When it comes to a new car, you generally have two options. The first is to lease the car while the other is to purchase the car. Of course, if you purchase the car, you have larger monthly payments, and you are stuck with the vehicle until you want to attempt to sell it. With a lease, you just have to trade it in, and you receive something new.
However, there are other variables that come into play when you are looking to either buy or lease a car. One element is the insurance. Insuring a leased car is similar to a car you own, but there are a few small variables you should consider. These elements might be enough to cause you to rethink leasing and instead opt for buying a car.
Higher Insurance
For starters, you need to know that leasing a car is going to bring about higher insurance costs than if you buy a car. Buying a car still, in total, is more expensive per month while you are making car payments, but insurance is an unexpected expense that many individuals might not be aware of, especially when switching from a purchased vehicle to a leased vehicle. You might think that this really isn't fair; that you should receive the same rates as buying a car, but it actually makes sense, when you think about it. When you buy a car, it is yours, and you are insuring and protecting your own car. With a lease, you are basically driving the bank's car. When you drive the bank's car, it is going to mandate a specific lease, which in turn increases the price.
Keep in Budget
Make sure you budget for the higher insurance when you sign a lease. Many individuals max out their budget with their lease because they assume they know what the insurance is going to be. However, when the insurance is higher, it ends up sending them over their budget estimate. Due to the higher rates, it is better to contact your insurance company and tell them you are considering a lease and the kind of model you are thinking about. They can tell you the price range you might pay for such a vehicle. From there, you can think about if you can afford the same vehicle now or if you need to move down to a different lease option.
Overlapping Coverage
If you are currently leasing a car and paying the insurance, you need to also make sure the insurance company knows about any possible trade-ins. With the trade-in you no longer are driving the same vehicle off the lot, so should you become involved in an accident, the insurance company is not going to cover it, and you'll be stuck paying to fix the bank's car out of your own pocket. There might not be anything worse than spending several thousand dollars on a car that isn't even yours. Because of this, always tell the insurance company you are trading in for overlapping coverage.
