When you go to a new car dealer in California and plunk down your money toward the car of your dreams, you should also consider the cost of insurance in your budget. The price of a new car these days can really put a strain on a person’s finances, and if you are financing or leasing that car, you may be saddled with high monthly payments for years to come.
Any time you lease or finance a new car, the lender will require you to carry full insurance on that vehicle. While California car insurance laws only require you to carry a small amount of bodily injury and property damage liability insurance to protect the interests of others, you might injure someone in an accident, and lenders require you to carry sufficient insurance to cover their interests.
A bank or other lending institution that provides financing or a leasing company that leases a vehicle to you has a financial interest in that vehicle until the terms of the financing or lease agreement come to an end. In addition to the mandatory liability coverage California auto insurance requires you to maintain, you must also maintain full comprehensive and collision insurance until the car is either paid off or the lease ends and you return the vehicle.
Collision will cover the value of the vehicle should it be damaged or destroyed in an accident while comprehensive covers property damage caused by forces outside of an actual crash or accident. Some areas covered by comprehensive include theft, vandalism or damage from severe weather.
While the cost of California auto insurance coverage that includes collision and comprehensive may go up by several hundred dollars, the amount added to your premium will also depend on the size of your deductible. Most lenders will require you to have a fairly low deductible, such as $250 or $500, which will cause your premium to be a little higher than if you had a $2,000 deductible.
The important thing to remember about insurance requirements when financing or leasing a vehicle is that you will need to buy more than the minimum amount of California auto insurance mandated by state law to protect the interests of the lender.