Car Insurance Considerations for Leasing vs. Buying
Looking for a car can be exciting, especially if you enter the showroom with a plan. Whether you have decided to lease or purchase, you are confident in the research and know what type of car you want and how you intend to finance and insure the vehicle. Let’s look at the basics of leasing vs. buying and the impact these choices will have on your car insurance.
Leasing Points to Ponder
When you lease a brand new car, the lease period is usually 3 years. This means you’re always driving a newer model vehicle. Many leases include free scheduled maintenance, which covers things like oil changes and tire rotations. Being new, the car should not experience any major mechanical issues for you to worry about, which means no additional repair expenses. Lease payments are lower than if you purchased a vehicle outright, and you may be able to afford a higher priced vehicle than you would be able to purchase. At the end of the lease period, you simply bring the car back and turn in the keys. If you prefer to always drive a newer car, leasing is your best bet.
The downside to leasing is that it may include paying mileage penalties if you exceed the allowable annual mileage provision. If you end up damaging your car beyond what the manufacturer covers, you may also incur charges for excessive wear and tear. If you want to turn in the lease sooner than its term you need to make the remaining payments. If you decide to switch brands at the end of the lease, you may have to pay a fee.
Considerations for Buying a Vehicle
Purchasing a car allows for the owner to customize a new vehicle. There are no mileage restrictions on a vehicle you own. Longer-term financing plans are available to qualified buyers, which reduces the monthly payments on vehicles, but they can still be higher than if you leased. The good news is that you may trade in or sell your car at any time, free from penalty. At the end of your financed payments, you own the vehicle and have accrued equity that you can apply to the purchase of your next car.
The biggest downside to buying a brand new vehicle is that outside of the vehicle warranty, you are responsible for all maintenance-related charges from day one. At some point while you own the car, your warranty will run out, and if you trade the car in early, the remaining payments will be rolled into the cost of your new car. You will also be paying interest on the total purchase price of the car, and you will probably need to put down a larger down payment.
Car Insurance Impacts: Leasing vs. Buying
Car insurance premiums for leased vehicles run higher because the leasing company retains ownership of the car and must protect its interests against potential loss in case of an accident. This is the case when the manufacturer includes gap insurance, which pays off the car in the event of a total loss. The policy you purchase may be dictated by the leasing company and exceed the state requirements for car insurance coverage which increases monthly premiums.
Those who finance the purchase of a car are required to provide proof of insurance to the lending company. There may be additional requirements, but typically the policy purchased just needs to meet the state requirements for minimum insurance which will keep car insurance premiums lower than those of a leased vehicle.
Whichever you choose, NSure can provide options for the perfect car insurance policy for you whether you lease or purchase. You can easily compare quotes in minutes from 50 leading insurers. Put your plan in place for peace of mind.