How do car dealerships handle totaled cars?
You are driving your car peacefully on a busy highway when all of sudden someone rear-ends you. You quickly exchange information with the at-fault driver and headed on to call his car insurance company.
But guess what? the insurance claims adjuster only has bad news for you! Your car is totaled! what does this mean? well, it’s not rocket science! Simply, your car is damaged beyond safe repair.
According to statistics, more than 10 million auto accidents occur yearly in the USA, meaning that, hundreds of thousands of vehicles are declared total losses yearly by various insurance companies. But the question is, when is your car totaled?
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When is a Car Considered Totaled?
Though there are many reasons your car could get totaled, one of the major ones is that, your car will highly likely be totaled if it’s damaged beyond repair.
What does the current market value of your car mean? The current market value of your car (actual cash value) is the price you would have been paid if you decided to sell your car just before the accident. For example, the actual cash value of your car could be $6,000 five years later if you bought it newly at $15,000.
Once an insurance company declares your car totaled (total loss), the insurance company will not help in repairing it. Instead, the insurance company will either give you a replacement or cut you a check worth the actual cash value (ACV) of your car.
Factors that determine if a car is considered totaled?
There are several factors that determine if your car is considered totaled. These include:
- Your car can not be safely repaired.
- It costs much more to repair your car than to replace the same car with the same value
- The cost to repair your car exceeds 60% or more of its actual cash value (this depends on your state)
- Your car was very old with high mileage.
How insurance companies determine the value of a totaled car?
Usually, all insurance companies love their money. They actually do not like the idea of compensating their clients. An insurance will always take the cheaper route once you report an accident.
If it costs less to repair your car than to replace it, the insurance company will always choose the cheapest way that gives them a chance to spend less.
The following are ways insurance companies determine the value of your totaled car.
1. Current market value / actual cash value (ACV). They will do research and look at the prices of cars with similar features to yours. For example, the insurance company could use data from sites like kelly blue book and other similar sites to get the actual cash value of your car.
2. Replacement cost value (RCV). if your car is new or nearly new, determining its actual cash value is hard. Assume you bought your car at $40,000 four months ago and you are carrying a collision insurance policy with a deductible of $1,000.
The insurance company may pay you $40,000 less by your deductible and other fees. For instance, you may receive $39,000 as your insurance payout once your $40,000 is totaled. You will need to have agreed on these terms with your company.
3. Agreed value. For example, you and your insurance company could have agreed on a certain value should your car get totaled. Using the above example, you may receive $38,000 even after 5 years as long as it was agreed between you and your company and it is stated in your policy.
Such a method of determining the current market value or actual cash value is largely used if you have a customized car, or if you bought a very expensive car like a sports car.
What Happens When Your Car is Totaled But Still Drivable?
In some states, insurance companies might declare your car a total loss even if it costs just 60% of its ACV, and in certain cases, I have heard that many body shops connive with insurance companies to total cars without sound reasons.
This implies that there is a chance your car is totaled but is still drivable. For instance, what if your car is totaled just because it’s very old? Do you just give up your car like that?
Can you continue driving a totaled car?
YES, you can still have and drive your totaled car, but this depends on where you come from. You must speak and negotiate with the insurance company that totaled your car.
Once your car is totaled, it will receive a salvage title. You won’t be able to drive it not until it is repaired and has passed your state’s DMV inspection. With a salvage title, you may struggle a little bit to get insurance coverage and its resale value will be low.
Assume your car is totaled and the insurance company determines the actual cash value of your car as $4,000.
Usually, the insurance company will pay you for example $4,000 mentioned above. The company takes over possession of your car wreck and will sell it to junk yards or salvage yards for a profit. Assume the value of the car wreck is estimated to be $600.
If you want to retain your totaled car, simply negotiate with the insurance company. In normal circumstances, you will get your car back, plus the actual cash value of your car, less by the salvage value. Using the above example, you will receive $4,000 – $600 = $3,400, plus your car.
Can You Trade in a Totaled Car to a Dealership?
Yes, it’s possible to trade in your totaled car to a dealership, but the major setback is that many dealerships do not buy totaled cars. You will need to reach out to several of them and by chance, you could land on one that buys totaled cars.
Another thing you need to know is that, you are more likely to get very price quotations from dealerships for your totaled car.
How dealerships determine the value of a totaled car?
Dealerships just like any other business firm is out there to make profits. There is no specific method dealerships use to determine the value of your totaled car.
But if your car was still in good condition, and if the damages it sustained during the accident are not so severe, expect a fair but not the best price. I recommend selling your totaled car privately or selling it to certain companies like carBrain for better prices.
What to Do with a Totaled Car Without Insurance?
If you caused an accident in which your car is totaled, you will need to file your compensation claim through your insurance company. You should file your claim against collision car insurance coverage and or comprehensive coverage.
If someone else caused the accident, his insurance company, through his liability property damage coverage should compensate you. But, what happens if both of you and the other driver have no insurance coverage?
Well, if someone else caused the crash that caused your car to be totaled, he/she will compensate you from his/her own pocket or savings. Having no insurance coverage is against the law in most states across the USA.
If you caused the accident and you do not have any insurance coverage, you will need to incur your car repair costs on your own plus expenses to repair the other car you damaged or totaled. I recommend buying at least the minimum insurance coverage if you cannot afford to buy full car insurance coverage.
What to Do with Totaled Financed Car Without? Insurance?
Suppose you took up a car loan worth $30,000 and your car is totaled after 4 years when you have only so far paid $15,000. Assume the insurance company says it will pay $13,000 as the actual value of the car.
Who pays the remaining $2,000? well, it’s you who will pay the difference between what you still owe on the financed car and the actual cash value of the totaled car ie ($15,000 – $13,000) = $2,000.
If you were smart enough and bought GAP insurance, then the difference ($2,000) will be covered by your GAP insurance coverage. The good thing is that, no company will let you have a car loan minus not buying GAP insurance.
How Often Do Dealerships Get Used Cars?
Dealerships frequently get used automobiles, though the regularity with which they do so can vary depending on a number of circumstances. These elements might consist of the location of the dealership, consumer demand, and dealership policies.
Dealerships can obtain their used vehicle supply from a variety of places, including lease returns, auctions, private sales, and client trade-ins. In certain cases, secondhand cars are even purchased directly by dealerships from owners or other businesses.
Dealerships need a varied selection of used automobiles to offer their consumers in order to remain competitive. As a result, they frequently have a steady stream of used cars entering and leaving their lots.
Conclusion
It can be a stressful and intimidating situation for the owner when their car is declared a total loss. Dealerships are aware of the significance of treating totaled vehicles with kindness and care.
Dealerships may decide to sell the car as a salvage vehicle or for parts depending on the severity of the damage. They might even provide the owner with a trade-in value for their totaled vehicle in specific circumstances.
To guarantee that the car is handled correctly and safely, dealerships collaborate with salvage yards and insurance providers. When it comes to handling damaged cars, automotive dealerships ultimately want to give their customers the finest option possible.
