If you’re shopping for a new car, one of the biggest questions you’ll face is how much insurance you’ll need to get.
If you’re leasing a new car, what you’re actually doing is buying the use of a brand new car for its first few years of operation. Those years are usually the most trouble-free and maintenance-free time of the car’s life. Because of that, you pay a slight premium for enjoying them. At the end of the lease, you’ll return an aging, used car to the dealer who expects that you’ve protected his asset by insuring it. The lender, in leasing the vehicle to you, requires that you fully insure the vehicle to protect that investment and the lender will tell you what insurance minimums you must meet. Unlike when you buy a car, if you lease the lender will typically require that you purchase higher limits of liability coverage to protect them since they are listed as an owner on the registration and can be sued by third parties. If you don’t meet the insurance requirements, the insurance company will communicate that to the lender who will attempt to repossess the car.
The same basic principles apply when you finance the purchase of a new (or used) car. The bank or lender that provides the car loan requires that the vehicle they are investing their money in be insured against losses. When you pay off the loan, that requirement goes away, but you will still be required to meet state-mandated liability coverage. Until you pay off the loan, if you fail to properly insure the car, you can expect contact from the lender and possible repossession by the bank.
If you buy a car outright, meaning you pay the full amount immediately, then it is your investment to protect or lose. At that point, insuring the vehicle against collision or theft becomes a matter of discretion in wisely protecting your property, but is your choice.
If you’re interested in a new (or new to you) vehicle, you’ll want to check the insurance costs before you go to the dealership. Request an auto insurance quote, so that you walk into the dealership knowing what you can afford in a vehicle and its insurance.
This content is offered for educational purposes only and does not represent contractual agreements. The definitions, terms and coverages in a given policy may be different than those suggested here and such policy will be governed by the language contained therein. No warranty or appropriateness for a specific purpose is expressed or implied.
