Auto insurance is something you need whether you finance or lease a car, but there might be differences in the types of coverages you need when financing a car versus leasing a car. If you are currently thinking of leasing or buying a car, you might wonder what the differences will be in terms of auto insurance needs, and here are several things you should know as you proceed with choosing a car to buy or lease.
You can purchase minimal coverage if you pay cash for the car
The first thing to understand is that if you pay cash to buy a car, you will have a lot more freedom and flexibility with your auto insurance policy. This is mainly because you will not have a lender telling you what types of coverage you must buy. Instead, you can make the choice for yourself. This means that if you want full coverage, you can buy this option, but if you want minimum coverage only, you could also choose this.
You will have requirements when financing a car
Secondly, when you finance a car, it is important to know that you must follow the rules your lender has in place for insurance. Your lender will tell you to purchase full-coverage insurance, which is collision coverage, as this protects your lender's investment in the loan, and you may have to also purchase comprehensive insurance, too. Failing to follow the rules your lender has will result in the lender buying coverage on your behalf, and the lender will then send you a bill for the coverage.
You may have more requirements when leasing a car
The last thing to know is that there will also be auto insurance requirements when leasing a car, but the requirements might be even more than those required when financing a car. It all depends on the lender or dealership that offers the lease to you, and they will let you know exactly what types of coverage you should buy when leasing a car. Generally, though, leasing a car will usually require purchasing both collision and comprehensive insurance coverages, and you may need to have higher coverage amounts for both of these when you lease a car instead of financing one.
If you have any questions about auto insurance coverage for leasing or financing a car, talk to a personal auto insurance agent to learn more about your options and requirements.