Are you currently thinking about getting a new car? If so, you may want to consider leasing your next vehicle instead of purchasing it. Leasing is a fantastic option for drivers who enjoy using the newest models or individuals who don’t want to commit to a particular model for too long.
However, whether you choose to buy or lease car insurance is still important — failing to assess the nuances of your auto insurance policy makes it easier for you to make avoidable mistakes in the future.
If you have questions about insuring a leased vehicle in Canada, be sure to continue reading.
What is a lease?
Before we answer your questions about insuring a leased car in Canada, we should take a moment to review the basics.
In a sense, a lease is similar to a long-term rental agreement. Drivers are required to pay a fixed amount regularly. Making timely payments allows drivers to use the car; however, these payments are not included if you decide to purchase your car after the lease expires (we’ll touch on that again later).
Generally, vehicle leases range from one to four years. After the period concludes, the driver returns the vehicle to the dealership. At this point, the driver can purchase their current model or lease a different car.
This is quite different from purchasing a vehicle — to buy a car, you have to make a sizeable down payment (often 10% to 20%), followed by monthly payments until the original cost is covered.
Pros and cons of leasing vehicles in Canada
There are several positive and negative aspects to leasing a vehicle in Canada. Here’s a swift list of some of the most noteworthy pros and cons.
Pros of leasing a vehicle
Some common reasons why drivers prefer leasing include:
Lower monthly payments
Your monthly lease payments are generally based on the overall depreciation of the vehicle. Because of this, leasing is a cost-effective choice for drivers that spend less time on the road.
Always have access to the newest features
Are you the type of driver that appreciates having the newest gadgets in their vehicle? If so, leasing may be the right choice for you.
As mentioned above, lease contracts generally last between one and four years. If you lease a new vehicle every four years, you’ll be able to treat yourself to the latest features and interior upgrades.
Less of a hassle
There’s no denying that selling an old vehicle can feel like a chore. Several tasks need to be completed before the sale is finalized. For instance, drivers have to:
- Temporarily store the vehicle
- Post pictures online or in a local publication
- Complete paperwork
- Notify your auto insurance provider about the ownership change
On the other hand, if you lease your vehicle, you can skip all the headaches related to getting rid of your previous model. This saves you time and energy in the long run.
Cons of leasing a vehicle
Although leasing has its perks, there are some negative aspects that you should be aware of:
Set kilometre limit
Your lease contract will clearly state your set kilometre limit. For instance, most dealerships will limit your driving to 20,000 km per year (this number varies depending on the make and model you lease). Although this may seem like a lot of mileage, it does make it difficult to go on impromptu road trips or drive across the country.
Additionally, it’s worth noting that you’ll be required to pay additional fees if you exceed your kilometre limit. Canadian dealerships charge up to 20 cents per kilometre that you drive over the limit.
Thankfully, if you notice that you’re about to surpass your limit, you can avoid these fines by increasing your limit. Although this will still cost a pretty penny, it’ll be less expensive than the alternative.
Costs more if you choose to purchase the vehicle
Although leasing helps drivers save on their monthly payments, it’s not the most economical choice if you want to purchase the model afterwards. If you do this, you have to pay for the value of the vehicle minus depreciation.
However, the monthly payments that you’ve made for the past four years are not included. In turn, you’ll end up paying more for your vehicle if you decide to purchase it after the lease concludes (as opposed to buying it on day one).
FAQs about leased vehicle insurance
You’d be surprised how often we receive questions about insuring leased cars in Canada. Here are some of the most common questions we’ve been asked:
Car leasing with insurance — is it required in Canada?
Yes, drivers need to have proper auto insurance in Canada, regardless of if they’re driving an owned or leased vehicle. Driving without auto insurance is a serious issue and can lead to hefty fines.
In Canada, you need to have the following types of insurance in order to drive a leased vehicle:
- Uninsured motorist
- Third-party liability
- Comprehensive
- Collision
- Accident benefits
Does car lease include insurance in Canada or not?
Generally, car leases do not include any form of insurance coverage. In fact, most dealerships require drivers to obtain select types of high-quality insurance from a third-party provider before committing to an agreement.
If you’re struggling to find cheap car insurance quotes, you should reach out to one of our insurance advisors. Our team can provide you with up to ten quotes in ten minutes, giving you the ability to compare prospective plans until you’ve found the perfect match.
Does leasing influence car insurance premiums?
Yes and no — for instance, you would pay the same amount for collision coverage, regardless of if you lease or own your vehicle.
However, the primary difference is that drivers that own their vehicles get to pick their level of coverage, whereas drivers that lease their vehicles have to meet certain requirements. For example, dealerships require drivers to obtain comprehensive and collision coverage; on the other hand, drivers who own their cars can choose to forgo these options if they wish.
Because of this, drivers who lease their vehicles have less flexibility when it comes to influencing the price of their insured lease premiums.
Do you still have questions about getting insurance for a leased vehicle?
If you have any questions that you’d like cleared up, don’t hesitate to reach out to your insurance advisor. Your insurance advisor can guide you and help you make informed choices that can help save you money in the long run.
