# Diminished value on leased vehicle



## joedaddy (Mar 27, 2014)

Interesting.. I would think the OP is entitled to DV claim whether or not he leased.

The value of his car is lower now since the accident, and leasing is just a form of financing?

If he were to take his car to CarMax before and after accident, the trade-in value would be different.

He probably won't have a problem at lease return, but the overall value of the car is down no matter what.


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## namelessman (Dec 23, 2004)

flaggrad00 said:


> Ard is 100% right on this, you have no basis for claim of DV since the car is not owned by you.


This may depend on state court rulings, e.g. CA lessees should be able to file DV claims as policy holders(which are considered first-party).

http://www.mwl-law.com/wp-content/uploads/2013/03/diminution-of-value-in-all-50-states.pdf


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## David1 (Jan 16, 2007)

You can't collect you don't own it, turn the thing in and move on.


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## EatonZ26 (Jun 27, 2014)

While a leasee does not own the vehicle, the diminished value of vehicle does impact the leasee in 2 ways:
1.) The leasee's ability to exit the lease early is hampered since the price a dealer would buy the car would be lower
2.) The optionality value of the lease end buyout clause is reduced. Should the vehicle retain value better than the residual agreed upon (not in my case but I've heard of other cars that this has happened to - Audi Q5 for example) then the buyout option is of value to the leasee but the accident would have reduced the likelihood of the leasee exercising this option. 

I emailed Adrian Avila (my CA on the lease) about this and he said that I am free to pursue a DV claim if I want but that as long as I repair it at a certified body shop (which I did) then there should be no problems at lease end. 

I got a voicemail today from the insurance company and they will be sending me something in the mail to deal with diminished value. Let's see where this goes......


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## namelessman (Dec 23, 2004)

EatonZ26 said:


> While a leasee does not own the vehicle, the diminished value of vehicle does impact the leasee in 2 ways:
> 1.) The leasee's ability to exit the lease early is hampered since the price a dealer would buy the car would be lower
> 2.) The optionality value of the lease end buyout clause is reduced. Should the vehicle retain value better than the residual agreed upon (not in my case but I've heard of other cars that this has happened to - Audi Q5 for example) then the buyout option is of value to the leasee but the accident would have reduced the likelihood of the leasee exercising this option.
> 
> ...


FYI, the article in post#22 says this about GA for first-party DV claim:

"The Georgia Supreme Court has determined that the public policy of Georgia
requires insurers to pay the diminished value, as well as the cost of repair of an
auto, even if the insured does not make a claim for the diminished value, if the
terms of the policy are similar to those of State Farm's. The court held State
Farm had a duty to evaluate all first-party physical damage claims for the
existence of diminution in value. In an action by the owner of personal property,
such as an automobile, to recover for loss or damage sustained by him as a
result of a tortious injury thereto, the measure of damages is to be determined
under general principles of law. But, in a suit on a contract, as a policy of
insurance, whereby the owner is insured against actual loss or damage to an
automobile by collision, the measure of the insurer's liability will be determined
according to the terms of the contract. State Farm Mut. Auto. Ins. Co. v. Mabry,
556 S.E.2d 114 (Ga. 2001)."


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## Ninong (May 20, 2014)

EatonZ26 said:


> I got a voicemail today from the insurance company and they will be sending me something in the mail to deal with diminished value. Let's see where this goes......


Good luck! Hopefully they will pay you something for diminished value.



namelessman said:


> FYI, the article in post#22 says this about GA for first-party DV claim:
> 
> "The Georgia Supreme Court has determined that the public policy of Georgia
> requires insurers to pay the diminished value, as well as the cost of repair of an
> ...


Is there anything that discusses their exact definition of "owner?" "Owner" of the vehicle or "owner" of the policy? They mention "an action by the owner of personal property, such as an automobile" but BMWFS is the owner of he automobile. The customer is the owner of the policy but not the owner of the car, just the registered lessee. BMWFS is the registered lessor as well as the legal owner of the vehicle unless and until the lessee exercises his option at the end of the contract to purchase the vehicle for the guaranteed residual.

I think that's something that could be open to different interpretations by the different states. I wonder if most of them (all of them) will pay a DV claim to the lessee instead of the lessor? Might some of them not consider the DV claim as owed to the lessor? When they say above that State Farm must pay a DV claim as well a the cost of repairs are they talking about separate claim checks or a single check made payable to both the lessee and the lienholder or the repair facility??

Have you seen some DV claims paid out as a separate cash amount directly to the lessee in his name alone? Just curious. I know this matter of who gets what when the car is leased can be (and has been) interpreted differently (even in the same state, California) by different people, resulting in some very angry customers. They didn't lease with us, they went with their own bank, but they wanted us to force their bank to give them that money and not keep it. That was 35 years ago, so don't consider that current in any sense. LOL


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## namelessman (Dec 23, 2004)

Ninong said:


> Is there anything that discusses their exact definition of "owner?" "Owner" of the vehicle or "owner" of the policy? They mention "an action by the owner of personal property, such as an automobile" but BMWFS is the owner of he automobile. The customer is the owner of the policy but not the owner of the car, just the registered lessee. BMWFS is the registered lessor as well as the legal owner of the vehicle unless and until the lessee exercises his option at the end of the contract to purchase the vehicle for the guaranteed residual.


Check out the article in post#22. It says:

"1. First-Party Claims: These are claims made by the vehicle owner/policyholder against his or her own insurance company to recover the difference in the value of the vehicle before the collision and value of the vehicle after the damage caused by collision had been repaired. This type of claim is usually governed by contract law and the terms of the insurance policy. When a vehicle is damaged, a policyholder generally expects to be "made whole" by its first-party property insurer, but an insurer is legally responsible only to pay according to the terms of the policy."

It is unclear how accurate and authoritative this is, but it is interesting that the table of the article shows different rulings from different states.


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## Ninong (May 20, 2014)

namelessman said:


> Check out the article in post#22. It says:
> 
> "1. First-Party Claims: These are claims made by the vehicle owner/policyholder against his or her own insurance company to recover the difference in the value of the vehicle before the collision and value of the vehicle after the damage caused by collision had been repaired. This type of claim is usually governed by contract law and the terms of the insurance policy. When a vehicle is damaged, a policyholder generally expects to be "made whole" by its first-party property insurer, but an insurer is legally responsible only to pay according to the terms of the policy."
> 
> It is unclear how accurate and authoritative this is, but it is interesting that the table of the article shows different rulings from different states.


I can understand why it would result in "different rulings from different states." "The vehicle owner and/or policyholder" is confusing because it doesn't make clear who gets to choose whether it is the "vehicle owner" or the "policyholder" who gets paid. In the case of a lessee, he is ONLY the policyholder and not the vehicle owner. Does the "vehicle owner" have first claim on the DV claim or is it an either/or situation where the lessee (renter) of the vehicle can claim first rights to DV based on his position as "policyholder." He can argue, as others have suggested, that his interest is diminished because the value of his option to purchase at the end of the lease is diminished but I don't know if that will hold water unless and until he becomes the owner.

To be honest, I don't remember that ever coming up in all my years of experience in the car business because very few lessees, if any, ever pursued a DV claim. I know I helped a lot of customers get paid for diminished value by explaining to them how to proceed against the insurance company but leasing wasn't as popular back then and those customers weren't lessees. And I don't remember ever helping anyone pursue a DV claim against his own policy when he was the one at fault, only against the other guy's insurance company when he was the innocent victim. I don't think it's a good idea to push your own insurance company if you're the one who caused the accident in the first place. That's just a theory of mine, nothing more.


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## namelessman (Dec 23, 2004)

Ninong said:


> I can understand why it would result in "different rulings from different states." "The vehicle owner and/or policyholder" is confusing because it doesn't make clear who gets to choose whether it is the "vehicle owner" or the "policyholder" who gets paid. In the case of a lessee, he is ONLY the policyholder and not the vehicle owner. Does the "vehicle owner" have first claim on the DV claim or is it an either/or situation where the lessee (renter) of the vehicle can claim first rights to DV based on his position as "policyholder." He can argue, as others have suggested, that his interest is diminished because the value of his option to purchase at the end of the lease is diminished but I don't know if that will hold water unless and until he becomes the owner.
> 
> To be honest, I don't remember that ever coming up in all my years of experience in the car business because very few lessees, if any, ever pursued a DV claim. I know I helped a lot of customers get paid for diminished value by explaining to them how to proceed against the insurance company but leasing wasn't as popular back then and those customers weren't lessees. And I don't remember ever helping anyone pursue a DV claim against his own policy when he was the one at fault, only against the other guy's insurance company when he was the innocent victim. I don't think it's a good idea to push your own insurance company if you're the one who caused the accident in the first place. That's just a theory of mine, nothing more.


My thinking is that "claims made by the vehicle owner/policyholder against his or her own insurance company" implies that if BMWFS has a policy on its leased cars then it can pursue a DV claim through BMWFS's own policy. BMWFS can also levy charges against the lessee at lease end(if it is not repaired up to BMW's quality spec), but BMWFS should not be able to pursue DV loss directly through the lessee's personal policy. Per table of the article it looks like some states rule that policyholders(e.g. lessees with personal policies) can claim DV, while others only allow owners to do so. In states that don't allow policyholders to pursue DV claims, it would be prudent to do repairs at CCRCs.

Since BMWFS's lease agreement states that lessee must carry enough insurance(liability/comp/collision), it is unlikely BMWFS carries its own policy on its leased cars.

My 2 cents.


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## Ninong (May 20, 2014)

namelessman said:


> My thinking is that "claims made by the vehicle owner/policyholder against his or her own insurance company" implies that if BMWFS has a policy on its leased cars then it can pursue a DV claim through BMWFS's own policy. BMWFS can also levy charges against the lessee at lease end(if it is not repaired up to BMW's quality spec), but BMWFS should not be able to pursue DV loss directly through the lessee's personal policy. Per table of the article it looks like some states rule that policyholders(e.g. lessees with personal policies) can claim DV, while others only allow owners to do so. In states that don't allow policyholders to pursue DV claims, it would be prudent to do repairs at CCRCs.
> 
> Since BMWFS's lease agreement states that lessee must carry enough insurance(liability/comp/collision), it is unlikely BMWFS carries its own policy on its leased cars.
> 
> My 2 cents.


As long as the repairs are done at an authorized repair facility, then I don't think there will ever be a problem with BMWFS claiming anything against the customer related to those repairs.

I have never heard of BMWFS carrying anything other than Single Interest coverage that automatically kicks in if the customer fails to meet his obligation to keep the required insurance coverage but that was almost always finance contract customers, not lessees. I don't remember a BMW lessee allowing his insurance coverage to lapse although sometimes it can get tricky when a young guy's insurance carrier sends him a notice of non-renewal because he had too many traffic violations or claims and they don't want him anymore.


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## namelessman (Dec 23, 2004)

Ninong said:


> As long as the repairs are done at an authorized repair facility, then I don't think there will ever be a problem with BMWFS claiming anything against the customer related to those repairs.
> 
> I have never heard of BMWFS carrying anything other than Single Interest coverage that automatically kicks in if the customer fails to meet his obligation to keep the required insurance coverage but that was almost always finance contract customers, not lessees. I don't remember a BMW lessee allowing his insurance coverage to lapse although sometimes it can get tricky when a young guy's insurance carrier sends him a notice of non-renewal because he had too many traffic violations or claims and they don't want him anymore.


The MSD's also helps BMWFS to buffer any such loss. BMWFS gives up quite a bit of interest on a lease with MSD, my guess is the MSD's allows BMWFS to package those leases as senior tranches and hence the cost of BMWFS to raise money is lowered.


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## Arcane.Host (Sep 8, 2006)

joedaddy said:


> Interesting.. I would think the OP is entitled to DV claim whether or not he leased.
> 
> The value of his car is lower now since the accident, and leasing is just a form of financing?
> 
> ...


I agree here. DV exists and a claim is valid. Also the OP does not need to go to BMWFS at all - if the eventual check comes with their name on it as well, just send them the check to endorse and send it back to you.

Insurance is there to make a person in an accident whole - repairs, injury, time off, rental of similar level, and DV (DV is permitted in California).

The OP is driving a car of a lesser value due to the accident. This is not a case of normal depreciation or an accelerated depreciation (if a new car generation comes out or the model line is not being produced any more). Further, at trade in, this incident costs the OP.

At the end of the day, buying outright or financing or leasing is a mode of paying for the car. There are people who initially lease and then buy as it is a good deal - often they intended to buy it at the time of acquiring the vehicle initially.

My brother in law has successful pursued a DV claim is Santa Clara county in California ( about a 10 month old X5).

After the repair was complete (total cost $9000 - no injury as car was parked and unoccupied) and he had the car in his possession, my brother in law took the car to a dealership with the final invoice and asked them to appraise the car's value without the accident and with the accident. The dealer found nothing on CarFax but confirmed that eventually it will show up.

He then spoke to insurance company and informed them that he would like to get reimbursed for DV and that he has the appraisal from a BMW dealer (who understands the local market well) with a DV of $6500 - they rejected the claim on the basis that their insurance company does not pay for DV. He sent them a polite email (key was to send it in writing, keeping the discussion always open and being engaged politely and patiently) summarizing the discussion and reiterating the fact that he does not agree with the denial, stating his reasons again and asking them to reconsider as it was unfair to him - he attached the dealers appraisals along in this email. He then called them up again in a week, left a voice message and followed up with an email asking for an update. A few days later, he received a paper letter denying the claim - but this time they wrote that the claim is ineligible for DV. My bro in law scanned the doc and emailed them again requesting reconsideration as it was unfair to him. This cycle continued for about 45 days when he informed him that he will file a claim with the local Small Claims court in two weeks if they don't resolve this matter (he put a specific date there). At the end of the 2 weeks, he filed a claim in the Small Claims Court with supporting documentation (appraisal and the emails) showing cause and that he has made various attempts to resolve the claim (no mention of lease at all). The amount he asked for was $6500 (this is more than the standard allowed amount by SCC but there are exceptions allowed with a proper explanation). In the state database (or something similar) there is info as to who should legal notices be sent to - in this case it was the EVP of the insurance company in our state (based in SoCal - so about 1 hour flight away) and my BIL filled out his name. Upon receiving the notice, dispute resolution team contacted him to compensate him a $1500 for the trouble and for him feeling that he is driving a cheaper car - without admitting DV at all. He stood adamant and after a few days, they sent him the full amount.

What we found was that insurance companies don't want to lose a DV case and hence an out of court settlement is the way to go for them.

So to the OP - pursue it if you can drag through the process.


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## namelessman (Dec 23, 2004)

Arcane.Host said:


> My brother in law has successful pursued a DV claim is Santa Clara county in California ( about a 10 month old X5).


Is your brother's 10-month old X5 a lease or a purchase(cash/finance)?


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## Ninong (May 20, 2014)

Arcane.Host said:


> The OP is driving a car of a lesser value due to the accident.


I understand what you're saying but this may be difficult to prove if the owner of the car, BMWFS, accepts the repairs as having restored the car to factory specs. So it might be tricky with a leased car.



> At the end of the day, buying outright or financing or leasing is a mode of paying for the car.


This statement is factually incorrect legally. Leasing a car is not a mode of paying for the car and that much has already been established by legal precedent. It is a mode of paying for the use of a car but not a mode of paying for a car. Big difference.

A lessee has absolutely no ownership interest in a leased vehicle unless and until he exercises his option to purchase the car. Until then he is merely renting the car and paying for the use of it just as a person who rents an apartment is paying for the use of the apartment and not actually paying for the apartment.



> There are people who initially lease and then buy as it is a good deal - often they intended to buy it at the time of acquiring the vehicle initially.


Yes, and that's the main point I think that we are talking about in this thread. Does the lessee (renter) of the car have a right to claim diminished value based on a claim that his potential future interest in exercising his purchase option has been diminished by this accident.

I don't personally have any experience with a lessee pursuing a claim for diminished value but I do have experience (in California) with people who were purchasing their car, or who owned it outright, pursuing a claim for diminished value against the other party's insurance when the other party was at fault and caused the accident. It's funny how this happens but it may be that receiving a phone call from the dealership asking them to assign their third-party appraiser to the claim if they expect the claimant to sign their release of all liability without seeking professional legal assistance can do wonders. We can always mention the obvious, that the car is now accumulating daily storage charges and the claimant is accumulating replacement car rental charges as well. 

Yes, they all use independent third-party appraisers to assess DV claims. Maybe that's the law, I don't know. They all deny DV claims initially. I guess? In any case, we always asked for the appraiser to appraise the diminished value right there at the dealership because that's where the car was going to sit until the DV claim was settled. Not only that, we knew most of the third-party appraisers because most of them were just guys whose previous experience was in the car business.  I remember probably half a dozen like that but all of them were involved in claims against the other party's insurance company and maybe someone sort of mentioned to them in passing that they were entitled to claim diminished value? Who knows. Maybe it just slipped out when they were complaining about the fact that they gorgeous new car had been hit by some stupid driver in the other car. I don't ever remember suggesting to a customer that he should pursue a DV claim against his own insurance company. Ever. In fact, I think that would be a very bad idea.



> My brother in law has successful pursued a DV claim is Santa Clara county in California.


The claim was against the other guy's insurance company but your brother-in-law couldn't use personal injury release over their heads to beat them into quick compliance. It still should have been a quick settlement with most carriers and I'm surprised it was so difficult unless this was a leased car?

So my only question is whether your brother-in-law's car was owned outright, financed or leased at the time it was struck by the other car? If it was leased, then that would be helpful to this discussion but if not, then it's just telling us something we (some of us, anyway) have known for decades (especially in California).

Thanks!


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## Arcane.Host (Sep 8, 2006)

namelessman said:


> Is your brother's 10-month old X5 a lease or a purchase(cash/finance)?


Leased


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## Ninong (May 20, 2014)

Arcane.Host said:


> Leased


Okay, that makes his experience much more relevant and could explain why it took so long to resolve his claim. The fact that his car was parked (totally innocent) and the fact that he was dealing with the other driver's insurance company certainly helped, but, as you can see, they don't give in easily.

So now we know it can be done, even if you're leasing the car, but you have to expect the insurance company to fight you all the way. At least that's the moral of that story.



P.S. -- I would still advise anyone considering a claim for diminished value to not do it against their own insurance company. That's just my personal theory, nothing more. So don't take that as professional advice.


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