SAMA clarifies the mechanism for assessing damaged vehicles for rental vehicles
The Saudi Central Bank (SAMA) has issued a decisive directive to all banks, financial institutions, and finance companies operating in the Kingdom, aimed at regulating the process of assessing damaged vehicles in leased-purchase agreements. The new circular emphasizes the necessity of relying exclusively on reports issued by the Saudi Authority for Accredited Valuers (Taqeem) when classifying a vehicle as "total loss" (economic ruin) after an accident. This strategic step aims to enhance transparency and protect the rights of all parties involved in lease-purchase contracts.
Regulating the financial leasing sector and protecting the rights of beneficiaries
This decision comes amidst the rapid growth of the car leasing sector in Saudi Arabia, which has become a popular option for many individuals. With this expansion, some practical challenges have emerged, particularly regarding disputes that may arise between finance companies and lessees in the event of vehicle accidents. Previously, the process of assessing damage and determining whether a vehicle constitutes a "total loss" sometimes lacked a standardized methodology, leading to disagreements over compensation amounts and contract termination. Therefore, SAMA's intervention is part of its regulatory and supervisory role in the financial sector, ensuring the application of best practices that protect consumer rights and support market stability and integrity.
The role of “Evaluation” in establishing standards for assessing damaged cars
Limiting the valuation process to the Saudi Authority for Accredited Valuers (Taqeem) represents a significant turning point. As an independent, government-accredited entity, Taqeem's reports are based on impartial technical standards and professional methodologies, ensuring a fair and objective assessment of the vehicle's condition after an accident. This procedure minimizes any potential conflict of interest and gives the lessee (client) greater confidence that the decision to deem their vehicle a total loss was not arbitrary or made to benefit only one party. For finance companies, this directive provides a clear procedural framework that reduces potential complaints and legal disputes, enhancing their market reputation.
Application of Article 22 of the Financial Leasing Law
The Central Bank's circular is based directly on Article 22 of the Financial Leasing Law, which governs the contractual relationship in the event of the leased asset (vehicle) being destroyed. The article stipulates that the contract is automatically terminated in the event of total destruction. However, in the case of partial destruction that affects the vehicle's usability, the lessee has the right to terminate the contract if the lessor (the financing company) does not repair the damage or provide a similar replacement vehicle within a reasonable timeframe. SAMA emphasized that before deeming a vehicle total destruction, the financing entity must exercise due diligence to ensure the lessee's continued use of the vehicle. By linking the determination of "total destruction" to an official report from an appraiser, SAMA ensures the fair and accurate application of this legal article, thus achieving a balance between the rights and obligations of both parties to the contract.
