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What if I lease a car instead of buying one?

If you lease a car, you still need to buy your own auto insurance policy. The auto dealer or bank that is financing the car will usually require you to have more liability insurance coverage than is required by most states. For example: Liability coverage of $100,000 per person / $300,000 per occurrence; Property liability coverage of $50,000. Most states require about a quarter of this. In addition the lease may require you to buy comprehensive, to cover costs of all types of damage and loss other than an auto accident, and collision insurance, to cover costs of damage due to an auto accident.

The leasing company may also require a separate "gap" insurance policy. If you have an accident and your leased car is damaged beyond repair or "totaled," there's likely to be a difference between the amount that you still owe the auto dealer and the insurance proceeds received. However, many times the cost of gap insurance is rolled into the lease payments, and you may not have to actually buy a separate gap policy. Be sure to check with the auto dealer when leasing your car.

Last Modified: Sunday 21st February 2010

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