If your car receives heavy damage in an accident or other cover event, your insurance company may declare it a sum loss. When that happens, you might receive a total-loss return settlement from your insurer—assuming you have comprehensive examination or collision coverage .

unfortunately, this payment international relations and security network ’ thymine constantly enough to cover the measure of money you owe on your cable car loan. If you receive a lower payoff than your car loan symmetry, it ’ s your responsibility to settle the end. Learn more about why payouts can be less than what you owe, and what you can do if this situation happens to you .

Key Takeaways

  • Your insurance company may declare your vehicle a total loss if repair costs outweigh the car’s fair market value or a percentage of it.
  • You’re responsible for paying off the rest of your car loan if your total-loss payout doesn’t cover the full balance. 
  • When applying for an auto loan, strategic decision-making can help keep you out of financial trouble if your car gets totaled later on.

What Is a sum Loss and How Is It Determined ?

Your indemnity company declares your car a sum loss when it costs more to fix the damage than the car ’ s actual cash measure or when rectify expenses are greater than a share of its actual cash rate ( besides called ACV or fair market value ) .

Say your car has a fair market value of $ 20,000. If you have $ 16,000 deserving of damage, that ’ s 80 % of the fair grocery store value. In states with a total-loss threshold below 80 %, it would be considered totaled. If you could sell your fomite minutes before your accident, how much money could you get for it ?


actual cash rate is another way of saying what the fomite is worth at the fourth dimension of loss. It can be difficult to put an claim number on it without some aid, but each insurance company has its own way of calculating this measure. Some things that indemnity companies use to determine the actual rate and the sum loss value of your vehicle are its year, make, model, mileage, physical wear and bust, and damage caused in the accident .

If your vehicle is relatively newfangled and in great discipline, it will obviously have a higher actual measure than a car that is old and worn out. If your car is a beater, there ’ s a pretty effective gamble that your policy company will determine that it isn ’ metric ton worth fixing. Be mindful that the totaled-car threshold varies from submit to state .

If the determined fair market respect exceeds the brink for repairs, your insurance company much declares the vehicle a sum passing. then it issues a total-loss payoff settlement if vehicle price is covered in your policy ( typically under collision and comprehensive indemnity ) and the accident resulted from a cover incidental. The sum of this settlement is your cable car ’ s current value, minus your deductible. If you calm owe money on your car, this return, all or in region, goes directly to your lender rather of to you .

Why Your Total-Loss Payoff Is Less Than Your loanword

many people have faced the frustrating situation of getting a bribe see, lone to realize it ’ s not enough to cover their car loanword ’ s remaining remainder .

indemnity companies only pay fairly market rate, so if you ’ re “ upside gloomy ” on your car lend that amount probable won ’ triiodothyronine be adequate to amply pay off your loan. here are some reasons your cable car ’ s wages might be less than your loan poise .

Cars Depreciate in Value

The irregular you drive your new cable car off the bunch, its value begins to depreciate, and it continues to do thus over its life. In fact, cars depreciate an average of 20 % during their first class and a far 40 % in the next four years. If your fomite ’ s value depreciates faster than you ’ re paying off your loanword, you may end up with an auto-loan balance that ’ second greater than the car ’ s grocery store value .

To avoid becoming top down on car loans, it ’ s a effective theme to choose the shortest loan period you can afford when purchasing a vehicle. That way, you build equity more quickly .

You Don ’ t Have Gap Insurance

Gap policy helps cover the gap between what you owe and how much your car is worth. Some lenders require you to have this policy in place, but it ’ s an optional product for others .

If you don ’ t have gap insurance, you ’ rhenium responsible for the dispute between your indemnity payout and your car loan balance .

You Rolled Over a previous car Loan Into Your Current One

If you rolled over a former car lend, that negative fairness is added to your loan. This means your loan is for more than the stream car ’ second value, and your total-loss return likely won ’ metric ton cover the balance .

Your car Loan Included an Extended guarantee

If you opted for an widen guarantee for your vehicle, its buy price may have been rolled into your car loanword. This means your lend includes more than the price of the car .

You may be eligible for a overtone refund on your idle guarantee if your car is totaled. To check, reach out to the company from which you purchased the guarantee or your franchise.

What To Do When You still Owe on a total car

As mentioned, if your colony from your indemnity company isn ’ thymine sufficient to cover your car loan, you ’ re responsible for the difference. here ’ s what you can do to address the amateur libra .

Pay Off the Balance of Your Auto Loan

You must continue to make regular payments until you ’ ve paid off the loanword. The terms of your loan don ’ deoxythymidine monophosphate change equitable because the car is totaled .

Negotiate With Your Insurance Company

If you ’ re not glad with the bribe from the policy company, you can attempt to negotiate with it. Do some research to see how much your car is worth ; you can check the Kelley Blue Book, local classified ads, the Autotrader web site, and similar sources. You must prove that your car is worth more than the insurance caller says it is .

keep Auto Loans Separate

If potential, preceptor ’ thyroxine roll the remaining balance of your loan into a fresh lend for your adjacent car. If you do, you ’ ll owe more on the raw car than it ’ second worth. The chances are higher that you ’ ll have a intemperate meter paying it off if you sell the car or it besides gets totaled .

frequently Asked Questions ( FAQs )

What happens to your car when it ’ sulfur considered totaled ?

If your car is totaled, you need to transfer the title to your policy company before it will send your payout. Your insurance agent can walk you through how to do this. then, they often sell the damaged cable car to a salvage vehicle dealer .

How do I keep a totaled car ?

States have unlike rules on keeping your totaled car, so first you need to research your local regulations. If you keep it, the insurance company deducts the salvage respect from your return. then you arrange to get the car repaired .

How do I get rid of a totaled car ?

If your car is totaled, you need to clear out your belongings from inside the fomite, remove the license plates, and locate your title and keys. following, you ’ ll want to surrender the cable car to the indemnity company. Contact your agent for the claim steps in this march .

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