How to keep your totaled car

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Crashed your car? Bummer. Even worse is getting a call from your auto insurance company saying it’s a total loss and should go to the junk yard.

Your attachment to your vehicle may be sentimental. In some cases, your bond may be financial: you may not be able to replace the totaled car with the money your insurance company is willing to pay. There are options — learn more about what happens when your car is totaled and what to do if insurance wants to total your car but you want to keep it.

What does it mean when a car is totaled?

Typically cars are totaled when damage exceeds 65% or 70% of the vehicle’s market value. Rick Ward, director of auto claims for MetLife Auto & Home, says the standard for deciding when a car is a total loss varies by company and may be set by state regulators. You can find out the threshold by contacting your insurance agent.

Car insurance companies find that many older cars are simply not worth repairing.

“We determine the value of your car through market research,” explains Ward. “There are three software providers that provide vehicle valuations, Blue Book averages and what cars are selling for in your area through dealer networks.” But this software isn’t available to consumers.

If you can demonstrate good maintenance and mechanical improvements, you may be able to win your totaled car a reprieve. Its age and mileage will be key factors.

What happens when insurance totals your car?

Obviously, it’s not the best news, especially if you really like the vehicle. In general, here’s the process of what happens when you total your car:

The insurer will calculate the car’s actual cash value (ACV). The ACV is how much your vehicle is worth after factoring in depreciation. On average, vehicles depreciate more than 20% the first year and approximately 10% each additional year for the first five years, according to Erie Insurance reports using Carfax data.

After that, the insurance company will calculate an estimate of the car’s market value, based on the make, model and year, mileage, and condition, as well as the demand in your area for the type of vehicle you have.

Another factor used to estimate the car’s value is the resale value of the parts and the metal.

If the cost of repairs plus the scrap value equals or exceeds the ACV of your car before the accident, then it is totaled.

What if insurance wants to total my car but I want to keep it?

If you decide to accept the insurer’s decision to total your car but you still want to keep it, your insurer will pay you the cash value of the vehicle, minus any deductible that is due and the amount your car could have been sold for at a salvage yard. It then will be up to you to arrange to make repairs.

“They will cut you a check,” says Ward, and then you’re on your own.

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If my car is totaled can I still drive it?

Not immediately. In order to safely operate a totaled car, you will need to make major repairs. And remember, safety should be your primary concern when keeping a totaled car.

If damage to the totaled vehicle is mostly cosmetic, you may be able to fix it and drive it again for a modest cost. However, if fixing the car means reaching deep into your pockets, you may be better off letting it go.

There is a good reason why car insurance companies are cautious about fixing badly damaged cars, says Ward. “Cars are complicated. All damages are not visible. Once you start dismantling, often you find additional damage.”

You think twice about repairing and driving a car that has been seriously damaged. If the professionals who work for your automobile insurance company think the car is beyond repair for a reasonable cost, it probably is. Damage, such as cracks in frames or to airbags, often can’t be seen by just looking at a vehicle.

What to do when your car is totaled and you still owe money 

If your vehicle is totaled and you still owe money on the loan, the insurer will reimburse your lender for the car’s worth i.e the actual cash value of the car, and you will be left to pay off any remaining balance if the money paid by the insurance company is less than the loan amount.

If you have gap insurance, it will compensate for the difference between what the vehicle is worth and what remains on your loan. Otherwise, you will need to keep making payments from your pockets until the loan amount to be paid becomes zero.  

Finding car insurance for a totaled vehicle

Ward says you may run into trouble when you seek auto insurance for a car that has been declared totaled. Your ability to buy collision and comprehensive coverage may be affected.

“That is really up to each individual company,” he says. Before you decide to fix your car, check to see if that is an issue.” Some insurers will not accept a car with “a branded title,” he adds. “It basically puts a stamp on it that says it is a salvaged vehicle.”

Ward notes that the federal government has established a database called the National Motor Vehicles Title Information System to provide information to car shoppers. “All total losses are recorded by the insurance companies. What this does is provide consumers with a database to see if a car has been previously salvaged.” That means don’t count on being able to unload your vehicle on a buyer.

Is repairing a totaled car worth the effort?

Only you can decide whether repairing your totaled car is worthwhile. However, you should consider the expenses of repairing a car, and whether or not it is safe to drive the car. 

In a nutshell

When a car is totaled, it means that the damage to the vehicle is so severe that it would cost more to repair than the car is worth. This can be devastating for a car owner, especially if the vehicle is new or has sentimental value. However, you can still keep your totaled car if you’re willing to put in the work. Make sure you consider the expenses of repairing your totaled vehicle before you decide to keep it.

Shivani Gite

Contributing Writer

 

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Shivani Gite is a personal finance and insurance writer with a degree in journalism and mass communication. She is passionate about making insurance topics easy to understand for people and helping them make better financial decisions.