Leasing a car can be an attractive option for those who want to enjoy the benefits of a new vehicle without committing to a long-term purchase. However, accidents can happen, and if you total a leased car, it can be a stressful experience.
What Does It Mean to “Total” a Car?
First, let's define what it means to "total" a car. A car is considered "totaled" when the cost of repairing it exceeds its value. If your leased car is totaled, your insurance company will typically pay the leasing company the actual cash value of the vehicle at the time of the accident, minus any deductible you may have to pay.
In some cases, the amount of money the insurance company pays may not be enough to cover the entire cost of the leased car. This is because when you lease a car, you agree to pay for the car's depreciation over the term of the lease. The insurance payout may only cover the car's current market value, which may be less than the amount you owe on the lease.
In this situation, you may be responsible for paying the difference between the insurance payout and the amount you owe on the lease. This is known as the "gap" between the insurance payout and the lease balance. Some lease agreements include gap insurance as part of the contract, which can cover this difference. If your lease agreement doesn't include gap insurance, you may need to purchase it separately.
If you are at fault for the accident, you may also be responsible for paying additional fees or penalties as outlined in your lease agreement. This could include fees for excessive wear and tear or for terminating the lease early.
Make sure to read your lease agreement carefully to understand your rights and responsibilities in the event of an accident. You may want to consult with an attorney or financial advisor to help you navigate the legal and financial implications of a totaled leased car.
Can You Give Me an Example of How Depreciation Works on a Leased Car?
Let's say you leased a car for 36 months with monthly payments of $300. At the end of the lease term, the car is expected to have a residual value of $12,000. This means that over the course of the lease, you will have paid $10,800 ($300 x 36) towards the depreciation of the car.
Now let's say that after 18 months of the lease, you are involved in an accident, and the car is totaled. At the time of the accident, the car's actual cash value is determined to be $8,000. However, the remaining balance on your lease is $12,000 because you have not yet paid off the full cost of the car's depreciation.
In this scenario, your insurance company will pay the leasing company $8,000, the actual cash value of the car at the time of the accident. However, you are still responsible for paying the remaining $4,000 in lease payments, which represents the "gap" between the insurance payout and the lease balance. If you have gap insurance, it may cover this difference. If not, you will need to pay it out of pocket.
What Are the Most Important Items to Review on a Lease Agreement?
When leasing a car, it's important to carefully review the lease agreement to understand your obligations and responsibilities in the event of an accident, particularly if the car is totaled.
Here are some of the most important terms to pay attention to in a car lease agreement related to totaling the car in an accident:
Gap insurance: Check if your lease agreement includes gap insurance, which covers the difference between the actual cash value of the car and the remaining balance on the lease in the event of a total loss. If the lease agreement doesn't include gap insurance, you may need to purchase it separately.
Early termination fees: Review the lease agreement for any fees or penalties related to early termination of the lease. In the event of a total loss, you may need to terminate the lease early, which could result in additional fees.
Excessive wear and tear: Determine if the lease agreement includes any fees for excessive wear and tear on the car. If the car is totaled, you may be responsible for paying these fees, which can add up quickly.
Mileage overage fees: If you exceed the mileage limit set out in the lease agreement, you may be subject to additional fees. Check the lease agreement to understand what these fees are and how they may be impacted by a total loss.
Insurance requirements: The lease agreement may specify minimum insurance requirements, including coverage amounts and types of coverage. Make sure you have adequate insurance coverage and understand what is required by the lease agreement.
It's important to read the lease agreement carefully and understand your obligations in the event of an accident. You may want to have it reviewed by an attorney.
Can a Lawyer Help Me Reduce the Cost of What I Have to Pay?
If you have totaled a leased car and are facing significant financial obligations, including potential gap payments, early termination fees, and other expenses outlined in the lease agreement, a lawyer with experience in personal injury law may be able to help you in several ways:
Reviewing the lease agreement: A lawyer can review your lease agreement and explain any legal terms and provisions that may impact your situation and help you understand your legal rights.
Negotiating with the leasing company: A lawyer can help you negotiate with the leasing company to try to reduce your financial obligations. They can work to reach a settlement that is fair and reasonable for both parties.
Filing a lawsuit: In some cases, it may be necessary to file a lawsuit to dispute the leasing company's claims or to seek damages. A lawyer can represent you in court and help you build a strong case to support your claims.
Providing legal advice and support: A lawyer can provide ongoing legal advice and support throughout the process, including answering your questions, helping you understand your options, and advocating on your behalf.
An experienced lawyer can help you navigate the legal complexities of a totaled leased car and work to minimize your financial obligations. They can provide legal advice and support at every stage of the process, from reviewing the lease agreement to negotiating with the leasing company or representing you in court if necessary. Call High Stakes Injury Law today at (702) 707-5934 for a free consultation!
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