Deal Structure: Security Deposit v. Down Payment

[KD6-3.7]

I think the only portion of the down payment that could be lost would be the difference between the appraised market value and what the payoff would have been if there was no money down (CCR). It can’t be right that the insurance company only has to cover the payoff regardless of what the lessee put down on the lease- that doesn’t make sense. For example:

Scenario A- no money put down on lease. Car’s market value when totaled $50K, payoff $53K. GAP insurance covers this, if included (it usually is).

Scenario B- down payment (CCR) was $12K, payoff is $41K vs $53K. Lessee gets $9K ($50K - $41K). It appears you guys are saying the $9K is lost. In reality, $3K is lost because the GAP insurance would have protected maybe some but not necessarily all of the down payment.

This was discussed here:

Customer Car Totaled.... Insurance Claim higher than payoff

I had a customer just lease a BMW from me last month, unfortunately, it flooded and was totaled out. I made sure to tell the customer to tell the insurance company that the value is higher than the payoff. His payoff is 37k (don’t know if this includes tax or not). Insurance valued the car at 40.3k. However, Insurance is refusing to pay him the difference and wants to deal with BMW directly in just paying the 37k. Is there any way for him to get the difference?

I think dermonte wants to write off $15K, not get a $15K tax credit.

@dermonte - it sounds like you’ve discussed this with your tax preparer, or you’re at least savvy about the tax laws. If not, I would have that discussion if you’re not 100% confident in what play you make. If you make a big down payment (CCR), GAP insurance isn’t going to help you, anyway. Most lenders include it.