Drivers looking for a combination of late model car and low monthly payments occasionally turn to leasing as a solution. Instead of financing to purchase the car outright at the end of the payment period, lease programs cover the depreciation of the vehicle over the lease term. The car remains the property of the leasing agent. The driver has exclusive use of a vehicle that’s likely under warranty. Repairs due to wear and failure are years in the future. The car exchanges or returns to the lessor at the end of the term.
While the driver never owns the vehicle, car ownership costs may be lower than owning a vehicle after its warranty expires. There’s also the “new car cachet,” important to many drivers.
Does leasing affect car insurance? On the surface, no, it doesn’t, but there are a few things to keep in mind. Lets learn about auto insurance in general, and how leased vehicles affect administration.
Car Insurance Requirements in Ontario
Every vehicle using public roads in Ontario, leased or owned, must have valid, up to date coverage. The mandatory statutory car insurance policy provides a minimum of coverage. This satisfies the provincial government, but most drivers prefer additional coverage.
While a vehicle owner may choose what coverage applies to their vehicle, the leased car driver may have less flexibility. Leased vehicles, remaining the property of the leasing company, may have insurance conditions as part of the lease. An owner could drop collision and comprehensive coverage, for example. Terms in the lease agreement may require the driver to maintain collision and comprehensive endorsements.
Insuring the vehicle remains the responsibility of the lessee, not the leasing company. The process is much the same as ownership. The leased car gets insured by the primary driver prior to licensing. There’s no change of ownership since the vehicle remains the property of the leasing agency. It’s important for the driver to know that a copy of the ownership should be received from the leasing company to carry in the car. Drivers must present proof of insurance and ownership when requested by police or face a ticket.
How Car Insurance Premiums are Determined
An auto insurance policy covers the risk that a driver and car represent to an insurance company, so the premium must offset expected costs for that risk. In Ontario, each insurer has their own unique underwriting formula, plotted to gain the advantage over competition. Most insurers use the same statistical information. It’s how they analyze the information that creates changes in pricing between companies. In some cases, the differences are substantial.
Factors base on personal information, demographics, make and model history and driving habits in the insured vehicle.
This is information unique to the driver or drivers listed on a policy. Names, driver’s license numbers, moving violation history, age, gender, marital status and insurance claims history are some of the personal factors collected. Driving history and claims information have perhaps the biggest effect on the cost of premiums. No claims or traffic convictions, such as speeding tickets, ensure that the drive pays the lowest rates available when all other factors weigh in.
While a driver can do nothing about their age or gender, these compare with accident statistics to help assess general risk for the various groups to which a driver belongs. Men, for example, have more accidents, according to insurance industry data. Young drivers have even more, and more severe incidents, while married drivers demonstrate statistically safer driving habits. While some provinces have eliminated age, gender, and marital status as risk determination factors, these are still in place in Ontario.
The insurance industry collects data on accident claims and breaks down each model, comparing these to national averages. When particular makes, years and models show trends, these convert to risk factors for those particular cars. Certain vehicle body types tend to perform more safely, whether by design or by the types of drivers that these attract. Four door sedans, minivans, SUVs and SUV crossovers tend to have lower risk factors on the whole. In some cases, such as luxury vehicles, some claims factors like occupant safety and anti-theft systems produce a positive effect on some aspects of insurance, while high costs of repairs influence premiums negatively.
How a car gets driven is another factor that affects premiums. Cars driven significant distances to work daily, for example, cost more to insure than those owned by drivers who also use public transit. Most insurers want to know both regular daily use and the general annual mileage. Vehicles on the road more frequently increase statistical chances for collisions.
Does my insurance company need to know that I lease my car?
Yes, they do, since the owner of the vehicle appears on the policy. It’s not likely to affect your premiums, however. The other insurance risk assessment factors discussed above have a much greater influence. Ownership of the vehicle has little to do with the cost of the policy. It’s about the vehicle’s primary driver, not the owner. The insurance company lists as owner, as this ensures that payment, in the event of an insurance claim, pays to the correct parties.
Misrepresenting ownership gains no advantage in lower premiums. Leasing companies require proof of insurance as well, so an attempt by the lessee to alter ownership will easily reveal itself. What’s more, the insurance company may be in a position to cancel the policy, due to the attempted deception, earning the driver high risk insurance status.
When leasing a vehicle, purchasing auto insurance should be the least of your worries.