Stolen lease car, insurance pay-out query

I'm really confused, Mu Rav4 was stolen just over a week ago, the keys were locked away in the house and the theft was by the CAN Bus invasion method so there was and is no question of liability here. 

My query relates to the insurance pay-out, my insurer (LV) has valued the car at £19,700 and the lease company has requested just short of £19,000. Whilst I am grateful that there is no shortfall in payment, after the £500 excess has been removed that leaves me with a return payment of £200.

I have researched online that my car is be worth closer to £25,000 but when I asked my lease company about this they informed me that the insurer would not be paying the tax back on the vehicle and therefore the pay-out is only 80% of the vehicle value, is this common practice and is this a fair way for them to operate?

As I said before I am grateful that there is no shortfall however for me there is a real world shortfall as I will need a significant down payment in order to purchase or lease a similar car, something I really cannot afford to be doing, especially as I paid the tax on the lease vehicle for the entirety of the lease. Surely the requirement to replace the vehicle's value includes VAT?

Comments

  • DullGreyGuy
    DullGreyGuy Posts: 8,990
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    When the beneficiary of an insurance payout is VAT registered it is normal practice to pay net of VAT as they will be able to recover the VAT element from HMRC if they use the payment for what its intended 

    So you go into the back of a lorry, they submit an invoice for £12,000 inc VAT, as an insurer we would pay them £10,000 as the net value of the invoice, they pay the garage £12,000 using our money plus £2k of theirs but at the end of the quarter they put it forward as a business expense and get the £2,000 back from HMRC. If we paid them the full £12,000 then they'd still reclaim the £2,000 VAT on the repairs and so would be in a better position than if the accident hadn't happened. 
  • When the beneficiary of an insurance payout is VAT registered it is normal practice to pay net of VAT as they will be able to recover the VAT element from HMRC if they use the payment for what its intended 

    So you go into the back of a lorry, they submit an invoice for £12,000 inc VAT, as an insurer we would pay them £10,000 as the net value of the invoice, they pay the garage £12,000 using our money plus £2k of theirs but at the end of the quarter they put it forward as a business expense and get the £2,000 back from HMRC. If we paid them the full £12,000 then they'd still reclaim the £2,000 VAT on the repairs and so would be in a better position than if the accident hadn't happened. 
    So are you suggesting that the lease company will benefit from the VAT back? Do I need to request anything back from the lease company? Please excuse my naiveite on this.

  • I should add it was a private lease, I'm not a business.
  • DullGreyGuy
    DullGreyGuy Posts: 8,990
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    Leste2b said:
    When the beneficiary of an insurance payout is VAT registered it is normal practice to pay net of VAT as they will be able to recover the VAT element from HMRC if they use the payment for what its intended 

    So you go into the back of a lorry, they submit an invoice for £12,000 inc VAT, as an insurer we would pay them £10,000 as the net value of the invoice, they pay the garage £12,000 using our money plus £2k of theirs but at the end of the quarter they put it forward as a business expense and get the £2,000 back from HMRC. If we paid them the full £12,000 then they'd still reclaim the £2,000 VAT on the repairs and so would be in a better position than if the accident hadn't happened. 
    So are you suggesting that the lease company will benefit from the VAT back? Do I need to request anything back from the lease company? Please excuse my naiveite on this.

    If they were to buy another vehicle they could so the buying power it represents is greater. 

    Having looked at a few cases with the Ombudsman (eg a favourable one https://www.financial-ombudsman.org.uk/decision/DRN8607381.pdf ) the answer is that it very much comes down to the exact wording in both your insurance policy and lease agreement. In some cases, like the above, the Ombudsman decided against the insurer saying full price should be paid and anything over the settlement value passed to the insured and in other cases the complaint wasn't upheld and was deemed fair that an amount less VAT be paid to the finance company and nothing to the insured. 
  • rigolith
    rigolith Posts: 2,554
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    Not much chance of the OP getting another deposit I think.
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