How Does An Accident Affect A Car Lease? What To Know
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Leasing vehicles has always been a popular choice for consumers, particularly when the cost of purchasing a new car has continued to increase in recent years. Car leases essentially allow someone to upgrade to a new vehicle every few years without having to worry about the upkeep that comes with owning a vehicle for an extended period of time. So the big question is, how does an accident affect a car lease?
The quick answer is that the lease itself likely won’t be impacted. Since a major benefit of leasing a vehicle is for the maintenance coverage, most of what you need to know happens following the damage itself. Car accidents can happen to everyone, no matter how careful or good of a driver they may be. In the case of an accident for leasing or buying, it’s important to know the proper steps for handling the situation.
A leased car is basically a long-term rental with a monthly payment made to the dealership. After the specified amount of time, the vehicle is returned to the dealership or leasing firm and turned in. Unless specified, drivers don’t own the leased vehicle when they return it, unlike a car you take out a loan to pay off. When a driver leases a car, it effectively pays for the vehicle’s depreciation.
How Does An Accident Affect A Car Lease: Following The Accident
You’ve just been in an accident in your leased car. What do you do? Similar to if you had bought the car, you’ll need to get your documents together and do the following.
Check the Passengers
First and foremost - if you’ve been in any leased automobile accident, it’s critical to make sure you and anybody else in the vehicle(s) are not hurt. If there is more than one vehicle involved, make sure you check on the other vehicles after making sure you and any other passenger in your vehicle is okay.
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Get a Police Report
The next step should be to contact the authorities. Regardless of the severity of the injuries, law enforcement intervention is critical because officers can properly document the incident, question witnesses, and prepare a police report. A police record will be useful later on, particularly if there are any disagreements regarding who caused the collision or damage when you return the vehicle. Some people might argue if there’s no visible damage or injuries that calling the police is unnecessary, but it’s important to have proper documentation in case any unnoticed injuries or damage come up later.
Exchange Information
The last step that needs to take place by the site of the accident is to exchange information with the other drivers involved. This should include their name, phone number, and insurance information (if applicable). If you have the ability, taking pictures of the visible damage and area of the accident is also important.
Contact the Insurance and Leasing Dealership
Assuming steps one through three have been accomplished, the next thing you should do is contact your insurance company. The general rule is to contact them as soon as possible, but it may not be necessary to contact them immediately at the scene. This is a no-brainer, but the dealership that the car is leased from also needs to be contacted as soon as possible. Many leases have clauses added requiring this since there may be repair stipulations.
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How Does An Accident Affect A Car Lease: Repairs
Depending on the lease conditions, you may be obligated to have the repairs done with OEM (Original Equipment Manufacturer) components rather than aftermarket parts. This may change your repair time depending on the make and model, and if the lease company or dealership imposes financial penalties for not utilizing original components to repair the car, it might cost you money in the long run.
If you are able to fix the car, the insurance company will usually pay for the repairs minus your deductible. Even if it is registered as a total loss, you’ll likely owe the leasing company the vehicle’s worth. If you have Gap Insurance, you may be able to use that to pay the difference. Some leases also allow you to roll the remaining balance owed into a new lease which won’t leave you stranded without a car.
If the body shop or adjuster declares the car a total loss, the insurance company typically reimburses the leasing company for the vehicle’s actual value. However, if you have a lease, you may still owe the remaining payments unless you have gap insurance, which would cover the difference. It’s critical to understand the terms of your lease agreement. According to LeaseGuide.com, most total losses are declared when the repair cost exceeds a reasonable amount of the vehicle’s estimated worth, which is usually considered 70%.
Your lease will end one way or the other if your leased car is totaled. The remaining sum on your loan is still owed to the lease company. However, your insurance company may provide an established amount to help pay some of the remaining amounts.
Gap insurance is often required by the majority of leasing agreements. If you’re in an accident and your car insurance doesn’t fully cover the repairs of the damage, gap insurance kicks in to cover the difference. Even if you don’t realize it, you most likely have gap coverage per many lease requirements.
If you were not at fault for the accident, the responsible party and their insurance company should compensate for the cost of the repairs or medical costs. Of course, if the other person does not have insurance or if there are issues with joint blame, it may not be as straightforward.
Regardless of who is at fault, your insurance company will likely take care of the repairs. But if you are deemed at fault, just be prepared for a possible increase in your monthly premium.
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How Does An Accident Affect A Car Lease: Returning The Vehicle
When you return a vehicle, most drivers are responsible for any damage that isn’t deemed general wear and tear. Scratches, scuffs, and dings may seem like cosmetic damage that may ultimately result in a fee by the dealer.
Check your lease agreement for servicing requirements; some lease agreements require you to have your car serviced at a certain facility within a specified time or mileage. Keep in mind that most contracts forbid the use of aftermarket components for repairs.
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