Hey guys. We will be signing a Hyundai single pay lease agreement tomorrow for an Ioniq 5 limited. I have been trying hard to figure out what happens if the vehicle is totaled before the end of the lease. We finally have the contract and my wife and I have read it in detail. I am an attorney and she is a CFO so we are used to complicated legal language. I have attached the relevant portions of the contract. It is essentially the same as the traditional Hyundai lease except for the “early termination” provision.
The language is very complicated and we think any reasonable judge or arbitrator would award the lessee a pro-rata share of their payments back if they fulfilled the insurance requirement and the payout equals or exceeds the residual value.
We think Hyundai would voluntarily return the pro-rata share of the up front payments if the insurance payout equals or exceeds the residual value.
In the unlikely event that the gap insurance kicks in, we believe Hyundai would take the position that no portion of the up front payment would be reimbursed. Really the only way the gap insurance would apply would be towards the latter portion of the lease, a 36 month or longer lease, the insurance company puts an unreasonably low value on the total loss or something causes the value of the I5 to plummet.
I believe a reasonable arbitrator would find the language ambiguous and rule in favor of the lessee in the following situation: the insurance loss payout is less than the residual and the gap insurance kicks in. There are enough months remaining on the lease that the pro-rata share of the up front payments exceeds the amount paid out by the gap insurance. We think Hyundai would refuse to refund under this situation and you would have to go to arbitration to get your up front cash back.
Please don’t consider this legal advice as this language is very ambiguous. We are comfortable going forward with a “single pay” lease as the benefits outweigh the slight risk for us.
Obviously this could vary by state as this language is the for Missouri/Arkansas lease. Looking forward to what you guys think.
I don’t have the final papers yet but it is supposed to be $12,700 single pay. Montana registration so no sales tax. I qualified for $2,500 Loyalty. So 10k off MSRP and dealer is making up the rest off MSRP. It’s been a very difficult process but I think buying an I5 Limited now is a huge mistake. Leasing is the smart route.
I have no idea how the gap works other than the very limited language in the contract. I’m guessing HMF has internal procedures how to handle a total loss on a single pay that probably don’t track the contract exactly.
It’s long been my opinion based on how I’ve seen others use binding arbitration for disputes with other types of creditors (credit card companies, for example) over relatively nominal sums of money, that it often isn’t worthwhile in time or money for the other party to proceed all the way to an arbitration hearing.
As I understand it, most commonly the consumer can open up an arbitration case at very little (or no) cost. Like ~$100-200.
The cost of the arbitration itself is the responsibility of the other party, and if they wish to proceed with the case, their initial costs to the arbitration company alone are in the $2-4k range just to open the case.
When it isn’t in the other party’s best interest to pay the startup costs, they relent and the case defaults to a victory for the consumer, and any initial money the consumer fronted to open the arb case is refunded.
Obviously you want to look more closely at this, but I’ve seen people get consistently good results with cell phone companies, credit card companies, etc., just by filing for arbitration.
I’ve mentioned this in other threads here, but to my knowledge no one’s ever pursued it on a car lease (blatantly excessive damage charges at lease return, for example). Or at least they haven’t reported back.
A typical GAP policy will not help here. It’s there to protect the bank from taking a negative equity hit, there’s no mechanism to provide any cash back to the lessee.
I agree the GAP does nothing to reimburse the up-front payments. I’m basing my opinion on paragraph 22d of the lease. The “single pay terminations credit” language.
I work in insurance and have seen single-pay total losses play out numerous times. The insurer will pay out the vehicle’s actual cash value to the lessor plus any applicable tax refunds. Once the lessor processes the lease termination on their end, you’ll receive a pro-rata refund reflecting the unearned rent charges you’ve prepaid.
While far less common, I have seen an adjusted payoff amount provided by a lessor subtracting the unearned rent; the insurer is then able to issue payment to the policy holder in this amount which happens much quicker. As stated, this is less common as the bank tends not to care about you receiving your money back in a quicker fashion.
