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Whether you decide to lease or buy a vehicle, you will require car insurance either way. There are some differences between insuring a leased vehicle and insuring a financed vehicle. When you purchase car insurance for a leased vehicle, the leasing company must go on the title as they actually own the vehicle. Essentially, when you lease a vehicle, you are paying to drive the car as opposed to owning the car. Lease monthly payments include rental of the vehicle, interest, taxes, and depreciation for the period you drive it. 

Benefits of Leasing a Vehicle

List of Requirements

If you are not quite ready to purchase a new vehicle leasing is a great alternative. The largest benefit of leasing a car is lower monthly payments. Essentially you are paying to drive the car and the depreciation of the car. Typically a car lease contract is between 2 and 4 years, which is perfect for those who like to drive a problem-free car. Leasing also allows the option of obtaining a brand new vehicle every 2 to 4 years. Many dealerships offer free oil changes and services in an attempt to obtain your business as well as protect their interest in the vehicle. Another great benefit to leasing is the ability to take advantage of tax benefits if you are using the vehicle for business purposes, such as a real estate agent. The government of Canada allows for tax write-offs for a portion of the lease payments on the vehicle as well as fuel and maintenance tax benefits. At the end of the term of the lease, you have the option of trading it in for a new model or the option of buying out the lease at the residual value. 

Gap Insurance

Most dealerships offer Gap insurance at an additional cost to those leasing new vehicles. Gap insurance is a wise choice as it covers the gap between the actual value of the car and how much you owe the leasing company. Brand new vehicles begin to depreciate the minute you drive them off the lot. In the event, you were in a collision and your leased vehicle was written off, gap insurance would cover the difference between the actual depreciated value of the vehicle and what you still owe to the leasing company. Without gap insurance, you would be personally on the hook for the difference. Gap insurance also covers any outstanding payments you owe the leasing company after insurance has been paid. 

Waiver of Depreciation

Another wise option is purchasing a waiver of depreciation from your insurance provider as an add-on to your policy. When a waiver of depreciation is in place, the insurer will not consider the depreciation value of the vehicle and they will pay the purchase value of the vehicle in the event of a total loss. A waiver of depreciation has a time limit of between 2 and 3 years. 

Leasing Versus Financing a Vehicle


Some people are confused about what the term leasing actually means. When you lease a vehicle you do not own the vehicle and will never pay it off. Even though you make regular monthly payments as you would a financed vehicle, you never own it. Leasing a vehicle may be a good option if you like lower monthly payments and like to drive a Brand new vehicle every 3 to 4 years at the end of the term of the lease. When you finance a vehicle the vehicle is solely in your name, you make monthly payments on it until it is paid off and you own it outright. However, when you finance a vehicle the lender will place a lien on the vehicle until the loan is paid in full to protect their interests. 

How Car Lease Insurance Works

Car lease insurance works pretty much the same as a financed car insurance policy except the leasing company will appear on the title as they own the vehicle. 

What Kind of Insurance do You Need For a Leased Car?

Most leasing companies have specific coverage requirements such as collision and comprehensive coverage on a leased vehicle. The reason being the leasing company owns the vehicle and they will want it fully protected. You may also be required to purchase $1 million in third-party liability as well as any other specified coverages. 

Insurance For Leased Car vs. Bought Car

Whether you lease or purchase a car, the leasing company or the lender must be paid off if the car is totaled. Both leasing companies and lenders require you to list them on your insurance policy. 

Driving a Leased Car Without Insurance


It is mandatory in Ontario to have car insurance in place prior to driving any vehicle. If you drive a leased vehicle without insurance you will be fully responsible for any damages and liabilities should you become involved in an automobile accident. 

Is There a Difference in What I Will Pay for Insurance When I Lease a Car?

Typically whether you lease, finance, or own a vehicle, the method in which you have it in your possession doesn’t affect your car insurance cost. Insurance providers access drivers with the same factors regardless of how you obtained the vehicle. Factors will include the year, make and model of the vehicle, your driving history, and where you live. As leasing companies and lenders may be listed on your insurance policy as an “Additional Interest”, should your car insurance policy be canceled for any reason, these additional interests must be informed. 

Making an Insurance Claim When Leasing a Vehicle

There can be differences in how a claim is handled when leasing a vehicle. This falls especially true if the vehicle has been written off. If there is a settlement to be discussed, your insurer will discuss the settlement with the leasing company as they are the legal owners of the vehicle. In the case of a financed vehicle, the lender, as the lienholder will receive the amount left owing on the vehicle, and the owner will receive the difference if there is any. However, if you owe more than the value of the car, you will be on the hook to pay the difference to the lender.

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