Can you get GAP insurance on lease car?
Guaranteed Auto (or Asset) Protection, GAP insurance, is a type of car insurance which protects your finances when a loan is taken out to pay for your car. Many people think that they cannot get gap insurance on lease cars but this is not true. With Obvi, getting gap insurance on lease cars is definitely an option.
Do you pay more for Gap insurance when the vehicle is on lease?
No! The amount you pay for Gap insurance does not depend on whether the car is on lease or not.
Leasing a car explained
Leasing a car is not the same as financing a car. When you lease a car and your term comes to an end, you either return the car or you can choose to buy the car. Both leasing a car and taking out a long-term loan are popular options in Canada. According to Automotive News Canada, around 25% of new cars are leased.
Why would I need GAP insurance on a lease car?
When leasing a car, you do not actually own the car and therefore you are responsible for returning the car back to the owner once the term is up. If you are in an accident, or the vehicle is stolen, the car insurance company will pay out the same amount as it would cost to buy that used car from a dealer. This is therefore much less than the new price due to depreciation, meaning that it wouldn’t cover the whole amount you would need to pay to end your leasing contract. This is why GAP insurance on lease cars exist, as it covers this shortfall.
Risks of a leased car
Unfortunately, people forget that both leasing a car and taking out a long-term loan over a number of years does come with risks. Here are some useful points that we often go over when we explain what’s GAP Insurance.
- Accidents happen – Hopefully you won’t ever be in an accident, but what if it is stolen? Or there is a fire? Not everything is always in our control, so if you have a lease, you want to have reassurance that you will be financially covered in case something happens.
- The worst case; you don’t want to be left with paying a lease and no car- this can happen, and that’s why you need protection. If you are in an accident, and the car needs to have repairs, your payments will still continue. If your car is totaled in an accident, you will also continue to make payments until the claim amount is settled.