Leasing vs. Financing: How it affects insurance
If you decide to finance the purchase of your car or decide to lease it, you will be required to obtain auto insurance to protect your vehicle. Auto insurance considers a number of factors to underwrite a new policy, including driving history, geography, and the type of vehicle you will be driving.
So what’s the difference between leasing and financing a car, and how does insurance play a role? The big difference between the two is that with financing, you are taking out a loan so that you can purchase the car and make payments to the financial institution in addition to interest. You will have to pay this loan out unless you decide to sell your car. With a lease, you don’t own the car and don’t take on the task of paying if off. Instead, you are paying month to month to a leasing company so that you can drive the car. Many leases provide the opportunity to purchase the car once the lease term is complete.
Some coverage may be required by law and some will be optional. It’ll be important to make the right decision and speak to a licensed insurance advisor if you have any questions or need assistance in selecting an auto insurance policy. Surex can also help you step by step with our easy to use online auto insurance quote tool. Here are some options for types of coverage:
Accident benefits coverage - if you’re injured, Accident Benefits help you recover
Liability coverage - protects drivers financially in the event of an accident where you’re at fault
Physical damage coverage - This protection covers the physical damage to your car
In the event of a claim, your two options of leasing or financing may play a part in how the claim is handled. If you lease the vehicle, your insurer would discuss a settlement instead of you.
Some benefits of leasing a car include being able to switch up your cars every couple of years due to lease periods lasting only 2-3 years; lower maintenance costs as most vehicles that are leased remain under warranty; and lower upfront or monthly payment costs.
Benefits of financing a car include full ownership once the loan is fully paid off (assuming you made your required payments), and there aren’t any restrictions when it comes to the amount of kilometers you put on your car. The majority of lease agreements will restrict the amount of mileage that you can put on a leased vehicle.
Learn more about your options for auto insurance here.