Leasing: Cheaper Payments, Costlier Insurance

Edmunds.com says 25% of new cars sold so far in 2013 are  leased, a pace that would top last year's record penetration level of 22%. 

Leasing typically allows individuals to have lower monthly payments for a vehicle than they could if buying a new car outright; averages payments are $433 for a lease and $468 for a financed car per Edmunds.com Car Shopping Trends Report.

Edmunds.com analyst Jessica Caldwell says, “Luxury brands have for a long time relied on leasing to maximize their sales volumes. Now mainstream brands are riding that wave, drawing buyers with the promise of lower monthly payments through leasing.”

But leasing isn't for everyone.

Leased vehicles come with some conditions that not all motorists want to contend with, such as:

• Mileage limitations - You're given a maximum amount of miles each year you can drive your leased vehicle, usually around 12,000 to 15,000, before you're surcharged per mile.  
• Condition of the car  - You can also be charged for the condition of how the car is returned if it's deemed to be in excessive of what is considered normal wear and tear.  
• Various fees - Added costs, such as a disposition fee when you turn in a lease vehicle and don't lease a new one, can make the lease not such a good deal.

And then there are the car insurance requirements for leased vehicles.  (See “Low, low payments - on the car, anyway”)

Leasing requires more insurance

If you buy a car outright, you can place any insurance on it that you want. If you take out a loan, the bank or finance company will require that you carry collision and comprehensive but will let you get away with only state-minimum liability coverages.

But leasing companies demand more.

When you lease a car you're required to carry liability coverages of 100/300/50.  This stands for bodily injury coverage of $100,000 per person and $300,000 per accident and $50,000 for property damage liability coverage.

In addition to these higher liability levels, you must obtain collision and comprehensive coverage for the leased car - and the maximum deductible you can choose is set in your lease paperwork (the normal requirement being no higher than $1,000 or $500).  If you're going from a liability-only policy to a fully loaded policy needed for a leased vehicle, you could easily be spending thousands more each year on car insurance.

Leasing a car at first glance may seem to be the cheaper option, but before signing on the dotted line look at all the costs and obtain auto insurance quotes -- or you could be wishing for three long years that you made a different choice.

The original article can be found at CarInsurance.com:Leasing is all the rage -- but is it for everyone?