Car leasing with insurance: How it works

If you’re looking to lease a car, you may have questions about insurance policies and who is responsible for insuring the leased vehicle. In this post, we’ll look at what type of insurance you need, how much it costs to insure a leased car and how you can lower the cost of your insurance premium.

Does car leasing include insurance?

Standard insurance isn’t usually included in a car leasing contract, meaning it’s the responsibility of the individual or the business that leases the vehicle to organise cover. Car insurance is a legal requirement in the UK and it applies whether you own, finance or lease a vehicle.

What type of insurance do I need?

Third-party insurance is the legal minimum requirement to drive in the UK. It covers damage to any other vehicle, person or property that may result from an accident that is deemed your fault. However, leasing contracts require you to take out a fully comprehensive insurance policy for your lease vehicle. While third-party policies only cover damage to others, comprehensive policies cover damage to your car as well.

If you were involved in an accident without comprehensive insurance, you would have to pay the lease company back for the full value of the car. You can also take out Guaranteed Asset Protection (GAP) insurance, which is an optional policy that covers the difference between the current market value of the car and the amount you owe for the lease agreement.

You don’t need gap insurance on a leased car, as it’s not a legal requirement and is designed to work alongside your comprehensive policy. However, some leasing contracts may suggest that you take out gap insurance to ensure greater protection against damage or theft.

How do I get insurance for my leased car?

Setting up lease car insurance can be done in the same way as regular motor insurance. You’ll need to inform your insurer that the finance company is the registered owner of the vehicle, not you. While this will have no impact on the price, it’s important to make sure the insurance provider knows that you’re looking for a quote on a lease vehicle.

Your car needs to be insured from the day it’s delivered, and it must stay covered until you return it to the finance provider.

How much does it cost to insure a leased car?

A common misconception is that insurance is higher on leased cars as you must have fully comprehensive insurance. This isn’t always the case. For an experienced driver for example, comprehensive cover can be considerably cheaper than third-party insurance.

Cars are categorised into fifty insurance groups from cheapest to most expensive, with upmarket vehicles generally costing more to insure. However, there are other factors too. The cost of car insurance depends on the type of vehicle you lease, your driving record, how you’ll use the car, your credit rating and the type of policy you choose.

Tips to lower insurance premiums

Car insurance can be expensive, but there are methods you can utilise to lower the cost of your premium. Your vehicle’s size, type and engine size will all impact your insurance cost, as well as the provider you choose. Some of the ways you can lower your insurance premium are:

  • Put an additional driver on the policy. Adding an additional driver can sometimes significantly lower the cost of your policy, especially if the driver is seen as a lower risk than you. However, adding an inexperienced driver to your policy can increase your premium. Many factors impact the price of your insurance when adding an additional driver, including their age, marital status, licence type and driving history.
  • Increase your voluntary excess. Compulsory excess is automatically applied to your policy and is decided by your insurer, while you choose the amount of voluntary excess you’re willing to pay. Choosing a higher voluntary excess will reduce the overall price of your policy, but you need to ensure you can afford to pay in the event of a claim.
  • Pay annually rather than monthly. Paying monthly can be more convenient, but it’s usually more expensive in the long term than paying for your insurance upfront. When you pay monthly, you’ll usually pay a deposit of around 20% of the annual cost, then the rest of your payments will be spread over 10 or 11 months. These monthly instalments can also be subject to costly interest rates.
  • Think about the distance you drive. Make sure that you provide a realistic annual mileage limit when getting an insurance quote. If you overestimate your mileage, you may find you’re paying more than necessary.
  • Improve your vehicle security. Before buying additional security features like a vehicle tracker or immobiliser, you should find out which devices your insurer will recognise. Parking your car in a secure driveway rather than leaving it on the street will also reduce your premium, as it will significantly minimise the chance of theft or accidental damage.
  • Install a black box. Some insurers offer discounts to careful drivers, which is monitored via a telematics device that measures vehicle speed, distance travelled and smoothness. It will also record the types of road you travel on and what time of day you tend to drive, to build up a comprehensive profile of you as a driver.

Choosing the right insurance policy for your lease car can be difficult, particularly if you’re a new driver. You’ll need to take out comprehensive insurance when you lease a car so it pays to shop around, comparing prices from different insurers before your commit.

Next steps

If you’re looking for a great deal on your new lease vehicle, call our experienced team today on 0113 387 4241 to discuss your requirements.

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