What Happens If You Total a Leased Car

Leasing a car is a popular option for many drivers, as it offers flexibility and often lower monthly payments. But, what happens if you’re involved in an accident and the car gets totaled?

In such cases, your insurance will compensate the company for the vehicle’s market value, but you may still owe payments if the payout doesn’t cover the remaining rental balance. Being aware of your responsibilities, insurance coverage, and the following steps can help alleviate the stress of this unfortunate situation.

At The Barnes Firm, we specialize in assisting individuals through the complicated aftermath of auto collisions, ensuring that your cases are handled professionally and carefully.

How Do Leased Cars Work?

Leasing a vehicle is essentially a long-term rental. Instead of owning the car outright, you make monthly payments to a leasing company over a set period, usually two to five years. During this time, you’re responsible for keeping the car in good condition and following the terms of your agreement.

When it comes to accidents, the key difference between a leased and an owned car is who holds ownership of the vehicle. Since the leasing company technically owns the car, they have a say in how it’s repaired or, in the case of a total loss, how the situation is handled financially.

The Difference Between Leased and Owned Cars

The decision-making process is fairly straightforward when you own a car and it’s totaled. You work with your insurance company to either repair the car or, if it’s a total loss, get a payout for the car’s value. You have full control over what happens next.

In contrast, with a leased car, the leasing company owns the vehicle, which adds an extra layer of complexity. They will be the ones to receive any insurance payout for the car’s value. Your responsibility largely revolves around continuing your lease payments and ensuring you meet any financial obligations outlined in your lease agreement.

If the accident caused injuries, the focus should not only be on the car but also on seeking compensation for medical expenses, lost wages, and other damages.

What Happens When the Car Is Totaled?

A car is considered totaled when the cost of repairing it exceeds its value, or if the damage is so severe that the vehicle cannot be safely driven. When a leased car is totaled, your insurance will typically pay the leasing company the car’s actual cash value (ACV) at the time of the accident. Nonetheless, this payout might not always cover the remaining amount owed on the lease.

In the event of an accident, it’s crucial to prioritize your health and safety first. If you’ve suffered any injuries, it’s important to seek medical attention immediately and document your injuries for any potential personal injury claim. In New York, you can order and access the motor vehicle accident report from the Department of Motor Vehicles, which is an important document for any legal proceedings (DMV Accident Reports).

What Should I Do After a Car Accident in a Leased Vehicle?

Totaling a leased vehicle can be a complicated process, but following these steps can help you protect yourself both legally and financially:

1. Seek Medical Attention
   Your health is the top priority. If you’re injured, make sure to get immediate medical care. Even minor injuries can have lasting impacts, so it’s important to have a doctor document any injuries. According to the Centers for Disease Control and Prevention (CDC), untreated car accident injuries can lead to chronic health issues and long-term disability.
2. Call Law Enforcement
   After ensuring your safety, it’s crucial to report the accident to law enforcement. In New York, it’s mandatory to file an accident report if there is injury, death, or property damage exceeding $1,000. You will need to complete the official accident report form, MV-104, which must be submitted to the New York Department of Motor Vehicles (DMV) within 10 days of the accident (MV-104 Accident Report Form). Filing this report is crucial for documenting the accident and may be necessary if you are pursuing a personal injury claim.
3. Document the Accident
   Take pictures of the accident scene, gather contact information from witnesses, and exchange information with the other driver(s). This evidence can be crucial if there is a legal dispute or if you’re seeking compensation for injuries.
4. Contact Your Insurance and Leasing Company
   Notify your insurance company and your leasing company about the accident. Make sure you understand your lease agreement and what your responsibilities are regarding payments after a total loss.
5. Consult a Personal Injury Attorney
   If you’ve been injured in the accident, it’s important to consult with a personal injury attorney to understand your legal rights. The attorney can help you file a claim for compensation, which may cover medical expenses, lost wages, and pain and suffering if someone else is at fault.

Who Is Responsible for the Lease Payments?

After a leased car is totaled, the question of who is responsible for the remaining lease payments can be confusing. Even though the vehicle may no longer be drivable, you are still contractually obligated to fulfill the terms of your lease. This means that, in most cases, you are still responsible for making any remaining lease payments unless your insurance or gap coverage addresses the outstanding balance.

Lease Payments After a Total Loss

When a leased car is totaled, your insurance company will typically pay the leasing company the car’s actual cash value (ACV)—the car’s worth at the time of the accident. However, depending on how much the car has depreciated, this payout may not cover the total amount remaining on your lease.

For example, if the car’s ACV is less than the remaining payments on your lease (a common scenario due to depreciation), you could still be on the hook for the difference, known as the “gap.”

The Role of Gap Insurance

This is where gap insurance plays a crucial role. Designed to cover the difference between what your insurance company pays for the car’s value and what you still owe on your lease, this type of coverage can often take care of any remaining payments, protecting you from out-of-pocket expenses.

Without it, you could be financially responsible for paying the remaining balance on your lease, even though the car is totaled. This could leave you with significant out-of-pocket costs, especially if the vehicle was relatively new and depreciated quickly.

Responsibility Beyond Payments: Focus on Injuries

While the financial obligations of a lease are important, your health and recovery after a serious accident should be your primary focus. If you or any passengers were injured in the car accident, you may be entitled to compensation for medical bills, lost wages, and pain and suffering. In cases where another driver was at fault, a personal injury claim could help alleviate some of the financial burden from both your lease obligations and your medical expenses.

Given the complexities involved in these situations—both in terms of lease payments and personal injuries—it’s crucial to consult a personal injury attorney who can help you navigate your legal rights and responsibilities. If another party is at fault, their insurance may also be liable for your injuries, potentially reducing your financial strain.

Car Accident? Don’t Face It Alone

If you find yourself in this situation, having experienced legal support is essential. The Barnes Firm is here to guide you through every step of the legal and insurance processes, ensuring you fully understand your rights and options. We are dedicated to helping you pursue the compensation you deserve while expertly handling the complexities of insurance claims.

Contact us today at (800) 800-0000 to get started.

For more information on leased car accidents, visit the Lease Guide’s article.

Richard Barnes – President of The Barnes Firm

Richard Barnes: “As President of The Barnes Firm, I have dedicated my career to achieving justice in hundreds of cases for the victims of injuries caused through the fault of others. Additionally, I have been honored to have been elected Best Lawyer and a Super Lawyer”

Years of Experience: 30+ years
LinkedIn Profile: Richard Barnes