What happens if you “total” a leased car?

If you total a leased vehicle in a car accident, you will need to notify the leasing company and your insurance company. You will be responsible for paying what remains on the lease.

Your auto insurance will only pay for the fair market value of the vehicle. You will be responsible for the rest.

If you have gap insurance, it can cover whatever remains.

Who decides if it is a totaled car?

It is the insurance company that determines if the car is totaled. Usually, car insurance companies decide that vehicles are totaled if the costs of repair are assessed to be over 65 percent of the vehicle’s value.

The initial assessment by the repair shop or insurance adjuster often does not find all of the damage. When the mechanic works on the damaged vehicle, new damage or other problems are often revealed.

To avoid this common occurrence, insurance companies presume that some damage is still hidden when they assess the vehicle. This is why they deem a car to be totaled, even if the apparent damage is less than the vehicle’s value.

Who pays after a leased car accident?

If your leased vehicle is totaled in a car accident, the leasing company will demand the remainder of the lease payments. Your car insurance policy’s liability coverage will pay for this, up to the policy limits.

However, your insurance policy will only cover the vehicle’s fair market value. Even if this is within your policy limits, it may be less than the remaining lease payments.

To make matters worse, many drivers choose to carry their state’s minimum liability insurance requirements. That minimal amount may not cover the costs of paying the rest of the lease.¹ For this reason, many leasing companies require drivers to carry gap insurance.

What is gap insurance?

Gap insurance is an add-on insurance policy for vehicles that have been leased or that still have a loan on them. Some auto loan lenders require gap insurance when you buy a new car.

When leased or loaned vehicles are totaled, you will still be responsible for paying the remainder of the lease or loan. Gap coverage helps to pay for that remainder.

For example: Patrice has a leased vehicle. There is still $20,000 owed before the end of the lease. She is involved in a truck accident that totals the car. She only has her state’s minimum of $5,000 in liability coverage for property damage. This leaves her responsible for paying $15,000 to her leasing company to settle the lease. If she had gap insurance, that coverage would help her pay it.

I strongly advise you to purchase gap insurance coverage when leasing a vehicle even if it is not required.

What should I do after a crash involving my leased vehicle?

If you drive a leased vehicle and are involved in a car crash, your first steps should be the same as any other motor vehicle accident:

1. stay on the scene of the accident,
2. move your vehicle to a safe location, if possible,
3. call 9-1-1 and see if anyone needs emergency medical treatment,
4. do not discuss who caused the accident and do not admit fault,
5. exchange contact information with the other driver, as well as insurance and registration details,
6. take pictures of the accident scene, if you can,
7. get the contact information of any witnesses to the accident, and
8. seek medical attention.

Reporting the crash

After you go through all of these steps, you will then have to:

1. report the accident to your car insurance company to start an insurance claim, and
2. report the crash to your leasing company.

However, it is generally wise to call a personal injury lawyer, first. I can contact your insurance company and leasing company on your behalf.

Where do I bring the car for repairs?

Because it actually owns your vehicle, your leasing company can tell you where to bring it for repairs. This puts your leasing company in a good position to assess the damage in a way that furthers its own interests, at your expense. If the assessment by the company’s body shop or dealership does not seem correct, you and your car accident lawyer can challenge it.

A similar thing can happen with your car insurance policy’s liability coverage. They determine the fair market value of the car, as it was before the crash. Because they are for-profit corporations, insurance companies have an incentive to pay out less than you deserve.

They may understate the cash value of your leased vehicle in order to pay less for it. You and your car accident attorney can challenge this assessment by presenting better evidence of the car’s value.

What if I was not at fault?

If you were not at fault for the accident, you may want to file a personal injury lawsuit against at-fault party who caused the crash. In my decades of experience representing countless car crash victims, I am often able to recover compensation for all your:

• medical bills,
• lost wages and other income,
• reduced earning capacity from any disabilities sustained in the crash,
• property damage,
• pain and suffering, and
• loss of consortium for your loved ones.

How do leased cars work?

A leased car is a vehicle that you drive but do not own. You agree to pay the leasing company a small sum every month in order to drive one of their cars. Leasing a car is similar to renting one.

This setup is not uncommon. Between 20 and 30 percent of vehicles are leased.²

Part of the lease agreement is that you return the vehicle in serviceable condition. If you are involved in a car accident that totaled the car, the leasing company will demand that you pay the remaining lease amount.

Car insurance

All states require you to have driver’s insurance coverage. This has to include liability insurance for both property damage and bodily injury. Many states also require uninsured/underinsured coverage and personal injury protection (PIP).

Leasing companies protect themselves by requiring you to have extra car insurance in order to lease the vehicle. This often includes collision coverage, comprehensive coverage, and sometimes even gap insurance.

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