Lease car write off - read this!

Jampot100

Recently I wrote off my lease car and went through the usual processes with insurance company / lease company ( the car was leased direct from manufacturer). Insurance company valued the car around 30k. Both companies were adamant they wanted to deal with each other direct and not include me. I eventually agreed but not before I'd managed to obtain the outstanding figure the lease company wanted to settle the contract. This was substantially less than the insurers valuation.
The insurers settled and initially I was kind of happy as I'd been worried that I might come out of the situation owing money.
I thought about it a bit more and then I realised the insurers had saved a small fortune because if I'd owned the car they would have had to pay out the full market valuation.
I went back to the insurance company and asked a few questions to be told that they always discount VAT from payments on lease cars. I thought about this a while and it occurred to me that the premium I was paying throughout would have probably been priced to cover the full market valuation regardless and the fact VAT hadn't been paid on the vehicle as it hadn't been purchased at any stage, really had nothing to do with my insurance contract. The contract stated that full market value would be paid on total loss - there was no reference to VAT reduction on lease cars.
I checked my separate contract with the manufacturers lease company and found a clause that said if there were any excess insurance monies after total loss figure settled that would be released to me.
So I decided to go back to the insurance company and asked for them to work out the figure deducted through VAT and pay that to the lease company. There was the usual fobbing off , small offers etc, but I mentioned ombudsman and eventually they agreed to make the payment to the other company.
I then spent several months trying to explain to the other company what had happened whilst they sat on the cheque from the insurance company and thought at one point they weren't going to release the money so made a further complaint.
Really pleased to say the money has now all been released to me and given the sums involved it was worth all the frustration and phone calls
I don't have any specific knowledge in this field, so can't say if there was anything unusual in my case that made them pay out, or even if the pay out was entirely for the reasons I pursued it. But I thought I would share this in case anyone finds themselves in a similar situation as persistence paid off !

WellKnownSid

Not sure how you managed to get them to release it - sooner or later an auditor may well pick up on the fact that the money wasn't additional fun money paid by the insurer but was in fact VAT that should have then been paid to HMRC / the tax-payer by the leasing company.

cw8825

This is very unusual from what you have said that money shouldnt have been paid to you

by paying the settlement fee to the lease company the insurers have completed all obligations, you are not owed anything

as above it could be asked to be paid back so worth keeping hold of it especially if a large sum

DullGreyGuy

It ultimately comes down to the terms of the policy, most insurers state that if it's a Lease or PCH then settlement is made to the lease company and that is the end of it. The ombudsman tends to agree this is fair in decisions like https://www.financial-ombudsman.org.uk/decision/DRN-4257827.pdf 

Hoenir

Jampot100 said:

 the fact VAT hadn't been paid on the vehicle as it hadn't been purchased at any stage

The leasing company paid and recovered the VAT when they acquired the vehicle. Likewise they bought the vehicle at a discounted rate.  

Jampot100

In reply to Dullgreyguy

Yes . My policy terms were different to those in the link. Mine said market value had to be paid to the owner of the lease vehicle. There was no clause saying they could agree a different settlement figure amongst themselves. It was in the insurance companies interest to try and settle at a lower figure but not mine as their customer which was why I challenged when I worked out what had happened. 
Maybe these circumstances are unusual but I would say if you find yourself in this situation do go back through the fine print.
The insurance company came back and said they reviewed ombudsman findings and upheld my complaint. They didn't explain what the ombudsman findings were or how they matched the case so not much more information than that.
Once accepted they had got this wrong they upped the payment by the amount they had held back.

moneytorques

Jampot100 said:

In reply to Dullgreyguy

Yes . My policy terms were different to those in the link. Mine said market value had to be paid to the owner of the lease vehicle. There was no clause saying they could agree a different settlement figure amongst themselves. It was in the insurance companies interest to try and settle at a lower figure but not mine as their customer which was why I challenged when I worked out what had happened. 
Maybe these circumstances are unusual but I would say if you find yourself in this situation do go back through the fine print.
The insurance company came back and said they reviewed ombudsman findings and upheld my complaint. They didn't explain what the ombudsman findings were or how they matched the case so not much more information than that.
Once accepted they had got this wrong they upped the payment by the amount they had held back.

"Mine said market value had to be paid to the owner of the lease vehicle."

I can't comprehend how that involves any funds being owed to yourself, a lease vehicle is always owned by the lessor.(Not the end user).
Might be worth holding onto those funds as HMRC/VAT man will be interested.

Grey_Critic

You never owned the vehicle so are not entitled. Yiu were as a condition of the lrase required to insure the vehicle which you did but because the vehicle never belonged to you then the policy is assigned to the owner (the Lease Company in this case) As in any insurance case the settlement will be agreed between the Insurer and Owner. Depending on the terms of the lease then you could be held liable for any shortfall.

As a point of interest having written the vehicle did the lease company replace the vehicle with another?

FlossieFlump

I have recently bought a new car on lease and made a particular point of choosing an insurance company that,  if the vehicle was written off, I would be reimbursed the full price of the vehicle when I first signed the lease (new for old), this also did away with the hassle of finding GAP insurance. There's a few companies that offer this option and if the cheapest one you find doesn't just get GAP insurance. It's well worth spending a little time to do a bit of research and hunting through different insurance companies for peace of mind with any new car purchase, whether it's lease or any other way of financing it. 

Grey_Critic

You do not buy a car on lease - you rent it from the lease company.

A lease is a legal agreement between the owner (The Leasing Company) and Leaseholder (the person renting) In some cases there may be an agreement for the Leaseholder to be able purchase the vehicle at the end of the rental period or return it to the owner (The Lease Company)

XRS200

FlossieFlump said:

I have recently bought a new car on lease and made a particular point of choosing an insurance company that,  if the vehicle was written off, I would be reimbursed the full price of the vehicle when I first signed the lease (new for old), this also did away with the hassle of finding GAP insurance. There's a few companies that offer this option and if the cheapest one you find doesn't just get GAP insurance. It's well worth spending a little time to do a bit of research and hunting through different insurance companies for peace of mind with any new car purchase, whether it's lease or any other way of financing it. 

Which insurance company did you choose?