YOU ASK:

Is car insurance cheaper if you buy vs. lease?

WE ANSWER:

All things being equal, the premiums for a financed new car and a leased new car are the same.

Remember, the value of the car is what determines the premiums. So whether it is bought through financing or leased, the car's value is the same. The difference will be to who the collision and comprehensive insurance claims payments will be given.

Buying a new car or just leasing depends on your preference. Both choices have their advantages and disadvantages.

  • Buying a new car will mean that you own the car once you fully pay for it. However, you will need to consider things like depreciation and valuation.
  • Leasing, on the other hand, would mean you get to drive any car you want - a new car every three years, if you prefer. However, this would be more expensive in the long run.

The point is, whether you buy the car or lease it, you still need to get car insurance coverage.

If you buy or lease, you will need to get comprehensive and collision cover, aside from the requisite liability insurance. Of course, the bank and the leasing company will want to have the car adequately protected.

For the bank, they would want to make sure that if something happens before you fully pay up the car; the value of the car will not be considerably decreased since you can get it repaired. The same goes for the leasing company. They would want you to get comprehensive insurance - it's their car, after all.

Gap Insurance

This cover protects leased cars by insuring the gap between what the driver still needs to pay on the lease versus the appraised value of the leased car, as set by the car insurance company. In the event that the car is declared a total loss, the gap insurance will pay the difference in order for the lease company to get full payment.

For instance, a new car is declared a total loss and it has been newly leased with a value of $30,000, and the car insurance valued the car at only $25,000. The gap insurance will cover the remaining $5,000 in order for the lease company to get the full amount.

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