How Much Coverage Does A Leased Car Need?

Car leases were hard to arrange during the depths of the recession, but they have made a remarkable comeback.

In 2009, about 10 percent of all new car sales were financed with leases. Today, according to Experian Automotive, leases comprise nearly 25 percent of the market. But the typical lease now is:
  • Shorter. According to Edmunds.com, the average term has dropped from 42 months to 36 mainly due to 24-month leases becoming more common.
  • Cheaper. The average monthly payment has dropped to $412 from $432 and the money factor (interest rate) has almost been cut in half, falling to 2.8 percent from 4.9.
  • Less generous. The number of miles included is also dropping, from an average of 13,000 down to 12,000. Some automakers are even offering leases with as little as 10,000 miles a year.

Yet even these cheaper leases require additional car insurance.

State laws govern minimum requirements for all car owners, but leasing companies, as the titled owners of the vehicles involved, get to dictate their own requirements. A new survey from lease-trading site Swapalease.com finds roughly 40 percent of leaseholders carry even more car insurance than their agreement requires.

But others might find that a lease allows them to drive a car they can't easily afford to insure.

Low, low payments, but not for insurance

A recent college grad going from an old car with state minimum coverage to a new car with full coverage could be in for a shock.

A 25-year-old woman living in Oakland, Calif., would pay about $610 a year for minimum liability coverage on a paid-off 2002 Ford Taurus, assuming a clean driving record and no accidents. But upgrading to a shiny 2013 BMW 3-series and appropriate full coverage (comprehensive, collision and 100/300/50 liability) would cost her about $3,285 a year.