Leased Vehicle Depreciation Insurance

[Neil4Speed]

Hey guys,

I was wondering if someone here with experience tied to leased vehicles could help me out. When I got my TLX I went with the full leased vehicle depreciation insurance (ie. total loss, insurance pays Acura the full leased value of the vehicle, lets say for this example it is $40k)

At first, I was wondering if it is an unnecessary insurance as my lease is at 0%, with zero down. So if the car was totaled, they would pay the depreciated reasonable value, and I would still make lease payment as usual and at the end of the lease I would simply take whatever was remaining and use my buy out.

The issue is of course that for Honda, they have no remaining collateral, and I assume that the insurance payment would be made out to Honda Canada (Not to me) for say $30k if it was a total loss today, and Honda would ask me to pay the remaining $10k to them (instead of the situation outlined above).

Am I correct in my thinking?

[realazy]

I don't get why you think you would get the chance to pay all the lease payments as usual. Once the car is totaled, the insurance would pay out and your lease will be terminated by buying out the lease (usually this is less than the sum of all payments + residual because you don't pay interest on the remaining payments). You will get whatever money is leftover if there is any.

What the coverage protects is the lender (Acura) will get the lease buyout (not the new value) and not have to try and collect from you if the market value is less than the buyout.

You paid for the insurance, so you get the difference between the new value and the lease buyout value.

Example 1:

New car $40k
Total it 23 months later, the car's worth $30k
Lease buyout at the time $27k

Without the depreciation insurance, you would pocket $3k, with it you would pocket $13k.


Example 2:

New Car $40k
Total it 23 months later, the car's worth $25k
Lease buyout at the time $27k

Without the depreciation insurance, you owe Acura $2k, with it you would pocket $13k.

[Mitsu3000gt]

So, if you total a lease with this insurance, the dealer gets their money AND you pocket a bunch of extra cash? I feel like that is begging for fraud haha.

[realazy]

Originally posted by Mitsu3000gt
So, if you total a lease with this insurance, the dealer gets their money AND you pocket a bunch of extra cash? I feel like that is begging for fraud haha.

It doesn't have to be a leased vehicle. You can buy the car out right and buy depreciation insurance. It's extremely common and is pretty standard on most insurance policies for new cars for the first 2-3 years.

The insurance gets more expensive as the car gets older as the difference between new and market value gets bigger.

[Mitsu3000gt]

^^ Interesting, thanks. So a car with a higher residual value would have a lower premium for depreciation insurance? eg. a Lexus vs a Cadillac of similar initial cost, the Lexus would be vastly cheaper to insure with this add-on?

[Jeff Lange]

I had this type of insurance on my Lexus, basically for the first 2 years (or whatever you get), if the car is totaled, you are able to get enough money to replace the car with a brand new version of the same car, instead of only being able to get a 2 year old car.

Obviously I never used it, but it wasn't that much more money and it would have been nice to have in case something did happen to the car.

Jeff

[lilmira]

Isn't this just 43R? I don't think they pay you as a lessee any money. You don't own the car. You just walk away less your deductible when shit happens. When I was leasing a car, the lessor was on the insurance paper.

Another thing about 43R, I believe they have to use OEM parts for repair.