It’s a bad car crash. Or maybe a flood that filled your whole car with water. Or a tree fell and smashed it to pieces. Or maybe it was just an old car with a fender bender more expensive than the worth of the car.

Having your car totaled by insurance is a very difficult situation to be in. It lowers the value of the car and insurance is unlikely to give you enough money to repair the car or buy a new one. For some, they are stuck in a hard situation without enough money to buy a new car but need a car for their job. If your car does get totaled, here are some steps to take during and afterwards.
 

What Does “Totaled” Mean
 

It’s easy to imagine that a totaled car is one that is absolutely destroyed, but that often is not the reality. A car being totaled simply means the cost of repair is more than the value of the car. For example, if you have an incredibly old car worth $500 and get a door smashed in, and the cost to fix or replace the door is $600, your entire car is now totaled.

When a car is determined “totaled,” the insurance company only has to pay the value of the car, not the costs of the repairs. It also significantly decreases the value of the car. Even if you decide to fix the car and sell it later, you’ll get less money for it because it was totaled.
 

Push Back with the Insurance Company
 

Whether you have comprehensive coverage on your car or someone else hit you and their insurance is covering it, they are going to try and save themselves as much money as possible. In just a normal accident, they often have deals with certain repair shops and mechanics to save themselves money. When it comes to a car getting totaled, they are going to try and give you the lowest offer.

How this works is that insurance companies look in your surrounding area to see how much your car, or a similar car, are selling for. For example, your totaled car is a 2010 four door sedan. They first will try to find the same make and model to see how much that sells for, but they’ll also look at how much other makes and models are selling for. They try to justify as much as possible how little money they are paying you.

If you feel like the insurance company is trying to lowball you on how much your car is worth, push back on them. In order for them to do their job, you have to agree to the paid amount. What you can do is insist they pull their data, not from just your local area, but across the state or even the nation. This is likely to give you either a better offer on your totaled car, or the insurance company says no. You were already going to get the amount they offered, the best scenario is you get a better offer.
 

Paying Off What You Owe
 

If you owe money on your car, even if it will never drive again, you still have to pay off the loan. This is one way to use the payment from the car being totaled. Hopefully, the amount you have left on the loan is smaller than what your car was worth. 

Paying off your auto loan will give you a fresh start for buying a new car. Keeping that auto loan around while trying to get a new car might negatively impact your ability to get a new loan, or give you higher interest rates.

There are also types of insurance to cover you in this exact problem. Pioneer offers our members Guaranteed Asset Protection, or GAP. This protection helps you cover the cost of what you have remaining on your loan if your car is totaled or stolen. For example, if you still owe $500 on your car, and the amount you get for your totaled car is only $300, GAP will pay the remaining $200. 
 

Repairing or Buying a New Car
 

This is the big decision. Your car has been totaled, you’ve got the money, now you need to decide: do you repair the car or call it good and buy a new one? 

First, you need to examine total costs. One thing to consider is how much insurance might cost. Even if you weren’t at fault, you might see an increase in your car’s insurance simply due to it having been totaled. You also need to factor in repair costs, and consider the potential for more repairs in the future. If you were in a large wreck, getting the car fixed could be a lot and there might be expensive additional repairs caused by the accident that could pop up later.

The alternative is to walk away from the car and buy a new one. Take the insurance payout, sell what you can off the car, and get something new. You won’t be driving around a car with a salvage title, and you won’t be paying for repairs either. 

If you are looking to buy a new car, Pioneer can help with our auto loans! You can even get pre-approved before heading to the dealerships so you know exactly how much you can afford.

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