Leasing vs. buying is a question a lot of people ask themselves when they are looking for a new vehicle. They are both great options, and each one has advantages and disadvantages. In this article, we will go over the basics of leasing a vehicle and talk about the pros and cons. This article will help you determine if leasing a car is the right option for you.
What’s the difference between car leasing and car financing?
This is a common question. Most people can’t afford to buy a car outright, especially a new one. That means taking out a loan and making regular payments on it. (Also known as car financing.)
On the other hand, leasing a car is sort of like a long-term car rental.
Here are the biggest differences between car financing and car leasing:
- When you make a payment on your car lease, think of it as a monthly rental fee. Just like how you would pay rent for your apartment.
- In car financing, your payments go towards paying off the car loan.
- When you lease a car, you don’t own the car. You’re simply paying for use of the vehicle.
- In financing, once the loan is paid off, the vehicle is 100% yours.
- When you lease a car there may be conditions you have to adhere to. For example, there may be a limit on the number of kilometres you can drive.
- When you finance a vehicle, there are no conditions on the usage of your vehicle. Road trip? Yes please!
Pros and cons of leasing a car
If you are considering leasing a car, it’s important to know the good and the bad. Here are a few of the pros and cons to leasing.
Pros of leasing a car
- Lower monthly payments
- You might be able to lease a more expensive car you couldn’t afford to buy and finance
- There is usually an option to upgrade your vehicle when the lease is up
- You will usually have the option to buy the vehicle when the lease is up
- There is less commitment than buying or financing. If you don’t like the car, you simply give it up once the lease ends
Cons of leasing a car
- Most car leases come with a mileage limit – going over that limit can result in fees
- You might be charged a fee for any damage to the vehicle, including significant wear and tear
- If you want to end the lease early, there can be significant fees
- You will not own the car once the lease is up
Leased car insurance
In Canada, any car being driven on the road must have car insurance. That includes leased cars. Car insurance is there to protect yourself, your passengers and everyone else on the road. Driving without insurance isn’t worth the risk. If you’re caught the consequences are serious. You could face steep fines, and it will affect your ability to get insurance in the future.
Leased car insurance options
Depending on the province you live in, some coverages will be mandatory while others are optional. Talk to a licensed insurance broker in your province to determine which coverages are mandatory.
With a leased car, the leasing company may have additional requirements above what the law requires. Talk to the company and read your contract carefully to determine what insurance coverage you need. Even if additional coverages are not required in your contract, you may want to consider some of the following optional coverages:
Comprehensive coverage protects you from damage to your vehicle caused by something other than a car accident. For example, vandalism or theft.
Some insurance companies offer accident forgiveness coverage for drivers with a good record. It means you will be forgiven for your first at-fault accident and your premiums will not increase.
This protects you from damage to your vehicle that is caused by a collision with another car or object.
There are many options to consider. Talk to an insurance expert at BrokerLink before making any decisions about your leased car insurance.
Consult with BrokerLink today about leased car insurance
When considering leasing a vehicle, there are a lot of factors to consider. Leasing has pros and cons, so it’s up to you to think carefully about what makes the most sense for your life.
If you do decide to lease a vehicle, let BrokerLink help find the right insurance. We have experience with all kinds of vehicle insurance, including insurance for leased vehicles. We will take the time to get to know you and understand your unique circumstances. Then we will find a plan that makes sense for you and your life. You’ll walk away with insurance that protects you and your leased vehicle.
You don’t have to go through the process of buying insurance alone. Let a BrokerLink insurance advisor help.
Pro tip: Don’t forget to read the fine print! Check your lease contract to see what insurance is required by the leasing company.
Contact BrokerLink now
It’s easy to get in touch with a BrokerLink insurance advisor:
FAQs on leased car insurance
Can I cancel the insurance on the leased car I’m driving?
If you still want to drive the car, you cannot cancel the insurance without finding new insurance. If you are terminating the lease early, talk to your broker about cancelling insurance as well.
What happens if the leased car I’m using gets stolen?
That depends on the type of insurance you have. If you have comprehensive coverage, your insurance could cover the cost of the vehicle. If you have less extensive coverage, you may have to cover the cost of the stolen vehicle. This is why it’s crucial you have the right insurance coverage.
Do I need to inform my insurance company that I am leasing a car?
Yes, you should inform your insurance company that you are leasing a car.