What happens if my car gets totaled and I still owe money?
Asked by: Jarret Marquardt | Last update: June 12, 2025Score: 4.8/5 (2 votes)
What happens when your car is totaled and not paid off?
What happens if my vehicle is totaled with a remaining loan balance? Your insurance company will pay off your remaining balance, and the remaining equity goes back to you.
What if my car is totaled and I have a loan?
GAP, or guaranteed asset protection, insurance covers any difference between your totaled car's value and the loan amount you still owe. For example, let's say your car's ACV after it's totaled is $27,500, but you still owe $32,000 on the loan. GAP insurance will cover the remaining balance of $4,500.
Who gets the insurance check when a financed car is totaled?
In most cases, if the car is declared totaled, the insurance company takes possession of it and pays the policyholder the actual cash value of the vehicle before the accident. If the car is financed, the insurer typically pays the lender first; any remaining value will go to the owner or policyholder.
What to do with a totaled financed car without insurance?
Your only recourse is to sell the wrecked car for its salvage value. If the accident is NOT your fault, you should be able to collect from the responsible party or their insurance company for the actual cash value of the auto before the crash.
What happens when your car is totaled and you still owe money?
Can I refinance my car loan if the car is totaled?
If the value of your vehicle has dropped below the amount you owe on your car loan, you will be upside down on your car loan, and some lenders may not allow you to refinance in this situation.
What happens when your car is totaled but still drivable?
Rebuilt/Reconstructed Title: Once a salvage vehicle has been repaired and inspected, the California Department of Motor Vehicles (DMV) will issue a "rebuilt" or "reconstructed" title for the vehicle. Once you obtain this, you can legally drive the vehicle.
Will Gap insurance pay off my loan?
When you file a qualifying claim, your comprehensive or collision coverage will pay the actual cash value (ACV) of your vehicle, minus your deductible. Your gap coverage may then pay the difference between your vehicle's ACV and the outstanding balance of your loan or lease.
What happens to your credit when your car is totaled?
Can a totaled car affect my credit? No. A total loss alone won't affect your credit. However, if you still owe payments on your car, you should continue paying your loan until the claim is settled.
How to get rid of your car if you still owe money on it?
Selling a vehicle and using the proceeds to pay off the loan in full can help you eliminate the debt without hurting your credit. You might also consider trading in the vehicle and rolling negative equity into a new car loan to avoid credit score damage; however, that can leave you with more debt to repay.
Can I sell a totaled financed car?
However, you have the option of keeping the vehicle and selling it yourself. If you do this, the car insurance company will subtract both your deductible and the amount they expected to profit off the vehicle at auction from your check for the actual cash value of your car.
What happens if my car is totaled and I have a title loan?
If your car is a total loss, the insurance company will determine the car's fair market value and pay you that amount minus any amount you owe to lien holders, such as a title loan lender. Because title lenders have a lien on your title, they receive payment before you do.
What do companies do with totaled cars?
Usually, the insurance company will take ownership of your vehicle with a totaled car title transfer to their name. After that, they'll likely sell it to a salvage buyer. If you decide to keep your car, the salvage value will be deducted from your settlement total.
Can you ask for more money when your car is totaled?
In some cases, you may get more insurance money for a totaled car than for repairs. In addition, it is possible to negotiate a higher settlement by providing evidence that your car was worth more than the insurance company's initial valuation.
How long does it take for a car to be totaled out?
There is no “time frame” as such. The vehicle would be examined by either a repair facility or a claims examiner to determine the approximate cost of repairing the vehicle, and the value of the vehicle. This generally takes a few days.
Is it better to have a car totaled or repaired?
Repairing your vehicle is cheaper than taking out a loan or paying monthly payments on a brand-new vehicle. It is often in the best interest of the insurance company to total a car, so you will need to look out for your own best interests.
What if my car is totaled and I still owe?
Here's the bad news: if you have a loan or lease out on a totaled car, you're still responsible for paying off the remaining balance. Usually, the insurer pays the lender or leaseholder first and gives you the rest of the settlement money if there's any leftover.
Who gets the insurance check when a car is totaled?
If you own the car outright, you will receive the check. If not, the check goes to the leasing company or the lender, otherwise known as the lien holder. If you owe money on the vehicle, you should notify the lending company that your car has been totaled.
Can you finance another car after a total loss?
That all depends on the car's actual cash value, its salvage value and how much you still owe on it. If you'll be applying for a car loan after a total loss, remember to talk to your insurance agent about getting lease or loan gap insurance on the new vehicle.
How much does gap insurance pay on a totaled car?
GAP insurance will pay the difference between the ACV paid by your primary insurer and the remaining balance on your car loan. For example, if you owe $20,000 on your loan but your car's ACV is only $15,000, your primary insurance will cover the $15,000, and GAP insurance will cover the remaining $5,000.
Will my insurance pay off my loan?
Your total-loss insurance payout will be for your car's ACV only. If you owe more money on your loan than your insurance settlement, you are still responsible for paying the difference. Most insurers offer "gap" coverage, which pays the difference between your car's AVC and your loan balance.
How much money do you get back from gap insurance?
You'll only receive a refund for the GAP insurance that you haven't used. For example, if you cancel your policy after three months of coverage, you'll only get a refund for the remaining nine months (if you paid for a year of coverage). The amount of your refund is based on how you pay your insurance bill.
How bad is totaled car?
In car insurance terms, the formal definition of a totaled car is one that costs more to repair than it's worth.
Is it legal to drive a car that has been totaled?
Some states, including California, require a salvage title for totaled cars legally driven on the road. This entails obtaining approval from the Department of Motor Vehicles (DMV) and adhering to the state's minimum insurance requirements.
Do you have to accept insurance offer on a totaled car?
Do you have to accept an insurance offer on totaled car? No, you do not have to accept the insurance company's first offer on a totaled car. You can negotiate the offer if you believe it does not reflect the actual cash value of your car.