How Does Insurance Work With A Lease Car?
What people do these days to enable them to drive a new car is changing, as more and more motorists turn to Personal or Business vehicle leasing as an alternative to purchasing outright. Instead of buying a new car, many are now opting to lease – paying a fixed monthly amount to drive a new car of choice over a set period of time, which with Flexed can be anywhere from 28 days to 3 months, 6 or even 12 months or more.
These type of agreements allow the customer to change vehicle as often as they like, without having to be tied into any kind of long term contract. Leasing is an affordable way for drivers to be able to get out on the road in a new car, as you don’t have to find the money to buy one outright or you might not want to go down the large amount of finance route.
Insurance and Car Leasing
When you lease a car from Flexed under personal contract or business contract leasing, you never own the car or have a chance of owning the vehicle but you must still insure the vehicle in order to be able to drive it. Don’t forget, that it’s a legal requirement for all drivers in the UK and must be in place before getting behind the wheel.
Insurance is NOT included as part of your lease contract with Flexed, therefore it’s your responsibility as the one who’ll be driving the car to arrange insurance. However, we’ve now made it easier for you, as you can now add Fully Comprehensive Insurance cover for your vehicle as standard with all 28-day contracts. This means all you’ll have to provide is fuel.
You might not own the vehicle you’re leasing but the principles are still the same – you, as the driver must have insurance in place for the vehicle you are going to be driving.
The new car you lease from Flexed will belong to one of the 50 car insurance groups – generally, the higher the group, the higher the cost, so bear this in mind when choosing a lease car on a budget. Cars in the lower groups will be cheaper to insure compared to more powerful, bigger and more expensive models found in the higher groups.
Normally when you lease a car, it’s a requirement with the leasing company that you take out Fully Comprehensive Car Insurance. The reason for this is simple, they want to protect their asset, as it’s their vehicle and not yours.
Of course, when insuring a car you own, you can choose the level of cover that best suits you but this isn’t the case with vehicle leasing and that’s because the vehicle is basically only ever ‘on loan’ to you and must be returned once your lease period is up.
Another option to consider when insuring your lease car is something called GAP Insurance (Guaranteed Asset Protection insurance).
What is GAP Insurance?
GAP insurance (Guaranteed Asset Protection insurance) is designed to protect you when leasing or buying a new car. Basically, it covers the difference (gap) between the value of the car (the amount your insurance provider will usually pay out in the event of theft or a ‘write off’) and the amount you owe to the finance company for leasing the vehicle.
A fact you may or may not be aware of, is that a new car can lose up to 40% of its value within its first year on the road – one of the main reasons why leasing is so popular amongst drivers in the UK! Your monthly lease payments are basically ‘paying off’ that depreciation, however if your lease car is stolen or ‘written off’ mid-way through your lease contract, a GAP insurance policy will cover and pay off the difference (gap) between what your insurer pays out (based on the value when the accident happened) and the cost of a new replacement vehicle.
It’s worth considering GAP insurance when leasing a car but it’s entirely your decision as to which option you go for.
Please bear in mind, whether you crash your lease car or not, you’ll still have to pay back the leasing company based on the terms of your contract, therefore your insurance ‘pay out’ won’t cover the full lease term. With GAP insurance, you’ll be able to pay back in full the cost of the car and won’t be left having to find the extra money to cover the ‘gap’ out of your own purse/wallet.
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