Car insurance premiums spiked 26% this year, leaving many Americans with sticker shock every month.
You probably already know that your driving habits and credit score impact your insurance premiums, but you might not have known that your car insurance costs could drastically differ depending on whether you lease or buy your vehicle.
Here’s what you need to know.
Why leasing a vehicle will cost you more
If you lease your vehicle rather than finance it, you’ll probably pay more for car insurance.
You’re not charged higher insurance premiums just because you’re leasing the vehicle, but it costs you more because the leasing companies usually require you to have better coverage and lower deductibles.
Here are some common reasons why auto insurance for leases are more expensive:
- Leasing companies typically require low deductibles for collision coverage, which increases your monthly premium.
- They usually want low deductibles for comprehensive coverage, too.
- They typically require liability coverage above the state minimum.
- You may have to buy gap insurance to cover the full vehicle price if it’s totaled.
Insurance tip: You always have the option to choose your own car insurance company. This matters because insurance companies charge different rates, and you can likely find a better deal when you compare quotes. Click here to find out more about the cheapest car insurance companies.
How you can save on insurance if you own your vehicle
If you finance your vehicle or already own it, you have more ways to lower your insurance costs. Here are just a few money-saving tips.
1. Raise your deductible
Raising your deductible is one of the best ways to pay less for car insurance. Speak with your insurance agent and ask how a higher deductible could potentially lower your premiums. The Insurance Institute says opting for a higher deductible could lower your insurance premiums by up to 40%.
2. Reduce your coverage
If you’ve got an older vehicle or really need to save money on your monthly insurance costs, cutting back on some of your coverage could be a smart decision. If your premium is more than 10% of your car’s value, it might be time to drop your collision and comprehensive coverage.
3. Bundle your home and auto insurance
Stop me if you’ve heard this one before, but you can save money if you bundle your home and auto insurance. Some insurance companies say that new customers can save up to 20% by bundling.
Related: If you haven’t compared insurance quotes in a while, you could be missing out on big savings. Click here to get quotes from the best car insurance companies.
While leasing a vehicle may cost you more in terms of insurance, it’s worth noting that the type of vehicle you lease or buy also affects how much you pay. For example, AAA says compact SUVs are some of the cheapest to insure. In contrast, electric vehicles are often the most expensive.
This means that if you’re really looking for the best deal on car insurance, you might want to get a few quotes for specific vehicles before you go to the dealership.
