You have finally decided to quit using public transit or getting a ride. Now you can afford to drive around in a car. With the joy of being a motorist, you also have obligations related to being one; such as getting car insurance. You may then ponder whether leasing a new car or buying a used car is better. In both options, you may have to arrange for insurance as it is mandatory in Ontario. Insurance rates are not affected whether you buy or lease a car.
How Does A Car Lease Work
By leasing, you consent to pay a monthly fee over a period of time as per the agreement. At the end of this period, you must return that car in good condition. The agreement between the lessor and you is legally binding. You may lease multiple times and this gives you the option of changing your vehicle every few years; provided you keep them in good condition.
When you lease, you do not own the car. You are responsible for costs for maintenance, registration, and insurance for the leased car. You may have to agree to conditions set by the leasing company about the specified distance that you are allowed to drive without being penalized.
Insurance On A Leased Car
When you lease a car, you may have to inform the insurance company. You may have to notify the car insurance as to who is the lienholder or lessor. This needs to be mentioned in the policy. In the event of a claim, the insurance company will have to pay the leasing company their portion.
The lure of lower monthly payments may let you choose to lease rather than buy. Your current insurance may cover your leased car for a limited duration of time. After which, you may have to get insurance in place for the car you leased. It is recommended to get insurance for a new car and leased cars are mostly new. This is because the cost of replacement or repair of a new car could be a steeper cost.
Guaranteed Assurance Protection Insurance
There are many car leasing companies that prefer auto consumers to buy GAP insurance. In the case of an accident involving your leased car, you may file a claim with your insurance. Your insurance claim may be settled for an amount equal to the prevailing market value. However, there could still be a gap between this value and the actual replacement value of the leased car. GAP insurance will help to bridge this gap between both values. Thus lease companies mostly insist on GAP insurance so that the loss absorbed is mitigated.
Other Recommended Coverage While Leasing
In case you are deciding on leasing a car, it would be a good idea to get collision, full coverage, and comprehensive coverage. This will ensure that the leased car will be adequately protected from most perils. It is not mandatory that you get comprehensive and collision coverage.