Chris2023

In December 2023, I leased a Mercedes Benz EQS SUV 450+ valued at $117,000+. To lower the lease interest (money factor) I put $20,500 as deposits (Multiple Security Deposit). In my lease agreement with Mercedes Benz Financial Services (MBFS) it clearly stated the lease EQS was under GAP insurance protection and eligible for GAP waiver. When I signed the lease contract, I thought no matter what happened (theft, accident, etc.) I should get back my $20,500 deposit back. MB dealership sales manager also confirmed that during my leasing process.

Unfortunately, that leased EQS car was in an accident and got totaled (battery hit) after 7 months. In late July 2023, my lease with MBFS got settled for the cash value of $110,000 (roughly). Mercedes Benz Financial first took away my $20,500.00 deposit by ignoring the fact that the vehicle was under GAP insurance protection; then, it asked my insurance company to pay the remaining balance (about $87,000). Due to the loss of $20,500 security deposit to Mercedes Financial Services, I have lost huge for this EQS lease!

I think the $18,000 GAP value ($110,000 settlement cash value minus $92,000 insurance settlement payment) should be paid by GAP insurance/waiver. How could Mercedes Benz Finance take away my security deposit at first before any GAP insurance Waiver applied? I have been contacting MBFS by email and phone calls for at least 20 times and talked to 10+ people from MBSF. My phone calls were transferred and kicked everywhere. I was even told that GAP insurance is for "protecting MBFS only" and won't protect a leasee from deposit loss due to a car accident. When a leased vehicle defaulted no matter for what reason like theft, accident, etc, MBFS will do first is to take away all of your security deposit first no matter $100 or $50,000. If this is legal, how can a lease dare to put any MSD Deposits to MBFS?! That has made me feel cheated by Mercedes Benz Financial!

I don't know much about GAP insurance and laws. Did anyone encounter similar situations in the past like mine for a totaled lease vehicle (Mercedes, BMW, Audi, Lexus, ...)? Could you help share your experience or suggestions?



-- Chris

wildta

Once the manufacturer gets its pay-off amount back (i.e., residual + remaining payments due), they are supposed to return your security deposit.

superswiss

What did you think security deposits were for? They are there to cover any damage to the car. That's what they are for. This is why they give you a lower money factory if you give them additional security deposits. It reduces their risk. Did you think they just do that out of the good of their heart? You gave MBFS $20k to cover damages to their property caused by you or your use of the car. So that's what they did when the car got destroyed. Security deposits are refunded if there's no damage to the car at lease end. I think we can all agree that's no longer the case. Gap insurance only comes in if you are still underwater after the down payments, security deposits and insurance payouts are all factored in.

This is why you should never put down money with a lease. Neither as a down payment nor voluntary security deposits. That's cash you already gave them, so they'll keep that in case of damage to the car. If they recoup more from the insurance, then you'll get part or all of your security deposits back or the insurance writes you a check for the difference. Depends on your policy and what it covers in case of an accident with a leased vehicle. You better talk to your insurance and you may need an attorney to make the insurance pay the full market value of the car and the Gap insurance pay the amount you are underwater if any. MBFS only wants to make themselves whole. They don't care about you. They have your security deposits and are looking for the insurance to cover the rest. If the car is worth more than the insurance payout, you gonna have to fight for that yourself.

Chris2023

Thanks, Superswiss! That's what exactly happened in my case! "GAP waiver" on my lease contract with MBFS was fake and misleading. In any default case no matter theft, accident, etc., it is 100% that a leasee will lose all his/her security deposits!

My lease EQS SUV 450+ was valued at 110,000 in December 2023 after $7,500 lease rebate. After paying 8 months' lease payments, thousands of dollars for fees, I have lost my $20,500 deposit to MBFS. I was forced to pay almost same amount of $110,000 again (after 6 months) for the vehicle-total-loss settlement! What a big fart from Mercedes Benz!

I have been a loyal Mercedes customer for many years. I just feel furious for being treated so badly and cheated by Mercedes Benz Financial Services. I will definitely talk to my lawyer and file a lawsuit against Mercedes Benz Financial Services for "GAP Waiver" cheating!

superswiss

I'm not entirely sure where you think they cheated you. Do you know what a Gap waiver is? It just waves the balance left on your lease if the car is worth less than what you still owe. You may have been given bad advise by the sales rep, but what else is new. Never trust a sales guy. They can pretty much say whatever they want to make a sale. You gonna have to do your own homework.

https://www.progressive.com/answers/...-a-gap-waiver/

Chris2023

Here was what was described in my lease contract with Mercedes Benz Financial Services for GAP waiver. I was advised no need of another GAP insurance because of that. I called MBFS and was told my lease EQS was GAP insurance protected by Zurich North America, but it does not apply to a leasee. no matter what, it did not even talk about potential loss of MSD security in the whole lease contract in any case.

"20. Total Vehicle Loss/Gap Waiver. If the vehicle is subject to a total loss due to collision, destruction or theft, you will pay us the Gap Amount which is the difference between the Early Termination Liability and the insurance proceeds we receive based on the total loss. We agree to waive the Gap Amount if you had the vehicle insurance required by this lease at the time of total loss, in which case you will pay to us the sum of: (a) all unpaid amounts that are due or past due under this lease; plus (b) the amount of your insurance deductible; plus (c) any other amounts that were subtracted from the vehicle's actual cash value to determine the insurance proceeds we received for the total loss. If this is a single payment lease, you will receive a refund equal to your lease payment divided by your Lease Term (as shown on page 1 of this lease) times the number of months left in this lease at the time of the loss of the vehicle. If you do not have insurance on the vehicle or your insurance company denies part or all of your claim, you will be in default and will pay us the early termination liability set forth in section 23."

superswiss

Yeah that's pretty standard. The security deposits go towards the Early Termination Liability. It's the same if you decide to buy out the lease. The security deposits will go towards the buyout and you only have to pay what's left. The key here is the insurance proceeds. Depends on how high they are. If the insurance proceeds are higher than what is left of the Early Termination Liability after factoring in the security deposits etc. then you should get a check for the difference. The thing is you have to understand your policy. Some insurance policies only pay as much as is needed to cover your liabilities, which could be less than the car is actually worth, because in a lease the car is not your property, so you don't have a loss of property, your loss is only the outstanding liabilities.

Chris2023

If I had not put any MSD deposits for the lease EQS, would MBFS "Total Vehicle Loss/Gap Waiver" have been kicked off and offset the GAP loss amount? If this is the case, it would be unfair for leasee with MSD deposits. There is definitely an argument for Mercedes "Total Vehicle Loss/Gap Waiver" clause. Normal leasees like me don't understand how those agreement items work and totally trust MBFS and its agents from MB dealerships.

Baltistyle

In reading this it seems pretty clear that you do not have gap insurance. That info you basically says if your insurance covers the total loss (to mbfs and your contract), you won’t need gap. In this case you are saying your insurance is not covering what is owed in the vehicle, which may not be market value. As you feel at risk of losing 20k, hire an attorney and if the loss is greater by that tiny investment, ok, but likely they will help reduce the overall cost to you.
Btw, for the cost of gap, it’s a good gamble on a new depreciating asset for which is not bought in cash. Gap came about because historically pretty much every car greatly depreciated immediately upon sale and most people buying are upside down on payments, hence the coverage of the “gap”

guess2098

Per mercedes dealer in riverside ca, all lease vehicle through mbusa automatic received gap insurance. but use msd before gap comes in, I am not sure.

superswiss

I think the confusion lies in misunderstanding what gap insurance/waiver actually covers. The gap waiver kicks in only at the very end if there's still a balance left after everything else was used to cover the liabilities. So let's try an example. Let's say you currently owe $50k on your lease and you already gave them $20k in security deposits. That's cash you already paid, so no longer a liability. Now the car is lost. So you owe $50k, but they already have $20k of your money. What's left is $30k that you still owe. Now let's say insurance only pays out $20k, so you still owe $10k. Now the gap waver kicks in to cover the remaining $10k.

Chris2023

Yes, you could explain in that way on behalf of MBFS to take my $20,500.00 deposit, but I still don't agree. I was told by MBFS operators (more than one) that my leased EQS was under GAP Insurance protection. I was even given a phone number (Zurich North America) to file GAP Insurance by VIN numbers!

$20,,500 is not a small number. Why didn't Mercedes Benz Financial Services put a clause to remind the risk on the lease agreement, but instead of arguable words - "GAP WAIVE"? It is MBFS's responsibility to train sales managers of its dealership network, right? GAP insurance is not expensive for $30 - $100 a year. It would be a no-brainer for purchasing it compared with the risk of loss of my $20,500 deposit!

I am not a first-time Mercedes vehicle owner. I have lost my $20,500.00 MSD deposits targeted for "lower lease money factor" but ended with 100% loss due to default from an unexpected accident. For my 7-month lease period of a 2023 EQS SUV 450+, it costed me $32,000 ($4,500+ per month). MBFS can use all its words and execute to say " NOTHING WAS WRONG WITH THE LEASE AGREEMENT. IT WAS ALL YOUR FAULT! YES, WE TOOK YOUR $20,500 MSD DEPOSIT.". At the same time, I also have my right to potentially sue Mercedes Benz Financial Services for misleading.

Understand MBWorld.org may or may not have direct or indirect relationships with Mercedes Benz. So, I will post my messages on other social media (Reddit, Facebook, Yelp, etc.) and share my experience there.

No matter what, I still want to say thanks to all for trying to clarify.

superswiss

MBFS etc. are not on here and they have no stake. It is absolutely your right to potentially consider legal action if you feel contract law was violated, but at the end of the day the lease agreement is a contract and you agreed to it by signing it. Doesn't mean you understood the contract, but such is the nature of contracts. Check the other sections of your lease agreement where it explains the Early Termination Liability. It'll most likely state there that the MSDs will be applied towards it in case of loss or buyout. As I tried to explain above, the Gap waiver doesn't even come into play at that point. But I'd definitely recommend you get an attorney to explain this to you and if there was indeed a violation of contract on MBFS' side then you have a case. I'm not an attorney, but you are not the first case I've seen.

Dima

This does not say anything about keeping your MSD. The purpose of MSD is like a bank deposit: they use your money for 3 years and get a MF discount. If what you copied here is all there is, they don't have the right to confiscate your deposit. You do need to contact an attorney ASAP. I would not go to social media before you do that as you might be in violation of privacy clause if there ever be a trial.

Chris2023

@superswiss, your explanation for "GAP WAIVER" was "total liability amount - Security Deposits - Insurance settlement, and finally GAP WAIVER ". How about I argue that "total liability amount - Insurance settlement - GAP Waiver; and finally MSD Deposit deduction"? There is nowhere in the lease agreement saying MSD Deposit lost first must be before GAP Waiver kicked in. Also, this was the answer I got from a MB dealership sales manager when I tried to lease another MB vehicle. If words from MB dealership could be wrong, whom should a MB buyer/leasee trust? Mercedes Benz has definitely missed something, and let its customer exposure to huge deposit loss risk.

Customers like me pay extra to Mercedes Benz not only for better vehicles but also services at the same time. I don't know how I can convince myself to trust Mercedes Benz anymore, after such a huge loss and how badly treated by Mercedes Benz Financial Services.

SW20S

This is reason # 3,243 why you never put any money down on a lease. Including MSDs. First payment and thats it.

guess2098

I read someone else' experience online, it said on your contract there is a section for GAP insurance. what is cover and what is not cover. you can check that part out.

superswiss

I understand what your argument is. What I'm saying is that's not how a lease works. Neither with MBFS, nor any other lease company. Security deposits are security deposits. They are there as a security. If the car is a total loss or damaged, MBFS etc. have the right to keep the security deposits to recoup their loss, because that's what they are for, nothing else.

Works pretty much the same as security deposits on an apartment lease. You don't get those back if you destroy the apartment.

guess2098

https://www.mbusa.com/en/financial-s...gap-protection

my sales told me that if I am going to buy off lease, I will not get my MSD back, it is part of payoff . so if the payoff is 130,000 and MSD is 20,000, the finance contract payoff is 110,000.

wildta

Maybe you'll get more help on the Leasehackr forums or Reddit:

https://forum.leasehackr.com/tag/mercedes-benz

https://www.reddit.com/r/askcarsales..._car_on_lease/

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nosnoop

The multiple security deposit is absolutely safe as long as there is GAP insurance.
It is totally different from Down payment, which is never a good idea.
The main issue here is the GAP insurance - if it was available, the total amount of multiple security deposit should be returned.

I do not agree with your statement above.

SW20S

Totally safe, unless you’re this guy and you lose yours MSDS lol. He’s never getting that money back.

Frenetic

That sucks.

While I generally agree that down payments on leases are unnecessary, I don’t think they’re bad versus excess security deposits, which are bad imo. I always thought that whether you finance or lease, the mechanisms of what you may or may not get back are essentially the same since any refund or payment is based on what you owe versus the value of the car at the time of accident. That down payment just lowers what you owe on the vehicle in both cases.

Say you leased with $10k down and made five payments. The total remaining of payments and residual is $80k. The insurance value is $75k. You lost your down payment and owe a gap.

Say you financed with $10k down and made five payments. The remaining buyout is $82k at the time of the accident (the interest payments are higher at the front end of the loan). The insurance value is the same at $75k. You lost your down payment and still owe a gap.

Am I off base in the above scenarios?

Chris2023

Already talked to a couple of attorneys for sueing Mercedes Financial Services. They agreed MBFS's misleading words "GAP Waiver', but suggest to sue the dealership and MBFS in a California Small Claims Court for $10,000 each. Maybe this case is too small for them to make money.

I will definitely sue Mercedes Benz Financial Services. Hopefully find a lawyer soon.

Frenetic

Maybe. All corporations are different. Most will fight tooth and nail and litigate every lawsuit no matter how small it is or how much they are at fault. A small few might cost/benefit the entire matter and just decide to settle before litigating anything, although these companies are becoming fewer and fewer. I bet MBUSA fights it. I’m sure they have an outside firm that handles all of these matters.

It will essentially come down to a judge deciding what pays first: the security deposit or gap waiver, unless it is stated somewhere in the contract. I know the security deposit is just for the situation you encountered where it is used if you damage the car. What does the contract say about the security deposit?