Leasing vs. Financing: Does It Affect My Insurance?


Owning a vehicle in the household is a priority for most Canadians. It gives you the freedom to get around the city as you like or take a road trip whenever you want one. Not to mention, it equips you to go around town when the winter months hit hard and cold. Depending on your needs and your budget, you may choose to lease or finance a car.

There are pros and cons to both.

Leasing vs. Financing

Leasing leaves you with the option to replace your vehicle should you need to, every few years. It allows you to have lower monthly payments without having to worry about selling it in the future.

Financing a car for purchase, on the other hand, gives you complete ownership of the new or used car. This brings you the added advantage of being able to sell the car in the future and if you keep it well-maintained, it could help in getting you some of the car’s value back in your pocket.

Regardless of the option you choose, you will be required to attain car insurance. Here are four ways the option you choose may (or may not) impact your insurance:


Neither leasing nor financing plays a part in determining the cost of your car insurance. The insurance rate is instead determined by several other factors such as the vehicular make and model, the duration you have been a licensed driver, your past claims and traffic tickets and violations.

Additional Interests

Whether you lease or finance, the lien holder or the financing company have a stake in your vehicle and are listed as “Additional Interests” in your insurance policy. This makes the insurer responsible to inform and advise them in case you lower your limits, increase your deductibles or if your insurance is cancelled due to certain circumstances.


Your lien holder or financing company may have specific requirements for the kind of coverage that they want you to get for your vehicle and they may add this clause as part of your agreement. Regardless of the option you choose, here are some types of coverage you should get:

Accident Benefits Coverage: In case of an accident and injury, it provides you with coverage no matter which party is at fault.

Liability Coverage: This coverage protects you and other drivers if there is an accident caused and you’re at fault. It covers financially for damages, injuries and losses.

Physical Damage Coverage: This coverage protects your vehicle from any physical damage that may occur because of your fault or otherwise, such as theft, vandalism, fire, etc.


In case you have to make a claim, there is a difference in the way your claim is handled, depending on whether you have leased or financed your vehicle. In case of a lease, the lien holder is the official owner of the vehicle. Therefore, the insurance company will discuss the settlement with them instead of you.

In case you’re in an accident where your vehicle has suffered total loss, both you and the lien holder/financing company will co-pay the settlement.

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