What Happens if I Crash a Leased Car?

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Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

, Content Manager - June 15, 2021

If you crash and damage a leased car, your auto insurance should step in to help. However, if it doesn’t pay everything you owe to the leasing company, it may be up to you to pay the remaining balance.

Leasing and Auto Insurance

Leasing a vehicle’s different from financing or owning a car. When you lease, your name isn’t listed on the title. The leasing company holds the title and nearly everything you pay the leasing company is predetermined. To end a lease contract, you must pay everything you owe, then you return the car to the dealership at the end of the term.

During the lease term, the lessor (leasing company) requires you to have full coverage insurance. Since you don’t own the vehicle, the lessor requires you to cover the leased car fully until the lease ends because it’s their asset.

This is good news, though, since full coverage could pay out the value of the vehicle if you were to get into an auto accident. If a car is totaled in a crash, the auto insurance company pays you the value of the vehicle to help you repay the leasing company the remaining balance, minus your deductible.

When Auto Insurance Doesn’t Pay Everything

It’s vital to remember that insurance companies only pay out the vehicle’s value. Whether or not that’s the full amount you owe the leasing company is a different thing.

Remember how we said the amount you owe the leasing company is predetermined? If you do crash the leased car and it’s totaled, and your auto insurance doesn’t pay out enough to cover everything you owe to the leasing company, then it’s on you to pay that deficiency balance.

Luckily, when you lease you’re not paying for the entire value of the vehicle – just some fees, money factor charges, and its loss of value during the lease. Odds are, your auto insurance should help you repay the total amount you owe the leasing company. But if it doesn’t, then it’s time to review your leasing contract and review your auto insurance coverage.

There are times when leasing companies require you to have GAP insurance (guaranteed asset protection). GAP insurance pays out the difference between your vehicle’s value and what you owe to the lessor. If the leased car was crashed during the lease and your full coverage doesn’t pay everything, then GAP insurance could pay the difference.

You may have also purchased damage protection insurance while finishing up your leasing contract. It’s additional insurance that helps cover things not covered by full coverage. In some cases, this coverage may help you pay the lessor if your regular coverage doesn’t.

What’s a Totaled Car?

A car that’s totaled means it was deemed a total loss after an accident. A totaled vehicle isn’t worth repairing to the insurance company, since the cost to fix it outweighs its value. If a vehicle costs more than 70% to 75% of its value to repair, then it’s usually declared a total loss.

After an accident, the insurance company sends an inspector to note the damage, add up the possible repair costs, and determine the car’s value at the time of the accident. For example, if you have a leased vehicle that’s estimated to be worth $20,000 at the time of the accident, and the repairs to fix it are at least $14,000, then it’s likely to be considered totaled by the insurance company.

Insurance Coverage Cost for Leased Vehicles

Auto insurance is usually more expensive when you lease compared to financing. A leasing company may require you to purchase a more comprehensive plan, such as higher coverage limits, or GAP insurance. And, since nearly every leased vehicle is brand new at the time of signing, premiums may be higher compared to the insurance on a used car.

As a general rule, the more expensive the vehicle, the more it costs to insure. This is due to two things: newer cars tend to have a higher theft risk, and they may have more expensive components. With the higher theft risk and possibly higher repair costs in the event of an accident, an insurance company may charge you more to insure a lease vehicle.

In Need of Another Car?

If your leased car is out of commission due to an accident, then you’re likely on the hunt for another one. Here at CarsDirect, we’re constantly updating our list of great lease deals.

For those that would rather finance, we can offer some guidance, too. Over the last 20 years, we’ve created a nationwide network of dealerships that assist borrowers with less than perfect credit. If your credit score is worse for wear but you’re in need of a vehicle, then fill out our free auto loan request form. We’ll look for a dealer in your local area that’s signed up with subprime auto lenders. Get started now!


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, Content Manager

Bethany Hickey is a Content Manager and Writer for Auto Credit Express, CarsDirect, and many other automotive blogs. She's a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. 

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