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Car leasing is one of the most affordable and stress free methods for gaining access to a new car. However, a car lease with insurance is not typical, and third party car insurance is a minimum legal requirement in the UK. So, if you are thinking about car leasing, and need information on insuring a leased car, read on for some useful tips, including how to get the cheapest car insurance for your profile.
When you lease a car, you enter into a rental agreement that allows you to use a car provided by the car leasing company. As part of the agreement, you will be charged a monthly fee to use the vehicle. You will be able to use the vehicle for a specific period of time, after which you must return the vehicle to the leasing company.
The size of your monthly payments will depend on a number of different factors. These include the following:
The monthly leasing payments typically include the Vehicle Excise Duty (VED), the warranty and the actual car. Some companies offer packages which include car insurance, but car leases including insurance are still rare. So in most cases, you must take responsibility for car leasing insurance.
When leasing a car, it is important to remember that you do not actually own the vehicle. It remains the property of the car leasing company over the term of the lease. As a result, leasing companies tend to insist on fully comprehensive insurance cover.
While third party insurance is the legal minimum requirement in the UK, it only covers you for damage or injury to another person, vehicle, animal or property. Third party insurance does not cover you for damage to your leased vehicle.
In the event of an accident, fully comprehensive insurance covers you for damage to the leased vehicle, someone else’s vehicle and anyone else involved in an accident (third party) regardless of who was at fault. You will also be covered for damage to the leased vehicle as a result of fire or theft.
It is important to note that the main policy holder will depend on the type of leasing agreement. There are two distinct types of agreement as follows:
Check your contract to see what your monthly payments include. You can also check with the leasing company to see if they offer car lease packages including car insurance. While it might be an option to include insurance cover as an added extra, it is also worth shopping around to see if you can get a better deal elsewhere.
When thinking about insuring a leased car, check to see if the leasing company offers breakdown cover as part of the lease agreement. If they do then you won’t need to include this in your car leasing insurance package.
If you are considering insuring a lease car, there are a number of steps you can take in order to get the best deal and/or reduce the cost of your insurance premium. These steps are as follows:
Looking for the best lease car insurance deal is the same as looking for the best deal for any other financial product. Quotes can vary over a wide range so it is definitely worth shopping around. Do some market research on the best car insurance deals available.
Check comparison sites and remember that you are looking for the most ideal lease car insurance policy for your specific circumstances. This might not necessarily be the cheapest. For further information, check out our car insurance calculator.
This is something that is worth thinking about before deciding on the type of car you want to lease. This is because the vehicle’s insurance group could make a major difference to the cost of insuring a leased car.
Smaller, cheaper cars belonging to lower insurance groups are typically cheaper to insure, while more expensive larger cars will cost more.
Adding an additional driver to your policy with a good driving history and extensive driving experience will help to reduce the cost of your lease car insurance. Insurers will view this type of driver as safer and therefore cheaper to insure.
However, you must make sure that the additional driver is officially registered as such. Be aware that if you register an additional driver as a main driver on an insurance document you are committing insurance fraud, even if this is a mistake.
Also, car leasing companies are likely to insist that the main driver on the leasing agreement and the main driver on the corresponding car insurance document are one and the same. This is because the person with the lease agreement is the person with the financial interest in the car and as such should be the insurance policy holder.
Also known as ‘black box insurance’, telematics is a type of car insurance that is based on your driving behaviour. With your permission, an insurance company will professionally install a GPS device in your car that transmits real-time information about your driving. Your insurer will then use this information to decide on your insurance premium. Telematics will typically take into account the following metrics:
Provided you are a good careful driver, using telematics will help to reduce your insurance bill. Many insurers also offer discounts if you develop a good track record.
When insuring a leased car, consider purchasing your car insurance annually in the form of a one-off payment. When you pay in monthly instalments, you are taking out a 12-month loan with the insurance company. You will have to pay interest on the amount borrowed, which increases the total amount paid. As a result, a one-off annual payment in advance is cheaper by comparison because you don’t pay interest.
Also, insurers will typically set a compulsory excess, but you can also decide on an additional voluntary excess in exchange for a reduction in your insurance bill. Remember though that you will be expected to pay that excess on any future insurance claim, regardless of who is at fault.
Guaranteed Asset Protection (GAP) insurance covers you for the ‘gap’ between the insurance claim amount and the actual value of the lease car in the event of an accident where the car is a total loss (write-off).
For example, if you lease a new car for £25,000 and at the end of the first year you are involved in an accident which damages the car beyond repair, an insurance provider may only pay £19,000 as a ‘total loss’ payment. If you have ‘return to invoice’ GAP insurance, you will be covered for the difference between the lease valuation (£25,000) and the insurance claim amount (£19,000) which amounts to £6,000.
Yes it can be. This is because car leasing companies can purchase large numbers of cars at once and can therefore negotiate a lower price per unit. This cost saving can be passed onto their customers and the amount of depreciation is lower.
Also, you can give the car back at the end of the lease period, or you could trade in your current agreement for a new agreement with a new vehicle. You don’t have the responsibility for selling the car, which can take time.
When thinking about how cost effective leasing a car is when compared to owning a car, it is worth working out how much you are expected to pay over the lease term before making a commitment.
Other financial responsibilities you will need to account for include the cost of maintenance. Many car lease companies offer a full maintenance and service package for an additional fee but you need to read the small print to make sure you understand what types of repairs are included.
Yes they can, but when giving permission for another person to drive your lease car, make sure they have the following:
Remember that you are ultimately responsible for who you allow to drive your car. Make sure the other person is trustworthy and that their documents are in order.
