What Happens When You Total A Leased Car

What Happens When You Total A Leased Car

One of the worst things that can happen to a car owner is totaling a leased car.

The process that follows can be complex and confusing, especially if you’re not familiar with the intricacies of car insurance and leasing agreements.

This article aims to provide an in-depth understanding of the process and consequences of totaling a leased car.

Dealing with Insurance Companies

When your leased car is totaled, the first entity you’ll likely deal with is your insurance company. The insurance company will determine whether your car is a total loss based on the cost of repairs versus the car’s actual cash value (ACV). If the cost to repair the car exceeds its ACV, it’s typically declared a total loss.

The insurance company will then offer a settlement based on the car’s ACV, which may not cover the remaining balance on your lease. This is where gap insurance comes into play. Gap insurance covers the difference between the ACV of the car and the outstanding lease balance, protecting you from having to pay out of pocket.

It’s essential to understand your insurance policy and what it covers. If you’re not satisfied with the insurance company’s valuation of your car, you can negotiate with the adjuster or hire an independent appraiser.

Financial Implications

Totaling a leased car can have significant financial implications. Even after your insurance company pays the ACV of the car, you may still owe payments on your lease.

This is because the lease is based on the car’s value when new, while the insurance payout is based on the car’s value at the time of the accident.

If you don’t have gap insurance, you’ll be responsible for paying the difference between the insurance payout and the remaining lease balance. This can amount to thousands of dollars. Therefore, it’s crucial to consider gap insurance when leasing a car.

Legal Steps to Take

If you’re involved in an accident that totals your leased car, it’s important to take the correct legal steps. First, never admit fault at the scene of the accident.

Fault is determined by insurance companies based on the details of the accident, not by the drivers involved.

Document the accident thoroughly by taking pictures of the damage and the scene, and gather contact information from any witnesses.

Depending on the severity of the accident and potential legal implications, you may want to consult with a lawyer.

Replacing the Totaled Vehicle

Once your leased car is totaled and the insurance and financial matters are settled, you’ll need to consider your options for a replacement vehicle.

You may choose to lease another car, or you may decide to purchase a car instead; the accident shouldn’t keep you from doing either as long as you handle all financial responsibilities associated with the previous lease.

If you decide to lease again, you’ll start a new lease agreement with the dealership. If you decide to buy, you can use the insurance payout as a down payment on a new car.

Either way, it’s important to understand the terms of your new lease or loan agreement.


In conclusion, totaling a leased car can be a complex process involving insurance companies, potential financial obligations, legal considerations, and finally, obtaining a new vehicle. By understanding these aspects, you can navigate this challenging situation more effectively.

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Steve is a former licensed car dealer located in the State of Florida.  He has many years of experience buying, selling, and working on cars mechanically and started Autohitch to help buyers and Sellers navigate the complex lands of Car Buying.