Buying Versus Leasing Vehicles
America's favorite pastime should really be driving. With over 225 million licensed drivers, they are competing for the most drivers in the world, falling just behind China. With 84% of the American population having a driver’s license, there must be a high demand for vehicles! There are a few ways that you can get around in the United States and almost all of them require you to have an active insurance policy as the driver. You could rent a car, lease a car, borrow a car, or buy a car. But one thing is for certain, you will need to purchase auto insurance first. It is reported than 13% of all drivers in the United States do not have auto insurance, thus making our streets less safe. When operating a motor vehicle, you run the risk of damaging your own vehicle, yourself and potentially someone else. Read more on how your method of transportation can determine your auto insurance rate.
Why Lease a Car? We have all seen it... the 16 year old with a freshly printed license who gets their brand new car. And shortly after they have a nice new dent, rapidly increasing their insurance rate and decreasing the value of the car. For this reason, a lot of people choose to lease vehicles. Leasing a car allows you to try multiple different types of vehicles without all of the risk attached. For every changing life event, you can upgrade or downgrade the size and functions of your vehicle. Take up skiing? Get a four wheel drive. Having a baby? Get the SUV. Have a new long commute to work? Get the electric car. Lease different types of vehicles in faster periods of time to fit your needs.
So what is the downside? Some would argue that without an investment in a car, it is similar to paying rent for housing. You have no investment to leverage should you ever need or want the extra cash. There are a lot of pros and cons to both decisions. What about when it comes to auto insurance, does leasing or buying make a difference?
Leasing and Insurance A lot of insurance companies base their rates off of behaviors. We have all heard of the safe driver rewards and easy breaking/ energy savers rewards. So what do these companies think about leasing a car? The majority of leasing terms will require you to have auto insurance and follow a specific set of rules by the leasing company. For instance, they may want you to purchase a specific policy or increase your coverage to ensure that the car has top coverage for resale. This sometimes outs the most value on the car rather than the driver. In addition to this, leasing companies may provide limits to the miles driven, creating somewhat of a roadblock for leasers. A benefit for your insurance is that the leasing company may offer a warranty for maintenance and regular wear and tear on the vehicle, saving you money and a headache in the long run.
Making Your Decision So how do you decide? If you are unsure of making a commitment to a vehicle type or do not have the cash reserves for a down payment, then leasing is a great option. Several leasers end up purchasing the same car after their term is completed. It gives them a risk free extended test drive of sorts. You may have less ability to shop around for the best car insurance rates when you lease, adding to some of the frustration and lack of freedom. The appeal of buying the vehicle for many is the return on investment and the ability to make their own decisions about car insurance, resale and maintenance. So you decide what is most important to you and let insurance cover the rest.