Auto Insurance Claims/leased car


QUESTION: I'm confused about something and you may know the answer. I'm thinking of leasing a new car and would want to put down a hefty down payment to lower the monthly obligation, but read that you should avoid making any down payment because "it's just throwing your money away; you are making a down payment on property that isn't yours, and if you total the car before the lease is up, that money is lost." They give the example, "Steve leased a $25,000 car and paid $3,000 down in cap costs. Two months later, he totaled the car. Since he didnít own the car, his insurer repaid the dealer $22,000; Steve lost his $3,000."
Wouldn't it be similar if you finance the purchase of a vehicle and then it's totaled before it's owned? Wouldn't that down payment also be lost?

ANSWER:  Hello Lee,

Regardless of the timing or circumstances, when your car is totaled the insurance company will pay for the actual cash value (ACV) of your car.  

In your above example, the insurance company offer was $22,000 - all of which was paid not to the dealer, but to the lienholder.  Steve "lost" his $3000 because the value of his new car had dropped since he purchased it.  Simply put, at the time of the loss, the car was only "worth" $22,000.

It doesn't not matter if the car is leased or owned - insurance companies process total loss claims based on actual cash value.  

When you are financing the car, if you owe less than the ACV, the lienholder is paid first and you receive the remaining balance.  For example, if Steve's car's actual value was $15,000 and he had a balance due on a lien of $10,000, then Steve would receive the balance of $5,000.   In the case of a lease, the leasing company is paid directly for the loss.

In any situation where you are "upside down" - meaning that you owe more than the value of the car - you are advised to purchased GAP insurance.  GAP insurance covers the difference.

As to your specific question regarding down payments - understand that depreciation occurs as soon as you leave the dealer, regardless of how much money you put down.

Hope this helps.


[an error occurred while processing this directive]---------- FOLLOW-UP ----------

QUESTION: Thanks, Jane. Just to be clear if I were to put $5k down on a leased car with a value of $20k and it were totaled soon after, I would be 'out' that $5k. Given the same scenario, but it's a car being financed, would I still be out that $5K?

Is full coverage for a leased new car more expensive than if you were financing/purchased it?

 Hi again Lee,

Yes, in all likelihood you would be "out" the $5000, because, chances are, the car's value would depreciate by at least that much.  But what you're asking is not really an insurance question, so you might want to do some further research.  It may depend on the type of car, etc.

As for full coverage leased vs financing, there should be no difference - assuming the coverage limits are identical.


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Jane Pytel


I can answer questions related to auto accidents, auto damage, auto theft claims, or personal injury claims. I am specifically suited to answer questions concerning insurance investigations and the effects of those investigations such as claim delays, claim denials, examinations under oath, or the special investigations unit. I can answer most any question that relates to proper claims investigations, or claims handling procedures and processes. I have authored several ebooks which provide claim guidance for consumers. Those books are available on Amazon Kindle: Power To Profit - will provide you with the knowledge you need to overcome the patterned obstacles that insurance companies will use to delay, devalue, or deny your valid insurance claim. The No Nonsense Guide to Accident Settlement - Teaches you how to manage your claim, how to identify the precise tactics likely to be used against you, and how you must respond.


12 years of experience with 3 major insurance companies. I hold an all lines adjusters license in Florida. I am well versed in claims handling, claims investigations, and industry standards related to both. The bulk of my experience stems from my 10 years as a police officer / detective. Building on that investigative experience, I became an SIU (Special Investigations Unit) Investigator. Accordingly, my unique expertise lies in the investigation of claims. What is necessary and related, what is not necessary and related? What constitutes a fair claims investigation? What recourse is available for consumers who suspect they are experiencing unfair claims delays? During the course of my experience, I became a certified trainer, instructing adjusters and investigators proper techniques for claims investigation and claims handling.

B.A., Communications, University of Miami 350 credit hours of intense investigative training, Miami Dade Police 80 hours of investigative training, various Federal Agencies, Miami, Fl Intensive Accident Reconstruction and Pedestrian Injury Analysis, NHTSA, National Highway Traffic Safety Agency, Oklahoma City, OK 2 weeks Auto Damage Appraisal, Winston Salem, NC Legal Principles Claim Specialist, AEI

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