At Quanz Auto Body, we know that getting into a car accident
is bad enough. It just adds inconvenience and hassle to be without your car
while it’s being repaired. But what about when your car is beyond repair—what
then? And worse, what happens when you still owe on a car that can’t be
repaired? Unfortunately, if your car is totaled and you still owe on it, you
could be stuck with a car payment on an undrivable car.
When a Totaled Car Isn’t
When you hear
the word “totaled” or “total loss,” you think about a car beyond damaged beyond
repair. That isn’t always the case. More often, your vehicle could be repaired—it’s just that the
cost of repairs is more than your vehicle is worth.
say your insurance company values your car at $8,000 but repairs after an
accident would cost $10,000. The insurance company will deem your car a “total
loss” and will not pay for any repairs. Instead, they will pay cash for the
value of your car (minus your deductible). If your deductible is $1,000, you
would end up getting a check for $7,000.
When You Still Owe
an accident does not cancel out your car loan. That $7,000 would go directly to
the bank to help pay off your debt. If you owed less than $7,000—great! Your
loan’s paid off and you may have a few hundred to put down on a new vehicle.
But, if you owe
more than your car is worth, you will have to continue to make monthly payments
for a car you don’t even have anymore. It’s not a great situation but one that
many people find themselves in since car loans now average 60 months to pay
not much you can do in this situation. Some states require that the insurance
company reimburse your for the sales tax of your car, giving you a little bit
of extra cash, but New Mexico is not one of them.
When You Have Gap Insurance
Your story may
have a bit of a happier ending if you have gap insurance. Gap insurance will
help you pay off your car loan in the event your car is totaled and you still
owe on it. However, it won’t help you put money towards a replacement, so you
are still out a functional vehicle.
Whether or not
you have gap insurance, you can choose to keep your car even if it’s been
“totaled.” In this case, your car will have a “salvage” title, which means you
cannot apply for new plates until you’ve made repairs…and you may be paying
completely out-of-pocket to have those done. If your car was damaged so
severely that it was totaled in the first place, it’s more likely than not that
it’s not safe to drive in the meantime.
So, here’s the
moral of the story: to avoid getting in a situation where an accident may leave
you with a hefty bill but no car, carefully consider your car purchase. In
addition to the retail price, also keep in mind:
length of loan terms needed to make payments manageable
depreciation of the vehicle
will help you determine if a long-term car loan is really your best option.
if you have any questions about your repairing damage to your car, or if you
need an estimate, we’re here to help! Contact