Car insurance for leased cars

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Lease car insurance

While you don’t own a leased car, you’re still responsible for making sure it’s insured properly, up until your lease contract ends. Insurance isn’t typically included with a lease agreement, so it’s up to you to arrange the cover.

Do I need car insurance for my leased car?

By law, you must have car insurance in place for your leased car before you drive it away from the dealership or leasing office. But before you take out a new policy, it’s worth checking if you can transfer any insurance from a previous lease car. You’ll probably have to pay an administration fee for changing the vehicle on the policy, so it may be worth shopping around too.

What kind of car lease insurance do I need?

You’ll typically need comprehensive car insurance for your lease car. This could cover you if you damage someone else’s car, as well as your own. It will also cover the cost of the car if it’s written off or stolen.

For personal contract hire (PCH) agreements, the person taking out the agreement must be the main policyholder or a named driver on the insurance certificate.
For business contract hire (BCH) agreements, the insurance certificate needs to be in the company or company director's name.

Does my lease contract include car insurance?

Very few lease agreements offer car insurance as standard so, in most cases, you’ll need to arrange car insurance yourself. Even if car insurance is included, it’s worth doing your research to make sure you’re getting the cover you need at the right price.

Your car dealer may offer insurance as an added extra but, again, you could find a better deal by comparing quotes, rather than sticking with what the leasing company offers.

Some insurance policies might offer breakdown cover as part of your package. But it’s worth checking whether your lease agreement already covers you for this.

What is Guaranteed Asset Protection (GAP) insurance for lease cars?

Contract hire gap insurance is specifically designed for leased cars. It gives you full protection against theft or damage – your normal car insurance covers the current value of the car, while the gap insurance covers you for the remaining payment costs on your lease contract. Compare the Market does not currently provide quotes for this type of insurance.

How can I reduce the cost of my lease car insurance?

Do your research. Cars fall into different car insurance groups that range from one to 50. The higher the group, the more expensive the insurance tends to be. To see what group your lease car is in, use our car insurance group checker.
Shop around. Comparing car insurance quotes three weeks before the policy start date could save you money. It’s typically the cheapest time to buy car insurance.
Add an additional driver. This could, in some cases, help to lower your premiums. A premium is the amount you pay annually or monthly for an insurance policy. If the additional driver is more experienced, your insurance provider might consider the overall risk to be lower.
Consider telematics insurance. If you’re a safe driver, you could be rewarded with lower annual insurance premiums.

So, why not compare insurance quotes with Compare the Market and see if you could find a great deal on your lease car insurance? We can help you find quotes from a range of UK car insurance providers with our simple comparison service.

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Frequently asked questions

How do I organise insurance for my lease car?

Taking out lease car insurance is the same as any other insurance product.

However, you’ll need to make it clear to your insurance provider that it’s for a lease vehicle and let them know the terms of the lease.

You’ll also have to provide the name of the vehicle’s ‘registered owner’, which will be the finance company and the name of anybody else who’ll be driving the car – a partner or spouse, for example.

Whose name should be on the insurance policy?

If you’re on a personal contract hire (PCH) or personal contract purchase (PCP) agreement, you will be named as the main policy holder.

If the car is being leased through a business, the insurance policy will need to be in the company’s name or a director’s name.

When do I need to insure my lease vehicle?

You’ll need to have car insurance in place for the day of delivery.

The car will only be handed over to you once you have proof of insurance. Your car must then remain insured until the finance company takes it back at the end of the lease.

Can I part-exchange when I lease a car?

No, you won’t be able to part-exchange your old car for a leased car.

Can I let someone else drive my leased car?

Yes, your partner or children are allowed to drive the car you’ve leased, as long as they meet certain conditions.

They must have a full valid UK driving licence and be a named driver on your insurance policy. The leaseholder should always be named as the main policyholder.

Is it more expensive to insure a lease car?

It shouldn’t be more expensive to insure a lease car than one you’ve bought outright.

However, because your lease car needs to be comprehensively insured, you won’t be able to potentially cut costs by taking out third-party insurance.

What happens if I have an accident in my leased car?

As with any car, whether leased or owned, if you’re involved in an accident, you should report it to the police. You’ll also need to let your insurance provider and leasing company know as soon as possible.

If your car is a total write-off, depending how far you are into the lease, your leasing company may want you to pay off the remaining balance or charge you a damage fee.

Depending on your insurance cover, the policy may pay out, which could help cover the lease, or even provide a replacement vehicle if you have ‘new for old’ car cover.

Make sure you read the terms and conditions of your insurance policy and leasing contract so you understand what will happen in a worst-case scenario.

Is it better to lease or buy a car?

It all boils down to your personal choice and financial circumstances. Here’s a quick recap of the pros and cons of leasing, to help you decide which option would suit you better:

Pros of leasing a car

You have the possibility of choosing a more prestigious car that you may otherwise have been unable to afford.
Once the lease is up, you simply hand back the car or decide to take out a new lease.
As the car is legally owned by the leasing company, they’re responsible for paying road tax.
Depending on the terms and conditions, maintenance and servicing costs might also be covered by your leasing contract.
Lease payments are tax deductible. VAT-registered businesses could claim up to 50% back.
You won’t have the hassle of selling a depreciated car once your contract is up.

Cons of leasing a car

You’ll never own the car outright, and you’ll have to return it once the lease is up.
Lease arrangements come with a mileage limit, which you need to stick to. If you’re planning to do a lot of miles over the course of a year, leasing may not be right for you.
While leasing companies allow for some wear and tear, any significant damage will have to come out of your own pocket before you can return it.
You can’t make any modifications during the duration of the leasing contract.
You’re tied into a contract, and if you want to leave early, you’ll probably be charged an early termination fee, which can be a minimum of 50% of the remaining repayments.

On the other hand, if you buy a car, you’ll need to stump up the cash straight away. But the car will be yours as soon as you drive it away. Simply put, the main benefit of buying a car, compared to leasing is ‘freedom’:

You own the car 100% outright
No damage fees to pay
No admin or early termination fees
You can modify it (although this could affect your insurance)
It could offer better value in the long run if you intend to keep it until it’s on its last legs
You can sell it whenever you want
You can part-exchange it if you want to upgrade.

Not sure what’s right for you? Read our guide to find out more about the differences between buying and leasing a car.

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