Posted on 06/16/2021 6:16:22 PM PDT by know.your.why
I cant be the only one to be blindsided by what seems to be such an unfair practice in the auto-leasing industry. I was planning to buy out the lease on a car when it came due in 2 months. Unfortunately the car was totaled (no injuries). The car is valued at $20K (round figures here). I owe $14K (been paying on it 3 years). Heres the kicker...the leasing company says that they are due $20K from the insurance company not the $14K that is owed...which is completely backwards from logic IMHO. Has anyone ever had to deal with this?? I need help! **This is in Alabama.
The problem is that you weren’t purchasing the car but were leasing it with a buyout option at the end. The company still owned it in total so it is entitled to market value for the loss. See, unlike when you are buying a house, which you own subject to a lien (mortgage), you were acquiring no equity with your payments. Not a cent. That’s why leasing is a terrible business decision, unless you own a business that can deduct the lease payments and don’t have to depreciate the asset over time.
What exactly is "unfair" about what the leasing company is doing? You are leasing a car from them that has a documented book value. Isn't the insurance company supposed to make them whole?
The issue of what you intended to do with the car two months from now has no real bearing on the dollar value of the asset the leasing company has lost here.
That’s a great article link, from Zack Attack.
Do you have Gap insurance??
Does your lease say that YOU get the full amount paid by the insurance co, or that THEY get the entire amount, paid by the insurance company?
Sounds like that’s what it boils down to.
” Now they are saying that it doesnt matter how much I’ve paid into the car. What if I had payed all but $100 on the car?”
That’s just it: You never paid into the car. You paid rent, not principle. You have zero ownership in the car. You were renting, and you were paying the depreciation based on time and miles. You were never paying into the car itself, just its use.
The most important question for you right now is what does your insurance company intend to pay. Will they cover the $20k the leasing company is (I assume) owed for the value of the car? If not, you might have a liability to pay. If your insurance company thinks the car is only worth, say, $14k, you will owe the leasing company an additional $6 ($20k - $14k = $6k) unless you have gap insurance, and you might. Check your paperwork.
What is the blue book value? The insurance company will probably only pay blue book. So if it is less then they will make a deal with the Lease company. They have lawyers for that.
Just a guess. But to them the loss is a 20K vehicle not your 14K paid on it. If your house burned down tomorrow (G-d forbid!)would you expect the insurance to pay you only what was owed on the mortgage or the full insured value? You would want to replace what you physically lost not just the money paid on it.
Because it does not matter what is owed, only the value to the owner.
You are not the owner, they are.
From what I am reading here, it appears that gap insurance is not an issue. The book value of the car exceeds what the person leasing the car still owes on the lease, so the car is not “upside down” in a way that gap insurance would be needed. Maybe I’m wrong about that?
I have only had a few leased vehicles but in each case the dealership had a Gap Insurance quote ready to be added to the lease cost. The full term cost of the gap was added to the lease cost and amortized with the lease cost.
This is really critical now as values of used or leased cars are way up with blue Book values lagging with reported sales.
Thank you for sharing that. I had not considered the boost in used car prices right now either.
Every time I have ever had a car totaled the ins company has called me and said “Congratulations Al you car is worth $ X.00
I have found the best response is to start laughing, then say that was pretty funny, the car is worth at least $2X
please provide me the comps that you used to determine the value, here is my email, thank you.
then you have to go through the comps, look at the options, tires miles condition and sales price.
Before you do this you cannot make any kind of judgement as to the value of the car.
since you leased, as everyone else says you need to know your buyout price in the contract, even if you have to pay lease payments for a few months you need to know that.
Sorry this happened to you. Car leasing seems akin to time share purchase.
its in the fine print of your agreement. They were going to sell it for the full amount after they got it back. It’s like buying a timeshare condo.
I had a vehicle leased and it was destroyed in a hail storm. Called the leasing company and told them where it was and that the insurance co said they would pay full retail used car price. Guy said, well, you won’t get hurt too bad. I pointed to paragraph 56 or so wherein it said the company would accept insurance payment in full for acts of God. Guy said I did not know that was in that lease. I responded it is, you got the news of where it is and one more thing, the Ford place said they start charging storage tomorrow, click. Never heard a word again,
In a lease you are not paying towards any equity, you are basically paying to rent it for a term. The car is actually losing value as you drive it around during your lease. It’s less complicated to think of it in those terms.
Since you can no longer turn in the leased car at the end of the lease, you have no value in that car. There is no car. You cannot negotiate anything.
You would have had an OPTION to buy the car after your lease expires.
When you turn in a lease the dealership will go over that car with a fine tooth comb and ding you for every teeny cosmetic flaw, and even remaining tire life expectancy. Even a small stain in the carpet inside of the trunk will cost you. Even if they can steam it out.
Your auto insurance should be covering the cost of the car. At three years old, it shouldn’t be very up-side down. As others have mentioned - gap insurance is usually offered when one purchases new, and/or when one leases a new vehicle. First of all, see if you took that option. Hopefully so.
Lease payments do not build equity in the way that a straight purchase loan does. Except for the dealership, they make out well with a lease turn-in. Leases are best for people who like to trade cars every two to three years, people that only need a car for a few years for what ever reason, company cars, and people that need a less expensive car that is new and (hopefully) very dependable - some parents do this for their teens.
Hopefully insurance takes care of the worst/all of it for you.
“How can the leasing company ask for more money that what is owed on the car???”
Because they own the car and the insurance covers the value of the car, not the debt.
If you owned the car, you’d get the 20K and pay off the loan and pocket the difference.
Unless a third party has a solid dollars and cents argument to lay claim on any ‘excess’ settlement, what the insurance company and the leasing company negotiate is between them. The path of least resistance for a third party would be a return to the status quo.
It should be no problem for the leasing company to show ‘community good will’ by transferring your lease to a replacement vehicle and lowering the end-price by whatever portion of the principal you’ve already paid or feel entitled to. You resume your $14K debt for a few months until you can buy out the lease as planned and have the replacement vehicle in the meantime. Which you can then sell for $20K or whatever and pocket all the profit. How favorable a deal you get from the leasing company will depend on your negotiating skills and answers to the below questions.
Do you have a lease agreement that acts as a rental agreement but gives you first dibs on purchase at the end of the term, at a pre-set price? What was that pre-set price? Is the lease agreement one that applies a portion of the monthly payment to principal (like rent to own)? Does that share add up to $6K? What were the costs to the leasing company of towing/wrecking the vehicle? Are you asking for reimbursement of all principal payments made or a percentage? How are you calculating that percentage? How does that compare to the cost of pursuing that amount in court? Was the lease ever used as a tax-deduction?
The Lessor owns the car.
The lessor lets you, the lessee to use the car under strict conditions.
At the end of the lease, lessor takes back his car.
Then, lessor decides what he wants to do with the asset.
You are responsible to make the lessor whole, you do not get a piece of upside gains
In addition to that, if you read the lease contract and it is like ours, it has early termination fees and end of lease termination fees to the tune of $4K+ combined. In addition to all that, you could be penalized for damage beyond fair wear and tear.
Also factored in to the purchase at the end of lease, is the residual value, what the car is worth in Kelly Bluebook or a similar source. Since your car was totaled before the term of the lease expired, it was worth more and the leasing company may be shooting for that too.
Your best bet is to have your insurance company fight it out with the leasing company, on your behalf, while you stay out of it. Neither entity has your interests at heart. Any fees or excess charges sent to you should be forwarded to the insurance company.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.