Leasing a car? The insurance costs may surprise you

Crawford Frazer
After driving the same car with a dent in the front bumper for months, you may be ready to upgrade to a nicer model. This is easier said than done, of course; new cars cost a lot of money, and you might not want to add a high car payment to your budget, especially in a tough economic climate. Instead of buying a car, you realize you can afford to lease an Audi. Then you call your auto insurance company -- and realize that the rise in your premium makes the total monthly cost of the Audi more than you can afford.

How insurance premiums affect the lease
Many think of a leased car as less expensive. Relative to the monthly payment for a purchased car, this may be true.
But to an insurance company, a new car is a new car. And if it’s worth $30,000 or $50,000, the premium will reflect that. To avoid the monetary crunch and feeling of remorse it can bring, do some homework beforehand. You won’t be scrambling to get out of your lease if you consider these four areas of auto insurance for leased vehicles before you sign the papers:
Collision: Whoever lends you money for the lease -- your bank or your auto dealership -- will demand that you buy collision coverage, according to the Insurance Information Institute. A collision policy covers the leased car for damages caused by colliding with another car or object.
Comprehensive: The lender also will require comprehensive coverage, which covers damage from things other than a collision. This category includes vandalism, theft and fire.
Liability: Collision and comprehensive coverage are part of the lease requirements. But in nearly every state, laws also will require you to buy liability coverage, which covers damage to other cars and injuries to their drivers and passengers.
Gap coverage: This is specific to leased cars. You may have heard that new cars depreciate as soon as you drive them off the lot. Well, this is also the case with leased cars. So if you get into an accident and total the leased car, you’ll likely owe more than what the insurance company is willing to pay. Gap coverage makes up the difference between the actual car value and what you still owe.
It could be the case that you don’t need to buy an actual gap insurance policy; many auto dealers include gap coverage as part of the lease payment, according to Edmunds.com. Make sure to ask whether such coverage is included. With foresight, you’ll still drive away with a car that makes you smile -- and auto insurance premiums that won't leave you with buyer's remorse.

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