What Happens if my Lease car is in an Accident?

Your no-panic guide to lease car accidents...

Accidents happen. And sometimes, accidents happen in lease cars.

It’s a huge inconvenience, we know that, but sometimes it does happen. Therefore, it’s important to know exactly what happens if your lease car is an accident.

We don’t deal with this directly. This is because we aren’t owners of the vehicle and once the agreement is activated we have limited power over what can be done. However, we do advise people on what they should do, and what tends to happen.

So we’re going to talk you through what you should do if your lease car is an accident.

What happens if I crash my lease car?

If you are involved in an accident then there are obviously different severities. So the first thing to do would be to contact the finance house to find out whether your car can be repaired or whether it’s a write-off.

If it can be repaired then this is where your insurance company comes in. However, your finance house will stipulate where you can get your car repaired and where you cannot. The best thing to do in this situation would be to put the insurance company in contact with the finance house so they can talk directly. Sometimes it can be one process one year and they have updated it the next, so it’s vital you talk to the finance house to make sure you tick all their boxes.

what happens if my lease car is in an accident

What happens if I write off my lease car?

In the event of a write off, then the process is different. The finance house will treat this as if you have bought the car, and therefore end the agreement.

However, you still have finance to pay. So the finance house will decide on a settlement figure that you will have to pay. The insurance company will then pay out how much the car is worth at the time of the loss. Hopefully, that will be enough to cover the settlement figure. If it does not, you will have to find that money yourself. Unless you have GAP insurance, but we’ll talk about that later.  

Have you considered GAP insurance?  Let's explore whether you need it...

How much will the settlement figure be?

It depends; we can’t really tell you how much it will be. If you have a contract hire (or personal contract hire) then the finance house will treat it as if you are buying the car. And there are other factors that determine how much the settlement figure will be than just how much the car is worth after the crash. These include;

Working out calculations at a desk
  • How much the car is depreciated
  • How much you have paid in monthly payments so far
  • The mileage
  • Type of car
  • Market value of the car

Ultimately, we can’t tell you how much it will cost. This is where the risk of a shortfall comes in. If the settlement figure is more than what the insurance company pays out, then you have to make up the difference.

With a hire purchase, however, it’s already assumed that you are going to be buying the car at the end of the contract. Therefore, the settlement figure will be whatever you have outstanding. However, there is still the risk that you will have to make up the difference, should the outstanding payments amount to more than what the insurance company has paid out. That’s where combined GAP insurance comes in. But again, more on that in a little bit.

Do I have to get a new contract if I write off my lease car?

Yes, you do. The finance house treat it as if you’ve bought the car, and therefore the agreement will end. This is regardless of the agreement. You won’t get charged a cancellation fee because again, it’s as if you’ve bought the car and not cancelled the contract.

If you want to get a new car, then you’ll have to go through the process again.

Have you considered GAP insurance?  Let's explore whether you need it...

What will happen to my insurance if my lease car is in an accident?

There are few things that can happen to your insurance. A total loss claim should be settled within a couple of weeks, so you don’t have to worry about that.

If you pay for your insurance monthly, then you will have to carry on making the payments unless you cancel the policy. Most insurance companies will allow the policy to continue for 2-3 weeks while you get a replacement car. However, if you aren’t going to be getting a car for several months, then you’ll have to cancel your policy. Once you have the replacement, you can set up a new policy.

There are two options available if your car is a total loss;

If the car is less than 12 months old at the time of the accident, then some insurance companies will offer something called ‘New Car Replacement’. This is when the insurance company provides you with a brand new like for like car. However, because you are leasing and you don’t own the car, whether you get this ‘New Car Replacement’ is up to the finance house. Because they are the ones that own the car. While this may seem like the most financially viable option, if there’s a long wait for that make/model, you could end up waiting for 2-3 months for a replacement car.

The other option is that the insurance company pays the ‘Market Value’ of the car to the registered owner, so the finance house.

what happens if my lease car is in an accident

What happens if I crash my company car?

The process is the same, however, it’s down to whoever’s name is on the finance. It will depend on what your company’s individual process is. Some companies will be paying the finance and it will be in their name, therefore it is their responsibility. Others it will be the driver.

Essentially, whoever’s name is on the finance agreement is the one who is responsible for settling the finance. But, it would be best to check with your company as each company has their own process. Therefore, we cannot speak for everyone.

What is GAP insurance?

what happens if my lease car is in an accident

We’ve mentioned GAP insurance a few times in this article so it’s best we explain exactly what it is, and why it’s relevant.

GAP, or Guaranteed Asset Protection or Assured Protection OR Guaranteed Shortfall Protection, and is something that you should consider before getting a car.

GAP insurance essentially covers the difference between what your insurance company pays out, and what the finance company would ask to cover their loss in the event of a write off (up to a maximum claim limit).

So, if your car is written off, you won’t end up in a negative equity situation. For example;

 

Your car is written off and the insurer values your car at £14,000. But the finance house is asking for £18,000 as a settlement figure. GAP insurance will cover the shortfall so you won’t have to find that money yourself.

Have you considered GAP insurance?  Let's explore whether you need it...

What is Combined GAP insurance?

Combined GAP is for those who are buying their car with cash or financing their vehicle. This is why we mentioned it when talking about hire purchase.

Combined GAP will not only cover the difference between the insurance pay out and the finance settlement, but it will cover the cost up to the original cost of the car. What this means is this;

If you have been driving your car for  two years and then have an accident that causes a  write-off, combined GAP will cover the difference between the amount initially paid for the vehicle, and the insurance payout. So, any depreciation of the car is covered.

The cost of both of these types of insurance varies, and there are exceptions, as with >everything. So, for more information, we recommend you either speak to your broker or read our guide to GAP insurance.

Accidents aren’t fun, and getting into one while still paying for your car is not ideal. However, hopefully this has given you some idea of the process that you will be going through. We do recommend you speak to the finance house, though, as the processes do vary from finance house to finance house.

Have you considered GAP insurance?  Let's explore whether you need it...
Martin Mitton

Martin Mitton

Finance Team Leader at OSV Ltd
Martin enjoys: Meals with friends and family, swimming, films, sports and playing his guitar.

Martin loves to challenge the team to make sure every aspect of the leasing process is clear and fully compliant, but that doesn't mean he doesn't love to joke around as well. He's always smiling, even on the busiest days in the office.
Martin Mitton

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