I’d like to trade in my current car (owned outright, est value $14k) but am concerned that like a cash deposit, if I total the new lease, I lose some/all of the $14k trade in. Is this correct?
If you total your car insurance will pay the current market value, GAP will cover the difference if you owe more than the car’s current market value. You should call your insurance and get a rate for car you are planning to get and then ask how much would it cost to get a “replacement coverage”. Then compare how much you save in interest payments with your trade in to what the replacement coverage would cost. You can decide then what to do. With replacement coverage you will be entitled to a brand new replacement of the same make/model (so if you total it in 2025 you will get the year 2025 car, they usually offer up to 125% of coverage to account for inflation). Most insurers provide this coverage for up to 2 years/24000 miles for brand new vehicles. Travelers offers up to 5 years of this type of a coverage. You need to do some math, calculate how long it would make sense for you to keep such coverage and see if it makes sense for you to do it.
Use the cash for msds and/or get a check and throw it in a 5.5% cd
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You will be entitled, or the bank will be entitled, since they’re the owner of the vehicle and many lease contracts stipulate that any overages go to the lessor, not the lessee?
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It’s just a terrible idea in general
No upside, all downside.
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That is the idea.
Bank can’t be entitled to replacement, it doesn’t require nor pays for replacement coverage. It would only be entitled to pay-off amount if the vehicle was totaled and you were out of your lease. Bank would then collect the market value from your insurer and any difference in value to loan from GAP.
If you pay for replacement insurance, your insurer will get you a brand new car of the same make and model, and you will continue paying your lease without interruption. Since it will be a newer vehicle, insured may actually gain a lot in equity (his pay-off will be equal to depreciation after 14K cap reduction plus rent charge , but his actual replaced car will be brand new and he could simply buy it for the by paying pay off quote to lease holder/bank).
But he needs to do math, see if it’s worth doing, if interest and tax savings on 14K trade is worth the premium he will be paying to add full replacement coverage.
OP- ignore everything said by @Eric51 and listen to these guys:
I have flagged above message for moderators to review. It’s unprovoked, uncalled and is a harassment of another poster (not just sharing a different opinion on the subject). I simply share my opinion and answer questions if directly asked (note that I never resort to ad hominems just because I disagree with what others suggest) . Anyone can take it or leave it. I am not in insurance business, not selling anything nor claiming to speak a Gospel, here or anywhere.
Once again you have no idea what you’re talking about. Ever since the pandemic/chip shortages, many lease contracts state all insurance proceeds go to the bank if the vehicle is a total loss. Lessee gets $0.
So yes OP could lose everything they put down.
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@max_g , if you, as a lessor, pay extra money out of your own pocket to get a replacement insurance, how the bank gets entitled to proceeds above the pay-off amount (which will be significantly less than a replacement cost)? If you are well versed in the subject matter, can you elaborate and answer this question?
You can mark it all you like for any purpose you wish.
It’s clear you have no idea what you’re talking about on almost every subject you “opine” on.
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That’s why an ignore button is not good enough. This topic has been discussed a million times.
OP: Just get a check, it’s so easy to sell used cars these days, there are no reason to trade anything in. You will only get low-ball offers 90% of the time.
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The esssstoooooooiddddddddness
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First off, you are a lessee, not a lessor.
And many lease contracts stipulate that the lessor is entitled to overages, not the lessee… which makes sense, since the owner of the damaged property is entitled to fair market replacement value of their asset.
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When opinions are opinions, people on LH are actually quite good about offering a different opinion or disengaging when a back-n-forth reaches an impasse.
But facts are not opinions. And a steady stream of misinformation cannot simply be ignored. Cue more memes, I guess.
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It is even worse when the misinformation is delivered as an enormous and dense wall of misinformation.
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You win on grammar lesson, bad English here.
Next, to the essence of subject matter and let’s stick to facts for a second:
Lessor is entitled to whatever you would owe it for loss of the vehicle. You don’t owe the bank to replace their used, depreciated, totaled vehicle with a brand new one. Do you?
Here is example (I had a leased car totaled once):
You lease a car that is totaled, you owe bank $33,000 for it.
Fair market value of the lost car is only $30,000.
Without GAP insurance (which comes standard with any lease I heard of) you would be under water $3000, and would owe it to bank. Yes, you would owe to bank pay-off value. Insurance would only pay the fair market value of that car at the time of loss, which can be significantly less than what you owe. That’s why GAP insurance exists.
Now, imagine you totaled that same car with market value of $30,000 and you owed on it only $15,000. Since bank is the lien holder, it would collect $15,000 and go on its’ merry way.
Assuming you have made a huge down-payment to owe bank so much less than fair market value of the vehicle, all that money/equity you invested in it would be lost.
However, what if you had a full replacement coverage for the car totaled? Do you realize that your insurance would get you a brand new replacement for it which would cost, let’s say, $35,000? It would get you a new car , you would continue paying the bank and you would be driving better car with $35,000 value, while owing only $15,000.
Tell me, how the bank is entitled to collect $35,000 (and not $15,000), if for whatever reason it refuses to continue lease and demands immediate settlement?
Can you answer the above questions, or state clearly what you specifically disagree with?
Thank you.
Some people should get an info-war job at CNN or MSNBC, so much talent is being wasted on LH.
This would be correct ON A PURCHASE. On a lease, any “equity” should be put in MSDS or taken as a check back.
The “opinion” quoted above is incorrect for a lease.
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