Question about prepaying/ single pay lease

If I single pay i.e. prepay the full lease amount upfront, will i be covered by GAP insurance if the car gets totaled?

Gap insurance doesn’t help/apply, because with a prepaid lease, you are never under water (except maybe the last couple months of the lease). Gap helps in the situation that you owe more than the car is worth. In a prepaid lease, the inverse will hold true.

What you’re asking is if you will be reimbursed the difference between what’s owed to the leasing company, and what the car was worth.

The answer to that is- I’m not sure.

I’ve prepaid 2 leases, one thru Mercedes Benz and another thru Audi. MB actually has a provision in the lease agreement to protect you in the case of a total loss on a prepaid leased vehicle. Audi does not. So in the situation with Audi, i was reliant on my insurance company and VW financial to do the right thing if the car was totaled.

in general GAP insurance is automatically included with Luxury car leases - regular or prepaid. Doesn’t hurt to check/re-confirm as things do change from time to time.

Now - I do know BMW and MB both do cover GAP - on prepaids too. You are only liable for N number of month payments until (including) months into - at which time incident/total-event happened. Between your insurance and GAP - those entities should take care of such total event.

Of course you stand to lose: lease related fees and any taxes paid/liable. Remainder/unused month payment amount will be returned back to the leaseholder.

In some states going prepaid lease - allows for full Sales Tax credits - in addition to lowered/near-zero finance charges. Hence it may ne worth checking prepaid-lease option for possible super savings. definitely make sure GAP is included in prepaid lease!

Thank you very much for the input!

Thank you for the help!

Depends on the finance company. In theory you’d be screwed if you totaled it a month into your lease, but I’ve seen people say they received prorated refunds when that happened.

I’m currently trying to get an answer to this exact scenario but Honda Financial and my insurance company can’t seem to give me an accurate answer. But in my case I am only certain about the first year of my One Pay lease but that is only through my insurance because of my New Car Replacement provision. In my first year I am completely covered for the entirety of my vehicle cost and then an extra $1000. After that is still a mystery as I will only have Gap waiver.

This is what my Ameriprise policy endorsement provides.

  • New Car Replacement Coverage: Pays for a new vehicle of the same make and model, or if a new vehicle is not available, it pays up to 110% of the original vehicle’s Manufacturer’s Suggested Retail Price.
  • GAP Coverage: Includes New Car Replacement Insurance for the first year of ownership, and then will pay the difference between the value of your vehicle and the amount of your original loan, up to 120% of the value of your vehicle. (If you lease your new vehicle, you may already have GAP coverage. Please check your lease agreement.)

I do have GAP included on my Honda lease however, it doesn’t include New Car replacement coverage.

This is what my understanding is now becoming with Honda. They can’t give me an answer at this point whether they have that provision like your MB lease on my One Pay Lease. I’m reliant on my New Car replacement coverage for the first year and then after I only have GAP which would only cover the RV plus whatever the actual value of the car is in let’s say 2 years.

Get a blank lease contract from Honda. Any one pay verbiage should be on the back.

Also, my old post was wrong. The Audi contract has the same language as MB.

You would think so but i’ve poured over my actual contract and have found nothing specific to the one pay. You would also think that HFS or AHFC would have the answer and so far they don’t. Honda’s website does mention One pay leases but nothing specific to the questions asked here.

If the contract is silent, than I don’t believe they have any obligations to you.

If I understand things properly, the new car coverage is beneficial to you, but once you’re past the first year, the gap is worthless.

A good reason to stay clear of one pay leases. A car is a depreciating asset and I hate to throw a ton of money at a depreciating asset. Furthermore, most cars are an expense, not an investment. If the buy rate on a monthly is extremely low, it’s almost like getting free money. Why would I want to do a one pay lease or, in the case of a monthly payment lease, make a large cap reduction? It doesn’t make much sense.

If the buy rate isn’t low, and the lease agreement has the protecting language (relating to a one pay), it could make sense.

If the interest rate is low than neither MSD or one pay makes sense.