How Does An Accident Affect A Car Lease?

Car accidents are a horrible thing to experience, aren’t they? In the aftermath, there are lots of things you will be worried about, and your car is going to be one of them. The amount of damage to it will get fixed, and then there is added worry if your vehicle is leased.

Leasing a car has become an increasingly popular way of owning a car, but that does not make you invincible from car accidents. So how does an accident affect a car lease?

Well, let us tell you right now!

The short answer is, it depends on your lease agreement and the damage to your vehicle. For example, if your car is declared a total loss, you may still need to make your lease payments. Let’s dive into the nitty-gritty now to get you those answers!

What is a leased car?

Before we go any further, let’s look at what we mean by a leased car. A leased car is essentially like a very long rental. Every month payment is made, which allows you to run and drive the vehicle.

At the end of the agreed lease, say four years, for example, you return your car to the dealership. At this point, you can take a new lease out, or some dealerships will let you purchase the vehicle at the end.

At no point do you technically own the car during this period. It is similar to renting a house, you may live there, but you do not own the property.

What happens after an accident?

If you and your leased car are involved in an accident, there are a few things you will need to do. As you would in a regular accident, you will need to check those involved are not injured and call the relevant authorities.

It is always worth filing a police report for insurance purposes, mostly if you were not at fault and photographing the accident.

Ensure you get the other driver’s information such as name, phone number, and insurance information, as this will speed the process up.

Once this has been done, you will need to contact your insurance company to report the accident and arrange for your car to be repaired.

You should also contact the leased cars dealership, as some dealerships have specific requirements for repairs. If you are unsure, this information should be in your contract!

Putting in your insurance claim if you feel the driver is at fault is the same as owning the car.

What does the contract say?

This is where we see a difference between owned cars and leased cars. As we mentioned earlier, you make monthly payments on your car relating to your vehicle’s amount.

If the damage to the car would cost more to repair than the worth of the vehicle, it can be declared a total loss in the event of an accident.

When this happens, your insurance company will pay the lease what they value the car to be. In some cases, this can be less than the amount left on your lease agreement to pay.

If this is the case, you still need to make payments to settle your lease’s debt. You can continue with your monthly payments, or you may be asked to set up a new payment plan. This varies depending on the dealership and your lease contract, so be sure to check this information.

Gap insurance?

Gap insurance is offered when you sign any lease agreement. It's designed to cover you for this very purpose.

You would make monthly payments on top of your lease payments, and if your car is declared a total loss, the gap insurance will cover the difference between the payout for your vehicle and the remaining amount on your lease. Hence the name, gap insurance, it fills the gap for you.

You must check if you have gap insurance after an accident. You will not be able to apply for it after an accident, so this may not apply to everyone.

Not a total loss?

However, if the car is not declared a total loss, it will be repaired. The cost is generally covered by your insurance company or the other parties if it is deemed their fault.

In this case, your dealer may recommend a specific repair shop to do the work. The recommendation can vary depending on the dealership and the brand of the car.

The work must restore the vehicle to its original condition when you took the lease out. Often, photographic evidence will be required upon completing the repairs and the vehicle’s return to the dealership at the end of your lease.

It is worth noting that if the car is not returned to the dealership in the expected condition, you can be expected to pay for a certain amount of wear and tear. It is essential to read your contract carefully to understand this and speak to your dealership if you are unsure.

Final Word

Before you leave today, let’s quickly recap how an accident can affect your car lease. It is important to remember that every lease will be slightly different, so thoroughly reading your contract is an important task.

The rules around insurance of vehicles also vary state by state, so ensure that all your insurance is in order before you get in your car.

Depending on the severity of the accident, your car could be declared a total loss. This can sometimes leave you with payments to cover your insurance payout’s cost that does not cover the remaining lease payments, or you do not have gap insurance.

However, if your car is not declared a total loss, you can have it repaired, usually to the dealer’s specifications, and continue with your lease. Remember that you may be required to provide photographic evidence of these repairs.

Be sure to check if you have gap insurance and read your contract thoroughly. Remember that there are slight differences with every dealership and that rules surrounding insurance also vary state by state.


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