What You Need to Know About Leased Vehicles and Diminished Value After a Wreck
When you’re looking for a car but not looking to purchase one in the traditional way, it’s likely you’ll turn to leasing. When a buyer leases a car, they pay for the depreciation of the vehicle over the term of the lease. There are also lessor fees and interest rates tacked on to the total. Once the contract is up, the driver can return the vehicle, renew the lease, or buy the vehicle outright.
While there are a number of benefits to leasing a vehicle, including driving a newer vehicle, lower monthly payments, and not having to deal with vehicle repairs by yourself, you may run into issues if you end up in a car accident and try to seek diminished value.
If you’re in an accident in a leased vehicle, the initial steps you take are still the same. You’ll want to stay at the scene, call the police, and seek medical attention. The steps you take after, however, when you’re dealing with the insurance company and your lessor, could have an impact on your financial future. Let’s take a look at what you need to know about leased vehicles and diminished value after a wreck.
Leased Vehicles and the Right to Diminished Value
Diminished value refers to the loss of market value a car experiences after it has been in an accident and is repaired. While the owner of a car can bring a claim to recover what their car is no longer worth, lessees do not always have that ability. When the accident is not your fault, you can file a third-party claim against the other driver for negligently causing damage to your vehicle.
According to the Mississippi Insurance Department, the cost of repair may be recovered in a third-party claim, in addition to the diminution after the repairs. In no event, however, can the cost of repair be recovered to the extent it exceeds total diminution.
When it comes to leased vehicles, however, recovering diminished value is often challenging or sometimes impossible. This is because most insurers argue that the lessee does not have the ability to assert that type of claim because they are not the true owner.
The lessee is hurt by that way of thinking because they are still contractually obligated to pay the same monthly lease payment they originally agreed to, even though the car is worth less. There’s also the chance the dealership or lessor could try to hold them liable for the diminished value when they return the car.
Regardless of whether the vehicle is owned or not, it suffers diminished value. When the lessee returns their vehicle at the end of the contract, there may still be thousands of dollars in diminished value—depending on the extent of the damage that was repaired. If a third-party caused the accident, neither the lessee nor the lessor should be responsible for the drop in value.
Adjusting Leased Vehicle Buy-Out with Diminished Value
If the lessee was planning on purchasing the vehicle after the conclusion of their contract, they’ll want to discuss their purchasing options and find out about the price taking the diminished value into consideration. If the lease company does not take the lowered value into consideration, the lessee would be paying too much for the vehicle based on what an insurance company would value it at.
While a lessee trying to purchase a previously damaged and repaired vehicle is a way to highlight how a lessee can be harmed by diminished value, it is often not enough to be eligible for diminished value. That’s why prior to signing any lease, it’s important for the potential lessee to understand the terms and conditions of their contract, so they know what will happen in the event of an accident.
Pittman Roberts & Welsh, PLLC Can Help
If you were involved in an accident you believe to be the fault of a third-party, it’s likely you’ll want to consider filing a car accident claim. When you do so with Pittman Roberts & Welsh, PLLC, we’ll handle conversations and paperwork from the insurance company, so you can focus on your own personal recovery.
If you’ve leased a vehicle, we can review the terms of your contract and give you an idea of what your options are when it comes to diminished value, and whether or not it’s likely you’re eligible for that. Get in touch with our attorneys today for more information. We can begin looking into your situation and providing you with a reliable legal opinion.
