons of a Car Lease|
|The car stays under a factory warranty, giving the driver some peace of mind||Some dealerships have limits on mileage and wear and tear|
|Monthly payments are generally lower than on an auto loan||Car depreciation is usually at least 20% in the first year, and the driver will pay for it|
|The driver isnt responsible for selling the car once the lease expires||Breaking a lease early can lead to higher fees|
|The driver may have the option to buy the car when the lease term ends||The driver wont build equity like they would on a car they bought|
Its usually a better idea to finance a car than to lease one. Leasing can be a great way to get behind the wheel when you cant afford to finance or outright purchase a vehicle, though.
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Additional Features May Be Mandatory
In addition to the compulsory insurance coverage by the state, the leasing firm may require additional comprehensive and collision coverage. The collision cover pays for your car damages in case it rolls over or gets into a crash with another irrespective of who is at fault. The comprehensive option covers damages that are not accidents related to theft and vandalism.
What Is Gap Insurance
Even if you have the coverage required by your state laws and collision and comprehensive coverage required by your lease agreement, the bank or dealership may also require you to purchase what is called gap insurance.
This type of insurance covers the gap in the event that your car is totaled and there is a difference between the amount your car insurance pays you for it and the amount that is owed on your lease.
This can happen because the amount your leased car insurance company pays you for a totaled vehicle is based on its actual cash value, not the amount that is still owed on a lease or a car loan.
Gap insurance is different than other insurance coverage on a leased car, because it is usually rolled up into the lease payments, so no extra payments or additional companies need to be paid.
In most cases, the dealer or bank that leases the vehicle out will purchase a master policy from a large insurance company. This policy covers the gap insurance for all of the vehicles that they lease out.
The bank or dealership will then charge you for a gap waiver with your lease agreement.
If you will be leasing a vehicle, you should check with your leasing company or on the contract to find out if you are responsible for obtaining gap insurance or if it is rolled into your lease payments.
Even people who are purchasing a vehicle might want to look into obtaining a gap policy.
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What Are The Cons Of Buying A Car
Plenty of cons for buying a car exist, too. Familiarize yourself with them so you can determine if its still in your best interest to buy versus lease.
Upfront Costs are Higher
The upfront costs are often higher when you buy a car. Many finance companies require you to put 10 to 20 percent of the cars value down as a down payment.
The monthly payments are also going to be higher because youre purchasing the entire vehicle instead of simply leasing it for a short period of time.
There is often a balance between what you can afford for a down payment and what you can afford as a monthly payment. The more you put down, the more affordable your monthly payment will be.
Insurance is Higher
In addition to what the state requires for car insurance, you also have to look at what the lien holder requires.
If you choose to finance your car when you buy it, you have to meet the requirements of the lienholder until the loan is paid off, and the title is transferred to your name.
The lienholder might require you to have collision and comprehensive coverage, which is common. These requirements also add more financial protection to your policy.
If you get into an accident that is your fault, you would have the coverage to make the repairs to your car. Plus, you have the coverage for non-collision related accidents, such as a rock hitting your windshield or hitting a deer on the road.
Increasing coverage will increase your premiums.
There Might be Negative Equity
Car Leasing And Insurance
Just like buying a car, when leasing youll need to obtain fully comprehensive car insurance* to protect not only you and your property but to also protect other people and their property as well. It’s also worthwhile in considering key insurance – it’s a great peace of mind service for replacement of keys and locks in the event they are either lost or stolen.
*Unless you stipulate that you’d like an all-inclusive package such as Total Care, insurance is not included in your car lease contract.
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What Are The Insurance Requirements In The State
According to AAA, insurance requirements vary from state to state. In most states, strictly third-party liability insurance is required.
This type of coverage will pay for the bodily injury and the property damage that is caused by the insured person and other listed or permissive drivers.
The actual limits that are required cross-country are fairly low, but some states have pushed for higher limits than others.
It is also possible that you might be required to carry personal injury protection and uninsured motorist coverage that will pay for your own medical bills.
Whatever the state insurance requirements are, its your job to be sure that you comply with them. Failing to comply with these mandated laws could result in court dates in both civil and criminal court.
Looking For A Great Car Lease Deal
Here at Lease Fetcher, we make comparing car lease deals easy. We round up deals from the UKs leading leasing brokers so you can compare them, all in one place. Read up on our car leasing tips and see our personal car leasing and business car leasing deals pages for more!
About The Author: Chloe Murphy
Chloe is our resident wordsmith. If you’re looking for car leasing tips and tricks, advice for car maintenance, or information about the latest car technology, Chloe writes easy-to-understand posts that cover all bases!
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Complete Care Terms And Conditions
Complete Care is available to drivers aged between 21-70 with no more than 2 at fault claims in the last 2 years and no more than 6 points on driving licence. The driver must not have been subject to a driving ban in the last 5 years and must have held a full UK/EU licence for at least one 1 year. Prices are based on the postcode of the customer. 72% of our customers would qualify for the advertised price however a confirmed rate will be sent in writing upon request.
In the event of an incident resulting in damage, loss or theft to the vehicle, the customer will be required to pay an excess known as a Customer Incident Charge if they are found to be at fault. The CIC varies depending on the number of at fault incidents for the vehicle and is an escalating charge as follows:
- First incident is £250
- Second incident £350
- Third and subsequent incidents £750
If a repair is lower than the CIC, then the customer will only be charged for the loss, also known as a Customer Elected Payment .
Full eligibility criteria, restrictions and policy exclusions are available upon request.
Am I Entitled To A Replacement Vehicle When Mine Is Off The Road Due To An Accident
You are entitled to a courtesy car for the duration of the vehicle repair and is subject to the repairers conditions. Please note this will not be a like for like replacement of your existing lease vehicle.
If you are involved in an incident where the Third Party has been identified and proved at fault, you may be provided with a vehicle similar to your current lease through Arval’s credit hire provider, Accident Exchange subject to acceptance.
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Who Is Allowed To Drive My Vehicle
For customers on a Personal Contract Hire agreement, the drivers spouse or partner and immediate family can drive the vehicle provided they fit the eligibility criteria.
For customers on a Contract Hire agreement, any employee of the company and their spouse, partner or immediate family can drive the vehicle, provided they fit the eligibility criteria.
There is no limit on the number of additional drivers, providing they meet the criteria.
Restrictions and exclusions also apply, for example, in relation to age, driver history and use of the vehicle.
How Do I Insure My Lease Car
Youll be glad to know that insuring a lease vehicle is no more difficult than if you were insuring a car you had bought. The main difference is that the leasing company is the registered keeper and owner of the car, not you. For the most part, this means you wont have to worry about taxing your new motor. However, be sure to check this with the leasing company, as some specify that its only included for the first year.
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When Does Leasing Make Sense
If you own your own business and use your car in your work, you can write off some or most of your vehicle spending including lease payments and repair costs on your taxes. At the same time, leases limit the number of miles you can drive without a penalty. If your business requires a significant amount of driving, a lease may be prohibitively expensive.
Talk to a CPA about your tax options and whether a car lease is a good fit for you. If so, start shopping.
What Is Glass Protection
Arval is responsible for repairing and replacing the body glass to your vehicle. You must report the damage to Arval and the repair will be arranged via Arvals network.
You will be required to pay a per incident charge which is fixed at £100 per incident where it is necessary to replace the glass. No CIC applies where the glass is repaired. The glass CIC does not count towards the escalating CIC for incidents.
To report an incident or for glass replacement call the Arval Driver Contact Centre on .
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Standard Car Insurance Requirements For Leased Cars
You will be required to carry an adequate amount of personal car insurance on your leased car because its required that all vehicles must be insured in the state where it is registered.
State car insurance requirements are very strict and they are not avoidable.
As long as the car is registered to be driven, it needs to have at least liability insurance, and it is the registered vehicle owners responsibility to buy the coverage.
Just because you are not the titleholder does not mean that the car is not registered in your name.
When you lease a car, the car will be registered to both the leasing agency and the contract holder.
You will be considered a co-owner of the car to the Department of Motor Vehicles. This is because you are responsible for damages that happen while you are driving and for fees accrued from tickets.
The leasing company is listed because they have an interest in the car.
What Are Additional Leased Auto Insurance Coverage Options
In addition to full coverage insurance and GAP insurance, you may want to consider additional coverage options to ensure you have enough insurance coverage on your leased vehicle.
Other types of auto insurance coverage that may be mandatory in your state or wise to consider include:
- Bodily Injury Liability Most states make this type of coverage a legal requirement of all drivers. If you cause an accident and someone else is hurt or killed, this coverage is extremely valuable.
- Property Damage Liability This coverage is for situations where you are again at fault but damage or ruin someone elses property. In most cases, it is a vehicle, but it could also be utility poles, trees, or garage doors. It is also mandated in most states.
- Uninsured/Underinsured Motorist If you are hit by a driver who does not have auto insurance or is not adequately covered, this coverage is essential, which is why many states require it of their drivers. You are allowed to purchase more than the required amount. However, many drivers elect to purchase greater amounts of collision and comprehensive coverage instead.
- Medical Payments If you or one of your passengers are injured in an accident and needs medical care, it will be covered under the medical payments coverage part of your auto insurance policy. This coverage is accessible no matter who is at fault for the accident, and some states may legally require it. It is also referred to as personal injury protection.
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Do You Need Gap Insurance On A Leased Vehicle
Gap insurance is also known as guaranteed auto protection insurance and its intended to help make up the difference between the amount you owe on the leased car versus the amount your insurance company might pay if the vehicle is totaled.
New cars quickly lose value, so what the leasing agreement says you owe for a lost or damaged vehicle could be more than what your insurance company is willing to pay. In addition, some insurance policies have exclusions, such as previous accident damage or overdue payments, that could limit how much youre paid. The difference could leave you on the hook for thousands of dollars.
The concept can be confusing due to the different ways dealerships and insurance companies cover the gap, but here are some basic approaches:
|Agree to pay any difference on your own||Includes gap coverage in the cars lease at no cost||Gap coverage sold by an insurance carrier|
|Sells a waiver or coverage for the gap between the owed amount and the cars value, bundled into your lease|
|Agrees in advance to accept the insurance companys settlement, in effect offering a waiver at no cost|
Heres more on the two main types of gap insurance you may be offered or can shop around for.