Yes, you can and should get gap insurance on a leased car. In fact, most leasing companies require you to have it. Gap insurance covers the "gap" between what you owe on the lease and the car's actual cash value (ACV) if it's totaled or stolen. Standard insurance only pays the ACV, which can be thousands less than your lease payoff amount, leaving you responsible for the difference.
When you lease, you're essentially financing the vehicle's depreciation. New cars can lose over 20% of their value in the first year. If an accident happens early on, the ACV will likely be lower than the remaining lease balance. For example, if your lease payoff is $28,000 but the car's ACV is only $23,000, gap insurance would cover the $5,000 shortfall.
You typically have three options for purchasing gap coverage:
- Through the Leasing Company: This is often the most convenient option, usually rolled into your monthly lease payment. However, it can sometimes be more expensive than other sources.
- From Your Auto Insurance Provider: Many major insurers, like State Farm, Geico, and Progressive, offer gap insurance as an affordable rider to your existing collision and comprehensive policy.
- From a Third-Party Provider: Specialty companies also sell standalone gap policies. It's crucial to compare coverage terms and costs.
The cost is generally low, often adding only $20 to $40 per year to your auto insurance premium. Before buying, confirm that your lease agreement doesn't already include gap coverage, as some do. Comparing the cost from your insurer against the leasing company's offering is a smart financial move.
| Consideration | Typical Details | Why It Matters |
|---|
| Lease Requirement | Often mandatory; check your contract. | Prevents you from facing a major financial loss. |
| Depreciation in Year 1 | Can be 20-30% of the new car's value. | Creates the "gap" that makes this coverage necessary. |
| Cost from Insurer | ~$20-$40 annually as a policy rider. | Usually more cost-effective than the dealer/lessor. |
| Coverage Trigger | When the car is a total loss or stolen. | Protects you in a worst-case scenario. |
| Payout Example | Covers a $5,000 gap between ACV and lease payoff. | Provides concrete financial protection. |
