Question

All drivers who lease the cars they drive carry automobile collision insurance, but many who own the cars they drive do not. Which of the following, if true, would best explain the cause of the situation described above? Automobile drivers are not required by law to carry collision insurance on the cars they drive, but automobile leasing companies require, as a condition of the lease, that the driver carry collision insurance. Automobile drivers are not required by law to carry collision insurance, and collision insurance is extremely expensive. Collision insurance is a sensible purchase only if the automobile it covers is under two years old. Most insurance companies prefer not to issue automobile collision insurance and are slow to pay when a policyholder makes a claim. Many drivers feel they would rather risk the cost of repairing their vehicles in the event of an accident than to pay the cost of collision insurance.

Short answer

The cause of the situation is that automobile leasing companies require, as a condition of the lease, that the driver carries collision insurance.

Step-by-step solution

Analyzing the options

Start by reading and understanding each option. Look for the option that most directly explains why drivers of leased cars have collision insurance while many who own their cars do not.

Elimination process

Exclude the options that do not directly explain the situation. For example, the claim that 'collision insurance is sensible only for cars under two years old' does not explain why renters specifically would carry insurance. Similarly, 'most insurance companies prefer not to issue automobile collision insurance and are slow to pay when a policyholder makes a claim' also does not provide a direct cause for why most leasers carry insurance whereas some owners do not.

Finding the best match

After the elimination process, the option that best fits is 'Automobile drivers are not required by law to carry collision insurance on the cars they drive, but automobile leasing companies require, as a condition of the lease, that the driver carry collision insurance.' This statement clearly states why leasing drivers are more likely to carry collision insurance - they are required to do so by the leasing company.

Key concepts

Critical Reasoning

Critical reasoning is a fundamental skill, especially in standardized tests like the GMAT, which involves evaluating arguments, identifying underlying assumptions, and understanding logical relationships. In the context of our exercise, critical reasoning is applied to discern why a certain group of automobile drivers (those who lease) are more likely than others (owners) to carry collision insurance.

To tackle this, one must analyze various statements and distinguish between facts, assumptions, and irrelevant information. The ability to identify the most relevant information and eliminate incorrect responses is vital. This involves the key critical reasoning steps: comprehending the given scenarios, questioning the evidence presented, and reaching a conclusion based on the most plausible explanation.

For example, let's look at one of the eliminated choices stating that 'Collision insurance is a sensible purchase only if the automobile it covers is under two years old.' While this may be an interesting point, it does not specifically address the difference between owners and leasers of cars, thus not directly answering the given question. In critical reasoning, such distractions must be identified and set aside to focus on more convincing arguments.

Automobile Insurance

Automobile insurance can be complex, with various types such as liability, comprehensive, and collision coverage. The latter, collision insurance, is the focus of our exercise. This insurance covers damage to the policyholder's car resulting from a collision with another vehicle or object, regardless of fault. It's vital for the protection of leased cars, where the leasing company wants to ensure their asset is secured.

The cost and legal requirements of automobile insurance can greatly influence a driver's decision to obtain coverage. While some forms of insurance are mandated by law, such as liability insurance, collision insurance typically is not - as highlighted in our correct answer. However, leasing companies, protecting their interests, require lessees to carry collision insurance. This nuance is crucial for understanding the exercise and reflects real-world practices where leasing contracts often include insurance stipulations that are not present when purchasing a vehicle.

Thus, understanding the intricacies of automobile insurance, such as the difference in requirements between purchasing and leasing a car, is essential for making informed decisions about which policies to obtain.

Logical Reasoning

Logical reasoning is the process of using a rational, systematic series of steps to arrive at a conclusion. In GMAT problem-solving exercises that involve logical reasoning, it's crucial to adopt a structured approach to deduce the answer. This is perfectly illustrated in the step-by-step solution of our exercise, as the problem requires you to apply logic to understand why leased car drivers are more likely to have collision insurance.

By following a clear elimination method, we can sift through the options to identify the correct answer. Logical reasoning demands focus on relevant facts while disregarding information that doesn't pertain to the logical relationship in question. Through logical deduction, the statement that drivers are not legally required to have collision insurance, but leasing companies require it, emerges as the most cogent explanation for the observed insurance patterns among drivers.

This methodical approach did not only rely on understanding concepts in isolation but on the ability to link them together logically, thus representing a solid application of logical reasoning in solving GMAT problems concerning practical scenarios like automobile insurance.