If you total a leased car, your insurance company will typically cover the vehicle’s actual cash value (ACV). In cases where the ACV of the car is the same as the outstanding balance, you simply terminate the lease agreement and walk away. The problem is that in most cases, you will still owe something to the leasing company. Gap coverage will cover the difference between the ACV of the vehicle and what you owe according to the lease agreement.
Do you know what happens if you total a leased vehicle? It can be a complicated and stressful process. This article will help clarify how to set yourself up with the best lease and insurance, as well as what to do if you total your leased car.
What is a totaled car?
In general, a car is considered “totaled” when the cost to repair it is more than the fair market value of the car or a percentage thereof. The percentage can vary state by state. Fair market value is the car’s local retail price before the accident. This can become important when it comes to insurance coverage because some companies will only give you limited benefits if they’re aware that there was out-of-the-ordinary damage.
How do I protect myself in case I get in an accident with my leased car?
Nobody ever wants to get in a car accident, but that’s exactly why they call it an accident. Often, the best protection is to have good gap insurance.
Get insurance required in your state
Your car insurance requirements will vary by state, but the minimum liability coverage required in each one is pretty standard. If you’re at fault for an accident and your policy covers your damages, then it would be enough to pay off any victims affected as well. This typically only applies to accidents where no property was damaged or if someone else was hurt.
When shopping for auto insurance, be sure to review your lease agreement. It may state what type of coverage you need to comply with the terms and conditions outlined by the leasing company; if this isn’t met, then they could cancel or sue on their own accord.
Do I need gap coverage?
If you’ve had your car totaled, the insurance company will pay for a replacement up until its fair market value. The vehicle’s fair market value (otherwise known as actual cash value or ACV) will likely be less than the remaining lease payments you still owe your leasing company. This means that in most cases gap coverage is very beneficial. Gap insurance covers you for the difference between fair market value and what you owe the leasing company. Visit SuperMoney’s in-depth guide on auto insurance to understand how to set yourself up for the best outcome in the case that your leased car gets totaled.
What do I do if I’m in an accident in a leased car?
Maybe you’re reading this article because you’ve already been in an accident, or maybe you’re catching up on some best practices. Either way, check out below to learn what you need to do in the unfortunate situation of a car accident with a leased car.
Do you have to report an accident on a leased car?
You should notify a few parties of your accident as your contract terms will require this. Try to report basic information about the accident to both your leasing company and insurance provider within 24 hours of the accident.
What happens if the car accident is not your fault?
Determining who is at fault is crucial to resolving your car accident. If you were not at fault in an auto collision, you can submit a claim against the at-fault driver’s insurance. Their insurance can help cover the costs of replacing your car, medical bills, pain, suffering, and other losses. If the other driver’s coverage does not fully compensate you for your losses or if there are disputes on the shared responsibility of damages incurred during an accident, consider hiring a car accident lawyer before taking legal action against another party involved.
What happens if the car accident is your fault?
If your leased car is totaled, and the accident was your fault, the first step is to file a claim against your insurance—usually personal collision or comprehensive coverage. As previously mentioned, your insurance will typically pay the fair market value (FMV) of that vehicle. Remember, this does not mean you are free from any obligations under your lease agreement. If there are gaps between how your base insurance pays out and what you still owe to the leasing company, gap insurance can be extremely helpful.
Sometimes it can get complicated to make the determination of fault in an accident. In such cases, it is wise to get an attorney who can help you through the process.
Do I need an attorney if I’m in an accident in a leased car?
When you’ve been in an accident, it can be overwhelming to manage everything yourself. Insurance policies often set strict time limits on claims, so time is of the essence. In many cases, it is smart to hire a lawyer who has the experience and knowledge to handle the legal aspects of your case. They will make sure everything falls into place for maximum recovery of damages or compensation from liable parties. Make sure your attorney has experience in car accidents with leased vehicles.
However, lawyers can be expensive. If it’s only a minor accident or you’re only claiming for a modest amount, you may want to carefully weigh the pros and cons of hiring an attorney.
How does totaling my car affect my lease?
If you’re leasing a car, the accident doesn’t affect your lease. You still owe for the vehicle’s value when an accident occurs. It’s necessary to have insurance that can cover replacement costs and it’s helpful to have gap coverage that pays what’s still owed to the leasing company. However, there can be some limitations on these types of policies, so it’s important to talk about them before signing anything. Learn more about if you can buy your leased car.
How do I receive compensation for my totaled car?
If an insurer deems your car a total loss, they will pay out the actual cash value (ACV) of it. ACV can be tricky to determine. Insurance companies don’t love giving away money, so if your ACV is less than what you think is fair, try negotiating with them. When negotiating with the insurance company, it is important to be as thorough and professional as possible in your documentation to maximize your compensation potential. It can help to have an attorney on your side who understands how large insurance companies work.
The Bottom Line
The process of filing a claim for your totaled car is not as straightforward or simple as it may seem, especially you lease the vehicle. Once you’ve spoken with the other driver, contact your leasing company, insurance agent, and attorney so they can guide you on what needs to happen next. If you’re looking for a new car, learn more about whether leasing or buying a new car is better for you.
- A totaled vehicle is one where the damages to the car are worth more than the car itself.
- If you total a leased car, you will often still owe money to the leasing company after the insurance company pays the “fair market value” of the vehicle.
- Gap insurance covers you for the difference between fair market value and what you owe the leasing company.
- Review your lease agreement to see whether your leasing company has any specific requirements regarding car insurance or gap insurance.
- It’s important to determine who was at fault during the accident—that will decide whether you need to provide compensation or vice versa.
- You may want to get an attorney with experience in leased car accidents to handle insurance company deadlines and other steps of the post-accident process.
View Article Sources
- What to do if you’re in an accident in a leased car? – Bernstein & Maryanoff
- Leased car totaled: What happens now? – Valiente Mott
- What happens If you total a leased car? – Naqvi Injury Law
- Lease or buy a new car — which is better? – SuperMoney
- Can you lease a car and then buy it? – SuperMoney
- Complete guide to auto insurance – SuperMoney