Our car insurance becomes more expensive and we are trying to reduce costs. We have a two -year lease on a car, but see in our police that we pay for the protection of new vehicles for five years. What does that mean and is it necessary with such a short lease? Could we retire or choose a shorter chronology? – Jessica, Toronto
Protection against damping against your insurance company can prevent you from duty of money if your rented car is struck off in an accident – but check that your lease does not already include the coverage, said an expert.
“The rental agreements are normally (already) delivered with gap insurance, which protects the buyer in the event of a serious collision when the vehicle is struck off by the insurance company,” said Shari Prymak, principal consultant at Car Help Canada, a non -profit goal based in Toronto who helps drivers to find cars and negotiate purchasing agreements. “If the value of the vehicle is lower than the balance of the lease, then the gap insurance is there to make the difference, so the owner of the vehicle is not on the hook.”
At the risk of simplifying too much, you can buy Lacne insurance the manufacturer or dealer, and you buy protection against damping, also known as new vehicle protection – in Ontario, it is called OFCF 43But there are versions in all the provinces – of your insurance company.
They are both designed to protect you from damping if your car is totalized in an accident or stolen. Without them, your insurance company will pay what your car is worth at the time of the accident or theft – and generally, it is much less That what you paid for it, said Prymak.
So, if you rent or have a car loan, for example, it means that you may have the financing company the difference.
But the protection of the gap and depreciation insurance ensures that the gain will be the amount you have paid for your vehicle.
“So, (for a funded vehicle, for example) if the market value of the vehicle is now $ 25,000, but that the owner still owes $ 30,000 on the loan, it is up to them to reimburse the privilege to compensate for this difference if he has no gap coverage,” he said.
Take care of the gap?
As a rule, the gap insurance costs around $ 1,000 and you have to buy it when the car is new, said Prymak.
“I saw dealerships billing up to $ 3,000,” he said, adding that financed vehicles are not automatically delivered with Lac insurance, although you can choose to buy it. “I do not know if it is a requirement of leases to have a gap, but I do not think I saw a rental agreement that does not have it. It’s just a common practice.”
We asked some car manufacturers to know if they included gap insurance in their leases and what it covers. We have not obtained immediate answers.
Protection of damping through an insurance company is an approval that you add to your insurance policy when you buy or rent a whole new vehicle or a demo with less than 5,000 kilometers. Like Lac Insurance, you can’t add it later.
It is available between two and five years and generally costs around $ 100 per year, or often less, said Traci Boland, an insurance broker based in London, Ontario and the Brokers Association of Canada insurance association.
“Anyone who buy or rent a new vehicle should have OPCF 43,” she said. “I have had it for five years on my Jeep Wrangler and I am in the third year. If my vehicle is stolen, I get the sale price for this. ”
Generally, the duration of the coverage depends on your insurance company – some companies only offer the two -year coverage of the OFF 43, for example, and others offer only five years coverage. Thus, to go from the five-year coverage to a two-year coverage, for example, you may need to change insurance companies. The annual cost of the OFCF 43 would probably still be similar, she said.
Although you can completely cancel OPCF 43 to save a little money, Boland and other brokers to whom we have spoken do not recommend it. Instead, they suggest doing the calculation to see how saving you saving it. “On a whole new vehicle, it’s $ 100 a year,” said Debbie Arnold, insurance broker based in Toronto. “I would have a customer signed in the blood if he does not want to take (OPCF 43) because when there is a complaint regulations, the customer will not be satisfied if he does not at least obtain the sale value.”
It is important to understand that OPCF 43 does not pay you the replacement cost of your vehicle by a brand new – it simply gives you the amount of the original bill, said Arnold.
But at least one company sells replacement costs coverage, separate from the OFCF 43, which will give you the price of a brand new car.
“So, if you buy a 2024 (Hyundai) Tucson and have paid $ 50,000 for that in 2024,” said Arnold, “if you have a replacement cost cover, then when there is a total loss in 2026, this puts you in a 2026 vehicle (which could cost much more).”
Although Prymak said you shouldn’t need OCCF 43 If your lease includes coverage of the gaps, Boland recommends carefully checking the Label of the dealer’s insurance police.
But there are also advantages to have both gap and OPCF 43 insurance. For example, if you decide to buy your car at the end of your two-year lease but you have OPCF 43 for five years, you would still be covered against damping for three more years, said the Canada insurance office in an email.
Intensive course?
If your lease includes gap insurance or if you have OPCF 43, you move away from the lease if your car is totalized or stolen, said Prymak.
“So, if the vehicle is struck off, the insurance company will pay the lease. It will be between your insurance company and the financial company that carries the lease,” he said. “Then you are mainly back to square one, and you have to buy or rent a new vehicle.”
But if you deposit at the start of the lease so that your monthly payments are lower, you will lose it.
“The insurance company is not responsible for compensating for this deposit. They are simply responsible for the reimbursement of your lease,” he said. “It is therefore not a good idea to make an important deposit on a lease. It does not benefit from you in any financial way.”
A better idea? Many car manufacturers allow you to file a security deposit in exchange for a lower interest rate, he said.
“So you get lower payments, then this security deposit has returned to you at the end of the lease when you bring the vehicle back,” he said.
Do you have a question of driving? Send it to globedrive@globeandmail.com And put “driving concerns” in your object line. E-mails without the right object line cannot respond. Canada is a big place, so tell us where you are so that we can find the answer to your city and your province.