Getting into a car accident is always stressful, but when you’re driving a leased vehicle that you don’t fully own, the situation becomes even more complicated. If your leased car sustains significant damage and is deemed a “total loss” by the insurance company.
You may find yourself facing unexpected financial responsibilities and legal obligations. In this comprehensive guide, we’ll explore what happens when a leased car gets totaled, outlining your rights, duties, and options to help you navigate this challenging scenario.
What Does Totaled Mean for a Leased Car?
When an insurance company declares a vehicle a “total loss” or “totaled,” it means that the estimated cost of repairing the damage exceeds a certain percentage (usually 60-70%) of the car’s fair market value.
For example, if your leased vehicle is worth $25,000, and the repair costs are estimated to be $18,000 or more, the insurance company may decide to “total” the car rather than pay for the repairs.
It’s important to note that the leasing company, not you, has the final say in determining whether the car is totaled or not, as they are the legal owners of the vehicle.
Insurance companies are often cautious about repairing vehicles that have sustained extensive damage, even if the repairs appear feasible. This is because hidden damage is frequently discovered during the repair process, raising safety concerns and increasing the overall repair costs.
In contrast, if you own the car outright (without a loan or lease), you have the option to decide whether to repair or declare it a total loss based on your personal preferences and financial considerations.
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Who Pays After a Totaled Leased Car Accident?
One of the most significant consequences of having a leased car totaled is that you are still responsible for the remaining lease payments, even though you no longer have possession of the vehicle. Your auto insurance policy’s liability coverage will typically cover the fair market value of the car, but this amount may not be enough to cover the full remaining balance of your lease.
Here’s an example to illustrate this point:
- Your leased car’s fair market value is $20,000
- You still have $15,000 in remaining lease payments
- Your auto insurance policy’s liability coverage pays $20,000 (the fair market value)
- However, you are still responsible for the remaining $15,000 owed to the leasing company
This scenario highlights the importance of having adequate liability coverage and, more crucially, gap insurance when leasing a vehicle.
Gap insurance (short for “Guaranteed Auto Protection” or “Guaranteed Asset Protection“) is an optional coverage that bridges the gap between the car’s fair market value and the remaining lease balance.
If you have gap insurance and your leased car is totaled, the coverage will pay the difference between what your standard auto insurance policy covers and the remaining lease payments.
For instance, in the previous example, if you had gap insurance, it would cover the $15,000 difference, ensuring that you don’t have to pay out-of-pocket to settle the lease. Gap insurance can provide valuable financial protection, which is why many leasing companies require it or strongly recommend it.
Your Responsibilities After the Accident
If you are involved in an accident with your leased vehicle, there are several crucial steps you need to take immediately:
- Call 911 and report the accident if anyone is injured or if there is significant property damage.
- Move your vehicle to a safe location if possible, to avoid obstructing traffic or risking further collisions.
- Document the accident scene by taking photos and videos, and exchange contact and insurance information with the other driver(s) involved.
- Seek medical attention if you or your passengers have sustained any injuries, even if they seem minor.
- Notify your insurance company about the accident as soon as possible, typically within 24 hours.
- Inform your leasing company about the accident, as they are the legal owners of the vehicle and will need to be involved in the process.
It’s generally advisable to consult with a personal injury lawyer, especially if there are injuries or significant damages involved. An experienced attorney can help you navigate the legal processes, ensure your rights are protected, and work with the insurance companies and leasing company on your behalf.
Regarding where to take the leased car for damage assessment and potential repairs, the leasing company may have specific requirements outlined in your lease agreement. In many cases, they will instruct you to bring the vehicle to an approved repair facility or dealership for evaluation.
However, it’s essential to be cautious about the assessments provided by the leasing company’s preferred repair shops or dealerships, as they may have a vested interest in underestimating the damage or the car’s value. If you disagree with their assessment, you have the right to challenge it and provide your own evidence or seek a second opinion.
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Recovering Further Damages If Not At-Fault
If the accident was not your fault, you may be entitled to recover additional damages beyond the value of the leased vehicle. In such cases, a personal injury lawyer can assist you in pursuing compensation from the at-fault party for:
- Medical bills: Costs associated with any injuries sustained in the accident, including hospital stays, surgeries, rehabilitation, and ongoing treatment.
- Lost wages: Income you lost due to being unable to work while recovering from your injuries.
- Pain and suffering: Compensation for the physical and emotional distress caused by the accident and your injuries.
- Loss of consortium: Damages awarded to your spouse or family members for the loss of your companionship, affection, or household services due to your injuries.
Even if the other driver’s insurance covers the remaining balance of your lease and repairs (or the total loss value), having gap insurance can still be beneficial. It provides an additional layer of protection and may cover extras like rental car expenses or other costs while your claim is being processed.
Avoiding This Situation – Leasing Smarter
While accidents can happen to even the most cautious drivers, there are some proactive steps you can take to better protect yourself when leasing a vehicle:
- Obtain maximum liability coverage: Don’t settle for the minimum liability insurance required by your state. Higher liability limits will provide better protection if you’re found at-fault in an accident that totals your leased car or causes injuries/damages to others.
- Purchase gap insurance: As discussed earlier, gap insurance is crucial when leasing a vehicle, as it covers the potential gap between the car’s value and the remaining lease payments.
- Consider new car replacement coverage: Some insurance providers offer “new car replacement” or “better car replacement” coverage, which can be particularly valuable if your new leased car is totaled within the first few years of the lease.
- Lease less expensive vehicles: Leasing a more affordable vehicle can limit your financial exposure in case of a total loss, as the remaining lease balance and potential gap will be lower.
Comprehensive Coverage and Alternatives
It’s also essential to understand the role of comprehensive insurance coverage when leasing a vehicle. Comprehensive coverage protects you against non-collision-related events that could total your leased car, such as theft, fire, flooding, or damage from fallen objects.
If you’re renting a car instead of leasing, you may want to consider purchasing a Collision Damage Waiver (CDW) or similar coverage from the rental company. This coverage can protect you from financial responsibility if the rental car is damaged or totaled, but it’s essential to review the terms and conditions carefully.
Alternatively, instead of leasing, you could explore options like financing a vehicle purchase or utilizing subscription-based car borrowing services. Each option has its own advantages and disadvantages in terms of ownership, financial responsibility, and risk management, so it’s crucial to evaluate your specific needs and circumstances.
Frequently Asked Question
What happens if you crash a leased car with insurance?
If you crash a leased car with insurance, the insurance will cover the damages up to the policy limits. You will need to notify both your insurance company and the leasing company.
Who gets the insurance check when a leased car is totaled in California?
When a leased car is totaled in California, the insurance check is usually made out to the leasing company, as they are the legal owner of the vehicle.
Will I get money back if my lease car is totaled in Ontario?
If your lease car is totaled in Ontario, you typically won’t get money back. The insurance payout goes to the leasing company, and you may owe the remaining lease balance unless gap insurance covers it.
What happens if you get in an accident with a leased car in Canada?
If you get in an accident with a leased car in Canada, your insurance will cover the repair costs or the fair market value if totaled. You must inform your leasing company and follow their procedures for repairs or total loss.
Should you do a down payment on a lease?
Doing a down payment on a lease can lower your monthly payments, but it won’t reduce your total lease cost significantly. It’s often better to keep that cash for other expenses.
Can I keep my car after total loss California?
In California, after a total loss, you typically cannot keep the car. The insurance company will pay the fair market value to the leasing company, and the car is usually taken to a salvage yard.
Conclusion
Dealing with a totaled leased car can be a complex and stressful situation, but being informed and prepared can help mitigate the potential financial and legal consequences. By understanding your responsibilities, knowing your rights, and taking the appropriate steps, you can navigate this challenge more effectively.
Remember to notify your insurance company and the leasing company promptly, document everything, and consider seeking legal advice, especially if the accident wasn’t your fault or if there are disputes over the damage assessment or vehicle valuation.
Ultimately, being an educated and proactive lessee is the key to avoiding or minimizing the impact of having your leased car totaled. Consult with insurance experts, legal professionals, and carefully review your lease agreement and insurance policies to fully comprehend your obligations and options.
With the right information and precautions, you can ensure that an unfortunate accident doesn’t escalate into a financial catastrophe, allowing you to move forward and secure your next leased vehicle with confidence.
