How to Manage/Mitigate Risk in a Lease -

[southpole12]

So with a One pay lease, will gap cover the amount you paid in the event of a total loss. I am in Florida.

[Ursus]

Then why people leasing Mazda have to buy their own?

[mllcb42]

@southpole12

So with a One pay lease, will gap cover the amount you paid in the event of a total loss

One pays typically offer a prorated refund, but that can vary by brand, and wont necessarily cover any negative equity rolled in.

[leaseguru2]

My guess is you would be refunded a prorated amount, but the specifics of the lease language or gap policy would determine the answer.

I would encourage you to call your lender or review the contract language.

G

[southpole12]

Yea I will have to do that. Thanks

[jeisensc]

Definitely read your contact, but the last column on this page (along with footnote 9) attempts to inform on this

The Captive Matrix

A best-effort to consolidate multiple wiki articles into a single table of OEMs, their captive banks, and the relevant rules that generate so many questions. If you find this helpful: Support Lease Hackr. Based on community submissions and is subject to change at any time. NOT A SUBSTITUTE FOR CONTACTING THE LENDER TO CONFIRM. Table scrolls left-to-right and up-down, or you may need to hit to pop-out control (diagonal arrows) in the top-right on the table when hovering over it. OEM Sub-br…

[southpole12]

Thanks for that. I seem to be getting varying info on whether gap would cover a total loss.

[jeisensc]

@southpole12

I seem to be getting varying info on whether gap would cover a total loss.

Best Current EV lease

In a total loss, irrespective of lease or buy, gap pays off any shortfall, I’ve never seen one that pay overage (ACV - settlement). So if the loan/lease still has a balance after insurance pays-off, it covers the difference. It depends in the bank. For some, a new car loan has to originate at the dealer, some offer a loan with new car rates based on MY and mileage — e.g. Navy Federal has a “New Car Refinance” loan at the same rates as “New-new” if car is a 2023 or newer with up-to 30k miles

If you search and spend a half hour reading, all these gap and one pay questions have been answered many times. There are posts from people that experienced total loss who describe exactly how it played out (“stolen equity” is a great search phrase here).

tl;dr

• if a 1 pay or MSDs significantly reduce the rent charge, and you can, do it. Don’t worry about losing your 1P or MSDs in a total loss if you have gap
• don’t put money down on a lease simply to lower the payment (to minimize the rent charge, maybe). Anything you pay toward a cap cost reduction is more likely to evaporate in a total loss.
• gap insurance or waiver will cover any shortfall in a total loss, not “equity” (it’s not your “equity” on a lease, it’s the bank’s). Toyota and Mazda don’t include gap so you need to buy it separately, your car insurance is the first stop to see if they offer it, and how much - last I checked a few years ago mine offered it for about $1/mo, many carriers don’t offer it. Plenty of threads on that too.

[southpole12]

Kia includes gap. But if I’m understanding correctly if my residual is say 40k. Let’s say I paid 26k for the one pay lease. If the car is totaled 6 months later and the car is worth let’s say 55k. I would get the 15k over the 40k to pay for the vehicle. Therefore I would be out 11k minus those 6 months so maybe 7k I would be out. Gap would not cover anything in that case.

[mllcb42]

@southpole12

I would get the 15k over the 40k to pay for the vehicle.

Most brands these days do not provide any insurance overage to the lessee.

For one pays, there’s usually a prorated return of the initial payment, so if it was a 36 month you did a onepay on and you totaled after 6 months, you’d receive back 30/36 of your original payment, or about $21700. Wouldn’t matter if it was worth $55k, $30k, or $15k.

As always, you’d need to confirm the specific terms of your contract though.

[southpole12]

Interesting I would be fine with that. I’ll ask directly then. Thanks!

[mllcb42]

@southpole12

I’ll ask directly then.

Don’t ask the dealer. Read the contract.

[southpole12]

Ok will do!

[Mister_Zachary]

@jeisensc

if a 1 pay or MSDs significantly reduce the rent charge, and you can, do it. Don’t worry about losing your 1P or MSDs in a total loss if you have gap

A salesman at a Jeep dealer told me the exact opposite of this a few weeks ago. I raised the prospect of doing a one-pay on a 4xe, and he discouraged me from doing so on the basis of possibly not having complete coverage in the event of a total loss.

So basically, in the event that I finally find a deal I’m happy with, 10% of my attention needs to be on the words coming out of the salesman, and 90% needs to be on the specific language of any documents I’m confronted by

@jeisensc

don’t put money down on a lease simply to lower the payment (to minimize the rent charge, maybe). Anything you pay toward a cap cost reduction is more likely to evaporate in a total loss.

To the salesman’s credit, he did tell me this.

[thevolvoguy]

in new york state?

[mllcb42]

@Mister_Zachary

10% of my attention needs to be on the words coming out of the salesman

That’s way more attention that you should be giving to what they say.

The only thing they can say that’s worth paying attention to is “yes” to your offer.

[max_g]

@jeisensc

if a 1 pay or MSDs significantly reduce the rent charge, and you can, do it. Don’t worry about losing your 1P or MSDs in a total loss if you have gap

GAP has nothing to do with a traditional one-pay: the money is returned by the lessor on a prorated basis.

@southpole12

But if I’m understanding correctly if my residual is say 40k. Let’s say I paid 26k for the one pay lease. If the car is totaled 6 months later and the car is worth let’s say 55k. I would get the 15k over the 40k to pay for the vehicle. Therefore I would be out 11k minus those 6 months so maybe 7k I would be out.

Read your contract but the ones I’ve seen don’t work like that. You’re not getting money back from the difference between insurance payout and lease balance. You’d be getting your money back prorated from the lessor.

[themachine]

@leaseguru2

Down payment or Capitalized Cost reductions on a lease are ALWAYS lost if your lease vehicle is declared a total loss.

Not true, there are lessors who refund a prorated portion of the cap cost reduction if there is equity in the lease, e.g. NMAC.

@leaseguru2

Multiple Security Deposits will generally be refunded unless the lease is terminated early for reasons other than a total loss.

Also not true, there are lessors who use MSDs to offset the gap, e.g. MBFS.

Net net, you have to read the contract for YOUR lessor. What other lessors do is completely irrelevant.

[max_g]

@themachine

Not true, there are lessors who refund a prorated portion of the cap cost reduction if there is equity in the lease, e.g. NMAC.

A portion of DAS monies may also be recovered if insurance payout exceeds the balance AND company policy or state law requires the overage to go to the insured.

[Ursus]

Yep…
[101010]