What Happens When You Write Off a Lease Car?

Writing off a lease car is something every lease driver hopes will never happen to them. However, armed with the information in this article, the situation needn’t be as stressful as you might imagine.

What is a Write-Off?

A write-off refers to a car that has been damaged to the point that the cost to repair it is more that the car’s worth.

What Do I Do if I Write Off My Lease Car?

If you have a serious accident and the car is written off then you need to contact your insurance provider. You’ll also need to give your funder a call and let them know what has happened. Your insurance company will usually contact the funder, but  you should also do this so that everyone is informed in a timely manner.

What Should I Do at the Point of the Accident?

It’s always important to swap details with witnesses and any other drivers involved at the scene of the crash, including:

• Name and contact details of other people involved
• Their insurance details
• Vehicle registration number, make and model

Also make notes and photographic evidence of details of the accident. For full guidance on what to do if you are involved in a traffic accident, read our full guide.

Do I Still Need to Pay My Lease if I Write Off My Lease Car?

The lease essentially still needs to be paid but how much, if any, depends on your insurance company and how much they will cover. Therefore you need to liaise with your insurance company first. They will determine the extent of the damage and any necessary repairs which are required to remediate the vehicle. Where the cost of arranging this becomes uneconomical, the insurance company will likely declare the vehicle as a write-off.

In the case of a write-off, the finance company and insurance company will discuss the market valuation of the vehicle and if the value the insurer offers meets the requirements of the finance company, the contract will cease with no further financial obligations from you.

If the settlement amount does not meet the requirements of the finance company there will be a “gap” and it is the responsibility of the customer to pay the amount that falls within the gap. Drivers can take gap insurance to protect themselves from this risk. 

While this is ongoing you must continue to pay your regular monthly rentals.

What is GAP Insurance?

Guaranteed Asset Protection insurance more commonly known as GAP insurance is an insurance product that helps you cover any shortfall between your insurance provider’s payout and your remaining payments on a finance agreement.

There are a number of different types of GAP insurance but for a leased vehicle then it is lease GAP insurance that you need.

Taking out a GAP policy if you haven’t yet taken delivery of a leased vehicle can help reduce the worry of what you might have to pay in the event of a serious accident.

How Does GAP Insurance Work?

In the unfortunate circumstances that your car is involved in an accident or fire and is damaged beyond economical repair (or is stolen and unrecoverable) then your vehicle insurer will pay out a sum for the vehicle value at the time that it is written off, taking into account the age, condition and mileage of the vehicle.

Your finance company will also send you a settlement letter which will confirm the amount owed to them for the remainder of the lease rental payments.

Where there is a gap between the amount that the vehicle is valued by your insurance provider and the amount left on your outstanding lease payments, your GAP policy will come into force. It should cover the difference between these two amounts that you would otherwise need to pay.

What Do I Do If My Car is Written Off and I Have Gap Insurance in Place?

You will just need to contact your GAP provider if your car is written off to start a claims process. They will then be able to talk you through the process and advise you on what you need to do next. You should contact your standard insurance provider too and leasing company.

Things to Consider when taking out GAP Insurance

If you’re considering taking out GAP insurance there are a few things you will need to understand:

• GAP insurance is separate from your standard comprehensive car insurance and works alongside this not instead of it. You will still need to insure the vehicle if you take out a GAP policy. 
• The vehicle will need to be maintained as per your manufacturer’s service schedule.

Please also be aware that your GAP insurance provided may not cover the below:

• Any circumstance giving rise to a claim which is known, or could reasonably be expected to be known, by the policy holder before the commencement date.
• Any arrears in the leasing or insurance payments.
• Any excess mileage charges or reconditioning cost.
• Any VAT element of the credit or finance agreement.
• Any excess or contributions required by the insurance company following a valid claim under the policy.

Lease Car Write Off FAQs:

Can I stop Paying My Monthly Lease Payments If I Write Off My Lease Car?

No, you must not stop paying your monthly payments until a settlement has been reached between your insurer and funder and you have been notified that there are no more payments to be made. If in doubt, contact your leasing company for an update.

When Should I Take Out GAP Insurance?

Most providers will let you take out GAP insurance at any point up to delivery of your lease vehicle.

Are There Any scenarios Where GAP Insurance Is Invalidated?

There are specific exceptions to be aware of. Your GAP insurance coverage may be invalidated under certain circumstances including where accidents have involved the driver being under the influence of alcohol or drugs, if your vehicle is stolen due to negligence on your part, if the vehicle is damaged beyond repair while you were engaged in illegal activities and if unauthorised modifications were made to the vehicle concerned.

Can I Cancel a GAP Policy I No Longer Need?

If you have fully paid off the remaining balance on your lease or the actual cash value (ACV) of the vehicle is equal to or greater than the lease balance, you should have the option to cancel the GAP insurance coverage since it is no longer necessary.

 

Enjoyed this article? Read more of our latest blogs below:

• Can I Make Modifications to My Lease Car?
• Can I Lease a Car with Points?
• Driving Fines in a Lease Car
• 5 Ways to Avoid Extra Charges When Leasing

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