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What Is a Totaled Car and How to Get a New Car After Total Loss?
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After an accident, an insurance company may determine that a car is "totaled," meaning a total loss and not worth the price of fixing it. This is when your vehicle becomes a total loss car.
Totaled Car Definition
By definition, a totaled car is when the cost of repairs after an accident outweighs the value of the vehicle. Typically, state laws set the thresholds for determining a totaled car. For example, some states may say that if the vehicle's damage is greater than 75% of its value, then it's totaled. The owner's automobile insurer often determines the value and repair cost and whether or not the car is a total loss vehicle.
Buying a New Car After a Total Loss
Once your car has been in a severe accident and classified as a total loss, you will need to purchase a new vehicle. First, keep in mind insurance and claims after a total loss can be confusing, and sometimes they take a while. Even when you finally do get reimbursed by your insurance company, you will only receive an amount equal to the current value of the car or truck (calculate in any depreciation since you bought it) and it will be less your insurance deductible. In some cases this means if you took out a loan to buy your vehicle, you might not be reimbursed enough to pay off that loan.
There are a few ways to handle it. If you can, pay off the difference before shopping for a new car and applying for a new loan. It helps to show that the old one is paid off first. Some dealerships may offer to roll in the old amount with the price of a new car. Your lender may also help you with consolidating the debt if you cannot pay off the difference.
Do I Have to Pay Off my Loan on a Totaled Vehicle?
Yes. Just because the insurance company deems your car or truck totaled, doesn't mean you get away with not paying for the loan. Your reimbursement check may not cover the total cost of the outstanding balance, in which case, you will have to make up the difference yourself.
How to Get a New Car After a Total Loss
Depending on the type of insurance you have and if the car was totaled, but you are not at fault, will determine how you get a new car. If your vehicle suffered damage due to weather or your accident did not involve another person, and you have comprehensive coverage that will kick in. The insurance company will pay your claim from that policy.
If, however, another driver hits your car and again, you are not at fault, your collision coverage will be activated if your vehicle is totaled and you file a claim. However, not all automobile accidents are cut and dry. If another driver is involved, your insurance company may contact the other driver's insurance company and try to get them to pay for reimbursement.
There are some no-fault states where regardless of how the accident occurred, no one is considered at fault, and therefore your insurance company would be liable for any repairs or the full value if it was totaled. In a traditional-fault state, whoever is at fault for the collision, their insurance company would pick up the tab for all damages, repairs, and claims.
Can You Keep Your Car if it's Totaled?
If your insurance company deems your car a total loss and pays you a claim (reimbursement for fair-market value), they have the legal right to take ownership of the vehicle and sell it for scrap or parts to recoup some of their losses.
If you do not file a claim after your car is totaled, then you can keep your vehicle and sell it for parts yourself. However, if the insurance company pays you, you can negotiate with them to keep it or give it up to them freely. Either way, you have options. In most cases, the insurer will want to sell the car to make at least some of their money back.
What Happens When Your Car is Totaled?
The first question you may be thinking is, when is a car considered totaled? A vehicle is considered totaled when the insurance company informs you that the repair costs exceed the car's fair market value and they are labeling it a “total loss”.
Next, you are probably wondering how much will my insurance company pay? Keep in mind, when you purchase vehicle insurance, those policies come with limits. Therefore, your insurer will only pay according to the maximum stipulated in your policy. If you are in an accident with another party and they have lower limits, their insurance company may not pay the full amount to get your car replaced or repaired.
What if I Think My Car is Worth More?
Insurance companies have a set system based on mileage, condition of the vehicle, age of the car, and resale value. They use these factors to evaluate the value of a totaled car and how much they are willing to reimburse you for it. If you believe that your totaled car or truck's value is much more than the insurance company calculated, you can dispute it. However, unless you can prove your vehicle's value with hard evidence, you will probably be overruled. You also can sue the insurance company, but that might be costly, and you still might lose.
For example, if you upgraded the vehicle with expensive parts and detailing, be sure you have receipts and photographs to prove it. You might have to do some research online comparing cars and showing fair market values like Kelly Blue Book and others. You might also hire a professional appraiser to value your vehicle and bring that information to the insurance agent in charge of your case. The appraiser could also be an expert witness should you decide to take legal action against the insurance company and sue.
Unfortunately, when your insurer values your car, you may have to accept it and move on. The idea of shopping for and buying a new vehicle might make it easier.