Wednesday, October 05, 2016

Turning over a new Leaf


Our beloved first electric car, a blue 2014 Nissan Leaf (S trim, with the Charge package and a 24 kWh battery), has been "totaled" in an accident.

We have replaced it with a white 2016 Nissan Leaf (SV trim, with a bigger 30 kWh) battery.

This transition has led to some "lessons learned" about the process of being in an accident in which you are not at fault, dealing with insurance, the subtleties of electric car depreciation and some observations on the impact of larger battery capacity on life with an EV.

This first post is about the accident and it's insurance-related aftermath.
The second post is about choosing a replacement electric vehicle.

The Accident:

Around noon on Tuesday, Sep 20, I was driving alone, southbound on I-405 in the #1 lane (not the carpool lane, but the "fast" lane), just south of National Blvd, at a speed of probably about 50 mph, when the vehicles in front of me slowed to an abrupt stop. I was able to come to a stop with a few feet to spare, and no screeching tires. In my rearview mirror I could see the vehicle behind me (a Lincoln) was attempting to slow to a stop, but was hit, hard, from behind by the vehicle behind him (a white SUV). This pushed the Lincoln into the back of my Leaf, and my Leaf into the back of the pickup truck in front of me.  So, at least 4 cars involved: 1. The pickup truck in front of me, which was only hit from behind. 2. My Leaf, which was hit from behind and pushed into the truck. 3. The Lincoln behind me, which was hit from behind and pushed into me. and 4. The white SUV that hit the lincoln. I don't know if that SUV was hit from behind as well, or whether it was the main at-fault source of the accident.

The pickup truck in front of me sustained what looked like relatively minor damage to its bumper, and the vehicle 2 cars behind me (the one that hit the Lincoln from behind), a white SUV, also seemed to have only minor damage on its front bumper. Both the Lincoln and my Leaf sustained major damage on the front and back (we were both "sandwiched"), and I think the Lincoln probably got the worst of it, since the driver was clearly in some sort of shock after he stepped out of his vehicle, leaning on his wrecked car for support and grabbing at his neck and back in pain. He was only giving incoherent, stuttering responses to questions, though he seemed cognizant of his surroundings and was able to walk around and follow directions. No one else showed any signs of injury or shock.

I had called 911 before even getting out of my car, and a CHP officer in a cruiser showed up within 2 minutes. He stopped traffic across all lanes of the freeway, and had each driver move their car over to the right shoulder. He tasked me to drive both my own car and the Lincoln, since the Lincoln driver did not appear to be in a confident state to drive his vehicle. Within 6 minutes of the accident occurring, all 4 vehicles involved were on the right shoulder and traffic on the 405 south was moving again. (I know this by comparing the timestamps of photos I took immediately after the accident, and then again when all our cars were on the right shoulder.) Another CHP officer showed up and took statements from each driver regarding what had happened, and gave me his officer ID number so I could later retrieve the CHP report (which would take "8 business days" to become available). An ambulance picked up the driver of the Lincoln, and a tow truck took me and the beleaguered Blue Leaf to a collision auto-body shop in Reseda, about 2 miles from my house. I came away impressed with the efficiency of the California Highway Patrol, and as we were leaving the scene the tow truck driver was telling me that he and others had heard a call of another major accident on the northbound side of the freeway, not too far from ours. The driver said some days he only responds to 1 or 2 accidents on the West side of Los Angeles, and other days it's 10.

Insurance when not at-fault:

My wife and I had some incorrect assumptions about how car insurance works in the case of an accident that is not your fault. We assumed that it would be the responsibility of the at-fault party's insurance to "make us whole" for the damage caused in the accident. This is not quite true. Since our car was "totaled" (meaning our insurance company assessed that it would cost more money to have it repaired than the actual market value (AMV) of the vehicle), the insurance companies would only be responsible for paying the AMV to the title holder. But who was at fault would not be determined until the CHP report was available and all insurance companies had reviewed it, a process that would take at least 30 days. So, we started a claim on our own insurance so we could get a rental car for a while and then a replacement vehicle. After we get our settlement from our insurance company, they will then seek reimbursement by filing a claim against the at-fault party's insurance company.

When we bought the Leaf in April of 2014, we put $5k down and spread the rest of the cost over a 72 month 0% APR loan. By this time we still owed $13.9k on the loan, however the AMV of the Leaf was determined to be ~$10,700 ($11.7k including sales tax). This meant that our insurance company would pay a $11.7k settlement (minus our deductible of $300) to the title holder (Nissan), we would lose the car, and we would still be responsible for paying Nissan the remaining $2.2k on the loan, which they would need us to pay quickly so that they could transfer the car's title to our insurance company. Basically, the benefit of the insurance was them agreeing to "buy" the totaled car from us for the actual market value it had just before the accident, even though it was wrecked. The downside was this AMV was less than we owed to Nissan for the car. So we had to come up with the difference out of pocket.

Gap Insurance:

Again, because of an accident that was no fault of our own, we lost our car and still had to pay $2,200 for the car we no longer had. After getting over the surprise of this situation, we realized it actually made sense: The at-fault party had no control over the way we chose to pay for our car, and therefore the amount of debt remaining we had on it, nor did they have any control over the rate at which our car depreciated over time. They are only responsible for the value of the property that was "totaled". The AMV of the car was determined based on what similar used cars of the same make, model, year, and mileage had been selling for recently (not the "Blue Book value"), and the fact that it was less than what we owed was a result of the depreciation of the car and the payment terms/duration we had set up when we bought it. The car's value, and what we owed on it, were two completely separate things.

The way we could have avoided this situation was to purchase "gap insurance", also known as a "debt cancellation policy". Our insurance company (Wawanesa) doesn't offer this service; it is something you can purchase from the car loan holder (in our case, Nissan Motor Acceptance Corporation) at the time you are buying the new vehicle at the dealership. Neither my wife nor I remember being offered this option when we bought the car in 2014, but it turns out it is offered right at the time the dealership is trying to tack all sorts of other costs on to the deal (theft deterrent devices, window etching, "rust-proofing", "fabric protection", . . . and, oh yeah, gap insurance), so I guess we must have just dismissed it as yet another thing we wouldn't need and didn't want to pay for. Turns out that if we had purchased it (for ~$900), it would have meant that whatever remained on our loan balance after a total loss settlement would simply be forgiven. So, in our case, if we had spent an extra $900 at time of purchase, we could have saved $2200 in an accident like ours. Not knowing that this accident was going to occur, I'm still not sure I would have purchased the gap insurance even if I had understood its value at the time. Do you (definitely) pay an extra $900 so that you can (maybe) save a (net) $1300 in the case that your car is totaled? Or do you save the $900 and bet on the car not being totaled?

This being our lesson learned, we did purchase Gap insurance on the new vehicle we bought as our Leaf's replacement: (a new 2016 Leaf, more on how we decided on that car in part 2). Leafs, in particular, have pretty bad depreciation from original MSRP (likely the result of people's fears about battery degradation, as well as due to the federal tax credit and state rebates that deeply discount the actual cost compared to the MSRP in the first place), so I'd recommend anyone purchasing a new Leaf spring for the gap insurance.

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