Leased Car Totaled: What Happens Now?
Leasing a car remains a popular type of auto financing for American drivers. As of the second quarter of 2020, 26% of new vehicle sales were leased in the U.S. If your leased car is totaled in an accident, there are specific steps you’ll need to take that may be different than if you owned the vehicle. This article will discuss all you need to know about what happens if you wreck a leased car. We’ll discuss insurance coverage issues, determining fault, and how a car accident lawyer can help in the event of a leased car accident.
What is a Totaled Car?
According to the Nevada Department of Motor Vehicles, a vehicle is considered “totaled” when damages to the car exceed 65% of the vehicle’s fair market value. In other words, if the estimated repair costs exceed 65% of the value of the vehicle just prior to the accident, insurance companies will write it off as a total loss. A key aspect to note is the fair market value of the vehicle. This value is not the same as the dollar amount you paid for the car. Nor is it the same value as what’s outstanding on your lease. Rather, it is the vehicle’s retail value based on local market conditions right before the accident. This distinction will become important when it comes to insurance coverage.
What Happens If You Total a Leased Car?
The steps you need to take after a leased vehicle accident are similar to those of any car accident. These steps include:
- Move your car to safety and remain at the scene.
- Call emergency services and check to see if anybody requires treatment.
- Exchange contact information, insurance policies, and registration information with the other driver.
- Do not admit fault.
- Document the accident with plenty of pictures.
- Secure any witnesses’ contact information.
- Seek medical attention right away.
- Contact your lawyer, who will then contact your insurance company.
However, there are additional complexities when dealing with a totaled leased car accident. In addition to contacting your lawyer and insurance company, you’ll also need to let the leasing company know of the accident. Then, you’ll need to bring your car to the repair shop. If the repairs are significant enough, the insurance company will write off your car as a total loss. Unlike financing or an outright purchase of a car, you don’t actually own the vehicle when leasing a car. When you sign a leasing agreement, you essentially agree that you’ll return the vehicle in an acceptable condition. So, what happens when a leased car is totaled? If your leased car is totaled, you are on the hook for the outstanding balance remaining on the lease. This is why having adequate insurance coverage is crucial.
Insurance Requirements
Each state will have its own automobile insurance requirements. In Nevada, the state mandates that each driver must maintain minimum liability coverage of:
- $25,000 bodily injury per person
- $50,000 bodily injury per accident
- $20,000 property damage per accident
Liability insurance simply means your insurance company will cover damages, bodily or property, sustained by another person or driver if you were at fault in the accident. Note that these limits are the minimum amount of coverage, as mandated by the state. This minimum may not be enough to cover the entirety of the damages given the severity of a total loss collision. Liability also does not cover damages to your own car or injuries you have sustained. In addition, leasing companies may require full insurance coverage before leasing out the vehicle. Full coverage means having comprehensive and collision coverage on top of the minimum liability coverage.
Gap Coverage: Do I Need It?
When a leased car is totaled, what happens to the outstanding lease payments? As mentioned before, the insurance company will deem your vehicle a total loss when repair costs exceed a certain percentage of your car’s fair market value (i.e., 65% in Nevada). The insurance company will then cover the cost of replacing your vehicle up to your car’s fair market value. In most cases, the fair market value of your car will be less than the remaining money you owe your leasing company under your lease terms. If that’s the case, you are responsible for paying for this discrepancy out of your own pocket. Gap insurance is optional coverage for this discrepancy. Because the value of your car will almost always be less than your leasing agreement, it’s a good idea to carry gap coverage when leasing a vehicle. For example, let’s say a car’s market value was worth $25,000 just prior to the crash. Under the current lease terms, a total of $30,000 was remaining on the vehicle. While the primary insurance will cover the replacement cost up to $25,000, gap insurance will cover the $5,000 shortfall.
My Leased Car is Totaled: Who’s At Fault
There are generally two scenarios in a leased car accident:
1. Leased Car Accident – Not My Fault
If you were not at fault in the accident, you can pursue a claim against the at-fault driver’s insurance. This means the other driver’s insurance will be responsible for the vehicle’s replacement cost, your medical bills, and pain and suffering you may have endured. You can also decide to bring a lawsuit against the at-fault driver. This would typically happen if their insurance does not fully cover your losses. Or perhaps there are disputes in regards to shared fault. Nonetheless, the situation can get complex, so consult with a car accident lawyer to understand your best options.
2. Leased Car Accident – At Fault
If your leased car was totaled and you were at fault, you’ll need to file a claim against your personal collision or comprehensive coverage. Your insurance will typically pay out the current value of your car. As discussed previously, this does not release you from the obligations of your lease agreement. Gap insurance is, therefore, useful in covering the difference between the market value and the remaining lease value. In both cases, standard car accident and fault law apply. Nevada is a fault state (i.e., tort state). This means the at-fault party is responsible for compensating the other parties’ damages. Determining fault can be tricky. Factors like speed, weather conditions, police, and witness reports all play a role in who is at fault in an incident. Speak with an attorney for guidance on navigating the legal process.
How Much Will I Get For My Totaled Car?
What happens if your lease car is totaled and you make a claim with your insurance company? How much money will you actually receive? After they deem your car a total loss, insurance companies will pay out the actual cash value (ACV) of your car. The ACV is also known as the fair market value—your car’s current market value just prior to the car crash. So, how do insurance companies come up with the fair market value? This is where things can get a little muddy. Insurance companies have their own computer programs and formulas to come up with an ACV. Their value may not be the same as other valuation tools like the Kelley Blue Book. Their assessed value may also not be the same as what your personal valuation assessment may be. Insurance companies are not in the business to give away money. If the insurance company’s ACV falls short of what you think your car is valued, you may want to negotiate with the insurance company. Here are some tips when negotiating with your insurance company:
- Determine the approximate value of your car: Sites like the Kelley Blue Book, Edmunds, or NADA Guides can be valuable tools to help you approximate the value of your car.
- Search local markets: Check out your local dealerships or classifieds to see how much cars of a similar model and year are going for. Local pricing can be used as evidence for a higher value than what the insurance companies are offering.
- Records of features and upgrades: Find documents or receipts showing upgrades done to the vehicle. These upgrades can boost the value of your car. Likewise, showing that the car is in excellent condition with low mileage at the time of the totaled car crash can also help your case.
The more documentation and proof you have, the better your chances are of getting higher compensation for your totaled car. If the thought of negotiating with an insurance company is a bit overwhelming, reach out to an attorney. An experienced legal expert understands the tactics of large insurance companies. They’ll fight on your behalf, giving you the best chance to get the compensation you deserve.
How a Car Accident Attorney Can Help
As you can tell, a total loss on your leased car can get complicated. Dealing with the other driver, insurance companies, and the leasing company can be a huge undertaking. Moreover, there is a time limit for making an insurance claim after your accident. Rather than going about it yourself, have a trusted car accident attorney who can help you manage your case. An attorney will level the playing field when it comes to dealing with the insurance companies. They’ll also come up with a strategy so you have the best chances of maximizing your compensation. Gain peace of mind knowing a professional is on your side.
Valiente Mott – Personal Injury Firm
A totaled leased car accident can be significant enough to affect every aspect of your life. Not only do you have to worry about your car, but injuries sustained could impact both your personal and professional life. If you’ve incurred damages due to an accident, we can help. Valiente Mott, we provide legal counsel to personal injury victims. Contact our Las Vegas car accident attorneys today for a free consultation!
