What Happens If You Wreck a Leased Car?
If you’re ever involved in an accident in a leased car, there are a few very specific things that you need to do. The first step is to call 911, even if it’s a relatively minor accident, you still need to report it to the police. That’s because insurance companies need the police report to resolve disputes about who’s at fault.
The second step is to notify your insurance company. Regardless of who’s fault it is, your insurance company will help you file your claim against the other driver. And if the other driver wasn’t insured or underinsured, your insurance company will pay for the damage, as long as your policy covers such things.
The third step is to notify your lease finance company, especially if the car was declared totaled. Since they definitely would want to know if one of their cars got destroyed and will need to talk to the insurance company.
If the vehicle can be repaired
If your car wasn’t declared totaled and can be repaired, it’s very crucial to have the work done by a professional body shop which has been approved by your insurance company. It’s also helpful if the shop is authorized and recognized as a repair shop for your particular make of the vehicle. Talk to your dealer about finding an authorized shop.
When repairing your vehicle, it needs to be done in a way that restores it to a like-new condition and uses only OEM parts. If you use substandard parts or repair shops, you run the risk of being charged at the end of your lease for any re-repair costs that will be needed to bring your vehicle to an acceptable condition.
If the vehicle is totaled
If the necessary repair costs exceed 70% of the vehicle’s value, that it will be considered a total loss. In this case, the insurance company will pay the market value of the car to your lease finance company.
If you get lucky and your lease buyout balance exceeds the payout from the insurance company, the lease company may possibly refund the difference to you. But this rarely happens with leases.
Majority of the time, the payout from the insurance company is less than the lease balance, which leaves a deficiency that you will be responsible to cover. The good news is that most lease contracts require GAP insurance, which would cover that deficiency.
So where does this leave you?
If your leased vehicle can be repaired and you have the repairs done then proceed with your lease as normal and return the car once the lease ends. There’s one note of caution, however. Whenever a vehicle is involved in an accident, the trade and resale value gets reduced. Sometimes the insurance company may give you or the lease company a “diminished value” payment.
If your leased vehicle is totaled, then your basically left without a car, the same as if you returned your car at the end of a lease. If your car was over the mileage limit when the accident happened then you will still be charged for the extra miles as you normally would at the end of your lease. Might not seem fair to you but the lease company see’s it otherwise.
If you’ll need a replacement car
If the leased car gets totaled and you need another vehicle, you will need to start over with a new car lease or simply buy another car.
So, if you ever get into an accident in your leased car, first call 911, then your insurance company, and your lease company last. What happens next will largely depend on the severity of the accident, repair costs, and your insurance coverage policy. And it’s possible that you might end up owning more money to the lease company.
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