Lets say you lease a new SUV, and a year later its totalled. Not your fault.

Downpayment on lease was $10k.

What would you think the outcome would be?

 

Depends how you insure it.

IIRC there is a way to insure your car and the down payment either through the dealer (which may offer that option) or through your own car insurance company that in the case of a total loss you are covered for it.

 

There is replacement cost coverage in some Canadian jurisdictions. Normal coverage is "cash value" or what the car is worth today. Replacement cost would be the value of a new vehicle.

On a leased vehicle, especially an SUV where the value would drop like a stone, I can't imagine not having replacement cost. Even on owned, new vehicles, the coverage isn't that expensive, and likely worth it.

 

Similar situation happened to me last year. Vehicle purchase price was $103000. Exactly 3 months later it was written off. ACV of the vehicle according to the insurance company was ~$85000. That is the amount of the cheque they would send to the leasing company to cover the loss, since the leasing company is the actual owner of the vehicle. Check with the leasing company to see if they have gap insurance in the lease (Merc and BMW do I believe, for example), as this would cover any differences. I had the limited waiver of depreciation on my policy, so what they do in this case, is use a company called Audatex to go out to their preferred dealers and get a cash price quote on a similar vehicle. The quote they gave me was ~$5000 less than what I paid, so they wrote a cheque for $97k and change, and sent that to the leasing company. The leasing company then sent me the scraps. I had end of lease insurance coverage that I paid cash for ($1600) that neither my insurance company or the leasing company would cover. In fact, the leasing company (BMW) would not even transfer it to my replacement vehicle. You will not be made whole, that's for sure. I think I was out close to $8k for 3 months of ownership of that car. My advice after that experience would be not to put any money down on a lease, but the depreciation waiver is well worth the money, even if it doesn't cover everything you've laid out. Also, FYI, the interaction between your insurance company and the leasing company is less than transparent.

 

Two ways to approach this: if no DP on the lease, just ensure you have gap insurance which will cover the difference between the payout value of the vehicle and what you owe the leasing company in the event of a total loss. If you make a DP, get replacement value added to your insurance policy. If the car is written off, Porsche Canada (or other leasing company) gets paid out, and you get a new car without any additional cash outlay.

 

^ This.

 

This is my understanding as well regarding insurance on leases. Out of curiosity, what's the advantage/appeal of making a DP on leases? I had always thought that the way to go with leases is to have no DP.

 

I suspect that some people may want to keep their monthly / bi-weekly payments below a certain number for budgeting and/or credit approval purposes (it's alarming how many people live beyond their means and are completely maxed out credit-wise).

 

When my truck was new it had new replacement value for the first 3 years. Isn't that normal?

 

Depending on the interest rate on the lease, might make sense to have money in a DP vs a bond fund paying a lower rate. (Although as pointed out here, unless you have replacement cost insurance, the DP isn't technically a risk-free investment.)

 

It did not "have" replacement value, you purchased it from the dealer. Quite expensive as well with the dealer mark up vs buying annually from your insurance company.

 

I pay extra insurance to get new car full replacement value for 2 years in case of total loss.