1. Total Loss Assessment: Insurance companies declare a vehicle a total loss when the cost to repair it exceeds its actual cash value. In the case of a total loss, the insurance company pays the lessor (the leasing company) the actual cash value of the vehicle, minus any deductible or depreciation.
2. Lease Contract Termination Fee: Upon receiving the insurance payout, the leasing company may charge you a lease contract termination fee. This fee is typically outlined in the lease agreement as an "early termination penalty." It's meant to compensate the lessor for their potential financial losses due to the lease's premature end.
3. Excess Wear and Tear: If your totaled vehicle had any excess wear and tear beyond what's considered normal wear and tear, the leasing company may deduct these charges from the insurance payout before paying off the lease balance. Excess wear and tear can include significant scratches, dents, or other damage that's not covered under normal usage.
4. Remaining Lease Payments: After accounting for the lease contract termination fee, excess wear and tear, and any other outstanding charges, the remaining insurance payout may be used to cover any outstanding lease payments. If the payout falls short, you may need to continue making payments until the end of the lease term.
5. Disposition Fee: In some cases, the leasing company may charge a disposition fee for processing the termination of the lease early. This fee varies from company to company.
It's important to carefully review your lease agreement and insurance policy to fully understand your responsibilities and the processes involved in the event of a totaled leased vehicle. If you have any concerns or questions, don't hesitate to contact your leasing company and insurance provider for clarification.
