How does car insurance work with a lease?

August 30th, 2016  |  Auto

Leasing a car isn’t exactly the same as owning a car and funding the purchase through financing. Some people think you don’t need to purchase car insurance when you have a lease, but that’s not the case. Even though you don’t own the car, you are still responsible for it’s well-being during the lease. You’re expected to bring it back to the dealership in the exact same condition as when you first drove it off the lot – with the addition of a few thousand kilometres, of course.

So, how does car insurance work with a car lease?

The cost of car insurance

The simple answer is that car insurance on a lease is very similar to car insurance when you purchase a new car outright, own an older car (used), or finance the purchase of a new car. Any driver of a leased car need to have proof of insurance before driving off the lot, as well as at all times throughout the lease. As the person who is leasing the car (and the driver of the car) you’re responsible for the protection and upkeep of the car at all times. Therefore, you’re required to have car insurance during the entire time the car is in your possession.

There is no difference in the price of annual insurance premiums whether you choose to lease, purchase, or finance a car. That’s good news. The price of your annual car insurance premiums depends on the make and model of the vehicle, the year, and your personal information such as age, gender, and driving record, among other factors.

Owners of the vehicle

Leasing a car is similar to renting an apartment. You’re using the space for the time being, but at the end of the lease you need to return the car to it’s rightful owner - the dealership. Although you have use of the car for a specific period of time, you aren’t the owner and that has implications for your car insurance.

Both you as the driver and the dealership as the owner have an interest in the safety and security of the vehicle. Therefore, the dealer usually requires that you add them to the insurance policy when you lease a vehicle.

Adding the dealership onto the car insurance

When shopping around for the best car insurance rates, the insurance agent asks if you are leasing or purchasing the vehicle. If you’re leasing, you need the dealership’s information to add onto the policy.

The reason the dealership needs to be added onto the insurance policy (even though you pay the premiums) is in case there is an accident or theft involving the car. This way, the dealership (the owner) of the vehicle can be paid out if a claim is filed.

If you’re in an accident and the car is so badly damaged that it’s a total write-off, the dealership is  

the party compensated for the loss by the insurance company because they are the owner of the car.

Before you lease a car and get an insurance policy, it’s important you understand the implications and are prepared for the realities involved.

The best rates on insurance

Our hunters will find you 7+ quotes in 3 minutes or less.

Home Insurance