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  • Regulations for Total Loss Settlement of Vehicle Leasing Contracts

    No: 498600000099 Date(g): 24/9/2019 | Date(h): 25/1/1441Status: In-Force

    Translated Document

    With reference to the powers vested to SAMA under the Banking Control Law issued by Royal Decree No. (M/5) dated 22/02/1386H, the Finance Companies Control Law issued by Royal Decree No. (M/51) dated 13/08/1433H, and the Finance Lease Law issued by Royal Decree No. (M/48) dated 13/08/1433H, and in order to achieve SAMA’s objectives of maintaining fairness in transactions in the finance sector and protecting customers.

    Attached are the regulations for the total loss settlement of vehicle leasing contracts, which apply to total loss incidents occurring after (01/01/2020G).

    • First: Definitions

      The following terms and phrases, wherever mentioned in these regulations, shall have the meanings indicated next to each of them, unless the context requires otherwise:

      No.TermDefinition
      1LessorA joint-stock company licensed to practice financial leasing, including commercial banks.
      2LesseeThe person who owns the benefit of the leased asset under the contract.
      3Advance Lease PaymentThe payment made by the lessee at the beginning of the contract to the lessor to enable them to use the leased asset. This payment is divided and amortized equally over all lease payments throughout the contract period.
      4Number of Last Due PaymentThe number of payments due from the lessee from the start of the financing period up to the date of the incident, according to the payment schedule attached to the contract.
      5Financing PeriodThe number of agreed-upon lease payments.
      6Total LossThe total loss or damage to the vehicle, where repairing the vehicle is either technically unfeasible or economically costly, according to the standards approved by the relevant authority in assessing vehicle damage.
      7Settlement in the Event of Total LossA calculation process through which the remaining debt amount is determined from the date of the total loss of the leased asset (interruption of benefit).
      8Unconsumed Amount of the Advance Lease PaymentThe amount owed to the lessee from the advance lease payment.
      9Remaining Principal AmountThe remaining principal amount as of the date of the incident, according to the repayment schedule in the financing contract.
      10IncidentAn event that caused damage or accidental loss to the leased vehicle.
      11Insurance CompensationThe compensation amount paid by the contracted insurance company.
      12Net Settlement AmountThe net credit or debit amount after the settlement in the event of a total loss.

    • Second: Mechanism for Settling a Vehicle Finance Lease Contract in the Event of Total Loss

      A. Unconsumed Amount of the Advance Lease Payment:

      Unconsumed Amount=(Financing Period–Number of Last Due Payment)×( Advance Lease Payment \Financing Period ​)

       

      B. Difference Between the Remaining Principal Amount and the Insurance Compensation:

      Difference=Remaining Principal Amount (including the last payment, if any)−Insurance Compensation

       

      • If the amount is greater than zero, multiply by (Lessee’s Responsibility Percentage for the Accident).
      • If the amount is less than or equal to zero, it is taken as is.

       

      C. Net Settlement Amount:

      =Unconsumed Amount of the Advance Lease Payment (A)−Difference Between Remaining Principal Amount and Insurance Compensation (B)

       

      D. Action Regarding the Net Settlement Amount:

      • If the net settlement amount is greater than zero, the lessee is compensated with the full net settlement amount - any outstanding amounts owed by the lessee before the total loss, if applicable.
      • If the net settlement amount is less than zero, the lessor is entitled to claim the net settlement amount from the lessee + any outstanding amounts owed by the lessee before the total loss, if applicable.