Car Lease With Insurance
A car lease is an alternative to buying a new car which may be too expensive for a low budget. There are of course disadvantages related to car leases and a main disadvantage is related to what happens if you are involved in an accident before you finish paying off the car lease. That’s because, even if you aren’t the car’s owner you are still responsible for its condition. That means you need to properly insure the vehicle and leasing companies have strict rules about the amounts of insurance you are obliged to purchase. The minimums you are required to buy are usually set at $100,000 for the cover of one single person hurt in an accident, $300,000 per accident and $50,000 for the cover of property damages.
What happens when you get your leased car involved in an accident mostly depends on the extent of the damages and on the terms included in the contract you signed. What applies to all lease agreements is that the leasing company expects its car to be returned in an acceptable condition as established in the contract. Therefore, if the car is involved in an accident, the leasing company will try to find a way to reduce its losses.
If the accident in which your leased car is involved doesn’t completely total the car you don’t have that much to worry about. That’s because the insurance company will have to pay for all the bills related to the car’s repairs and you will just have to keep covering your monthly payments. That’s why car lease works with insurance. If more than one vehicle is involved in the accident, the bills will be paid by the insurance company of the driver found at fault. Also keep in mind to have all the repairs made at a shop approved by your leasing company because otherwise you might end up loosing the deposit you had to pay when you leased the car.
If after the accident you realize that the car is totaled, you will have to once again deal with the insurance company. If the car has sustained damages that exceed 60 or 75 percent of its total value, the insurance company will declare it totaled and will pay the insurance company the car’s value. If the insurance you purchased doesn’t cover the vehicle’s value, you will have to pay the difference out of your pocket. If you find yourself in this situation you may also have to cover the remaining payments. That depends on the terms included in the lease agreement you signed. You may even have to pay early termination fees. In order to avoid such a situation you should also purchase gap insurance when you lease the car. This type of insurance will cover the difference between the amount covered by the insurance company and the amount you are required to pay by the leasing company. If you didn’t purchase gap insurance and the leased car gets totaled in an accident and you are unable to pay the amount required, the lease company may be willing to offer you the chance to finance the remaining balance through another car lease or loan.
As a conclusion I must tell you once again that even if the leased car gets totaled, your responsibility towards the leasing company doesn’t cease to exist. The best case scenario is when the car can be repaired and the bills are covered by the insurance company. Otherwise the situation gets more complicated and possibly more costly for the one driving the leased car. By purchasing car insurance and gap insurance the risks will be reduced.