Should I file a car insurance claim before my lease ends?
Leasing a vehicle provides an opportunity for a driver to obtain a clean new vehicle at a lower initial cost than purchasing it outright. When interest rates are high, the cost of leasing a vehicle is often substantially lower than making payments on a financed vehicle, and new cars depreciate quickly after being purchased. Leasing certainly isn’t for everyone, but for some people, it’s a smart economic choice.
If you do choose to lease a vehicle, it’s important to maintain an appropriate amount of coverage. Because you do not own the car, you need to ensure that the financial interests of the car’s true owner is protected. This means carrying ample car insurance to pay for damages the vehicle may sustain while you own it.
All leased and financed vehicles must be insured with full coverage auto insurance. You must also file a claim any time you cause damage to a vehicle that you don’t own outright, and you must use the claims settlement to pay for the damages. If you own a car, you can use the settlement any way that you choose, but this is not a luxury available to people who lease or finance.
What if I Turn My Car in With Damage?
At the end of your leasing term, you must turn your vehicle in or buy it from the dealership. When you return a leased vehicle, the dealership will look over it to assess for any damage to the body and interior. If the car has damage, you are financially responsible for paying the cost of repairs. Although some of this may be taken out of any security deposit you put down, the rest will likely need to be paid out of pocket.
These damages do not count regular wear-and-tear, however, and the car isn’t expected to be in flawless condition when you return it. Small pockmarks, scuffs, chips or scratches are a regular part of car ownership and shouldn’t count against you. Slightly larger dents and scratches may be charged a specific fee.
For example, BMW has a tool that measures the size of a dent or scratch. If the damage falls within the tool’s range of about two inches, the damage will not be charged to you. If the damage falls outside of these limits, each dent will cost $100 to $450 to repair depending on its size.
Other damages that the dealership may charge for include excess miles or torn and stained interior. You can get a pre-inspection done on the vehicle to see how much you might be charged for damages so that you can decide how to best proceed.
Can I File a Claim for These Damages?
Auto insurance pays for sudden, accidental damage, not wear and tear. This means that you cannot necessarily file a claim for any damage that your vehicle sustains. You can, however, file a claim for any damage that occurred at a specific time and was caused by a covered peril. If your leased vehicle is damaged by hail, vandalism, collisions with fixed objects or flying rocks kicked up in the road, you can file a claim to cover the cost of repairs.
All damages caused at a single time by a single incident will be covered as one claim. For example, if you’re driving behind a truck that’s hauling gravel, and several small stones fall out and hit your car, that would be considered to be a single claim despite multiple dents. On the other hand, if you have several dents from other people’s car doors, each dent would be considered a separate claim.
When filing a claim, you will need to know when and how the damage occurred. If you cannot pinpoint an exact time or cause, you can still file the claim, but the insurance company may deny it if they cannot prove conclusively that the damages were caused by a covered peril.
If you do decide to file a claim, be sure to give the insurance company ample time to inspect the car prior to the end of the lease. The insurance adjuster cannot complete an inspection if you turn the vehicle in right away, and the claim cannot be settled in time to save you from paying the dealership for damages.
Also bear in mind that you must pay the cost of your deductible. Depending on the damage that you’re reporting, your deductible may be higher than the fee to cover the damages on the vehicle. It’s worth doing the math to determine which option is cheaper so that you don’t over-pay for the damages on a leased auto.