When You Total a Leased Car, What Happens?


For those who require a vehicle but do not wish to go through the hassle of purchasing one, leasing is a popular option.

Leases enable people to use and own a vehicle without the hassles and costs that come with ownership.

However, there are some risks associated with leasing that should be understood before signing any documents.

One of these dangers is that you're still responsible for the remaining lease payments if your leased car is totaled in an accident or stolen.

Before you lease a car, here's what you should know.

When You Total a Leased Car, What Happens
Leased Car

What happens if a leased car is totaled?

The ramifications of being involved in an accident, as well as how it may affect your credit.

The leasing company may charge you for the cost of renting a vehicle until the vehicle is repaired or replaced if you total a leased car.

This is usually accomplished by deducting money from your monthly payment in advance or charging you a daily fee for using one of their rental cars.

As a result of this, there are two possible outcomes:

If they charge you more per day to fix your car than they would have set for repair, it may take longer to get back on track with your lease agreement.

This is where things become a little complicated:

If they charge you more per day to fix your car than they would have set for repair, it may take longer to get back on track with your lease agreement.

If they are deducting money from your monthly payment in advance, this will shorten the term of your lease agreement if you are behind on payments, but it will not help if you are current because there will still be less money coming in at the end of the month.

A totaled car's potential cost

A totaled car can cost a lot of money to repair, not to mention the inconvenience of not being able to drive.

If the cost of repairing the vehicle exceeds its value, you may be able to declare it totaled and walk away from your lease.

You'll need to contact your leasing company and explain the situation to them.

Before they will release a check for the remainder, you must pay for any damages related to the accident upfront.

If they do issue a statement, it will not be for a sum close to the total value of your leased vehicle.

The good news is that if your policy includes collision or comprehensive coverage that covers all or part of the repairs, you may be able to receive reimbursement from your insurer rather than the leasing company.

But, before you total a car with a lease agreement, make sure you talk to an insurance professional about it!

How to avoid having to pay for a totaled vehicle

If you lease a car and it is totaled, your insurance company will notify your leasing company that they will cover the cost of renting a car until the car is repaired or replaced.

This may appear to be a good thing, but it may not be as straightforward as it appears.

To use one of their rental cars, the insurance company will deduct money from your monthly payment or charge you a daily fee.

In either case, you may have to wait longer to get back on track with your lease agreement.

What can you do to avoid spending more money than you need to?

The best option is to talk to your leasing company and see if they will consider waiving your early exit penalty because of the accident.

This would help to reduce any additional fees that may be incurred as a result of the accident.

What should I do if I get into an accident while driving a leased car?

Whoops! You may have just encountered a stumbling block.

If you're leasing a car and it's involved in an accident, your insurance company is likely to declare it totaled.

That means you'll be responsible for the vehicle's repair or replacement costs, as well as any other expenses.

Keep in mind that this may have an impact on your credit: If you don't keep your end of the lease agreement, your insurance company may send your leasing company a Loss of Use letter, stating that they will cover the cost of renting a car until the car is fixed or replaced.

This is usually accomplished by deducting money from your monthly payment in advance or charging you a daily fee for using one of their rental cars.

It could lengthen the time it takes to get back on track with your lease agreement in either case.

If you don't lend out your leased vehicle, you can avoid this situation. If you do lend it out and someone else gets into an accident, check with your leasing company first before using their rental car service to make sure you understand their policies.

What happens if you are not at fault in a car accident?

If you rent a car and get into an accident, the consequences vary depending on who is at fault.

Your insurance company will cover the costs of totaling the car if you are not at fault.

If you are at fault, however, finding coverage can be more difficult. Because the other driver's insurance company may refuse to cover your deductible, you may have to pay out of pocket.

This is because you were the one who caused the accident in the first place.

There is, however, some good news! If the car you're leasing is worth less than ten times your monthly payment, or $1000, your leasing company may be able to waive this requirement in the event of an accident that isn't your fault.

They expect their vehicles to be returned undamaged!

If this occurs, you will be responsible for paying for repairs and deducting them from your lease balance before returning the vehicle.

What happens if you're the one who caused the car accident?

If you're leasing the car, the leasing company will usually cover the cost of the car's lost value. When most people hear the phrase "total loss," they immediately think of this.

However, if the accident was your fault, you may be responsible for the entire cost of the vehicle. This is because most comprehensive auto insurance policies do not cover leased vehicles.

So, before you lease a car, you should understand what happens in an accident that results in a "total loss."

You'll want to make sure you're covered and that you can afford to pay for repairs or replacement yourself if necessary.

What impact does a totaled car have on my lease?

Consider the case where you're leasing a brand new car and it's totaled in an accident. What does this mean for your rental agreement?

The leasing company expects you to be responsible for all maintenance and repairs to the vehicle from the time it is delivered to the time it is returned when you lease a vehicle.

If you total your leased car in an accident, you'll have to pay to have it repaired or replaced.

As long as you have collision coverage on your insurance policy, this shouldn't be an issue. However, if someone else was driving, you may have to pay for the damages yourself.

In either case, your insurance company will send your leasing company a "Loss of Use" letter stating that they will cover the cost of renting a car until the car is repaired or replaced.

This is usually accomplished by deducting money from your monthly payment in advance or charging you a daily fee for using one of their rental cars.

It could lengthen the time it takes to get back on track with your lease agreement in either case.

How can I protect myself if my leased car is involved in an accident?

If your insurance policy covers a leased vehicle, you may be covered if the vehicle is totaled in an accident.

However, if someone else was driving, you may have to pay for the damages yourself.

In either case, your insurance company will send your leasing company a "Loss of Use" letter stating that they will cover the cost of renting a car until the car is repaired or replaced.

This is usually accomplished by deducting money from your monthly payment in advance or charging you a daily fee for using one of their rental cars.

It could lengthen the time it takes to get back on track with your lease agreement in either case.

This is where things get a little tricky. If they charge you more per day than they charge themselves for the rental car you use, getting back on track with your monthly payments may take longer than expected.

When negotiating the cost of an incident like this, it's critical to keep this in mind. Then both parties are satisfied, and neither party suffers a financial loss.

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Is it necessary to report an accident in a leased vehicle?

If your insurance policy covers a leased vehicle, you may be covered if the vehicle is totaled in an accident.

However, if someone else was driving, you may have to pay for the damages yourself.

In either case, your insurance company will send your leasing company a "Loss of Use" letter stating that they will cover the cost of renting a car until the car is repaired or replaced.

This is usually accomplished by deducting money from your monthly payment in advance or charging you a daily fee for using one of their rental cars.

It could lengthen the time it takes to get back on track with your lease agreement in either case.

This is where things get a little tricky. It's too bad if they charge you more per day than you paid for the rental car! In any case, you're out of cash.

Whatever type of lease agreement you have with them, works out.

So keep this in mind if you're deciding how to handle an accident involving a leased vehicle, especially if the person who caused the accident didn't have insurance and was driving without permission or knowledge.

Finally, some thoughts

Final thoughts on what can happen if a leased car is totaled.

You are responsible for ensuring a leased vehicle. If you cause an accident, you will be responsible for the repair costs.

This is why obtaining insurance for your leased vehicle is critical.

The leasing company may require you to purchase gap insurance if you are involved in an accident that was not your fault.

If you cause an accident while driving your leased car, the leasing company may demand that you pay the difference between the car's value and the new vehicle's value.

If you're unsure what to do in the event of an accident, speak with your leasing company.