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What Happens if You Total a Leased Car?

Posted in Car Accidents

When you total a car that you own, the insurer that is responsible for paying for the accident may give you the actual cash value (pre-crash value) of the vehicle. If you were leasing the car at the time of the accident, however, this can complicate the insurance process. When you lease a vehicle, you essentially agree to return the car in an acceptable condition. If the car is totaled, therefore, you will be responsible for paying for the balance remaining on your lease – with or without insurance.

What Is a Totaled Car?

A totaled car, or a total loss, is a vehicle that is worth less in total value than the price it would cost to repair – ultimately making it not worth repairing. In New Mexico, a car is considered a total loss when its actual cash value is less than or equal to the cost of repairs plus the salvage value. The actual cash value is how much the vehicle was worth before the car accident. The salvage value is the vehicle’s worth after the accident, in its damaged state.

Who Pays When You Total a Leased Car?

In New Mexico, the person or party who causes the car accident is responsible for paying. If an investigation finds the other driver to be at fault, his or her insurance company will be liable (financially responsible) for your related losses, including the total pre-crash value of your leased vehicle. If you are found to be at fault, however, or if the other driver doesn’t have insurance, you may need to seek coverage from your own insurance provider.

Most leasing companies require full insurance coverage. All drivers in New Mexico must carry at least $25,000 per person and $50,000 per accident in bodily injury liability insurance, as well as $10,000 for property damage. In addition, to lease a vehicle, you most likely need other types of coverage, such as collision and comprehensive insurance. This means that you should have the right type of first-party insurance to pay for a leased vehicle if it gets totaled in a car accident.

What Is Gap Insurance?

Gap insurance is a special type of policy that covers the difference between the value of the vehicle when you first leased it – the value that is listed on your lease – and the actual cash value of the vehicle at the time of the accident. Since most vehicles lose value when they are driven off the lot, you may need gap insurance to help you pay for this difference. For example, if a total of $20,000 remains on your vehicle lease at the time of an accident, but your car insurance will only pay to cover $15,000 as the actual cash value of the car, gap insurance will pay for the remaining $5,000.

What to Do if You Total a Leased Car

If you total a leased car in New Mexico, you will take many of the same steps that you would after any car accident. This includes stopping at the scene of the crash, checking for injuries and calling the police. Exchange information with the other driver and take photographs of both vehicles and the crash scene. Do not admit fault for the collision. If you’ve been injured, go to a hospital without delay. Then, begin the insurance claims process.

Start by notifying the leasing company of the car accident. Most leasing agreements require prompt crash reporting. Ask if there is a specific repair shop that you need to go to for a vehicle repair estimate. Depending on who is at fault for the accident, you will file an insurance claim with your own insurer or the other driver’s car insurance company. If the repairs are significant, the insurance company will write the vehicle off as a total loss. This will result in a payout of the actual pre-crash value of the vehicle to help you pay off the outstanding balance on your lease. If you need further assistance, contact a car accident lawyer in Albuquerque to make sure your rights are protected.