What Happens If My Car is Totaled and I Still Owe Payments On It?

by Eric Chaffin | Last Updated: January 20, 2021

If your car is totaled in an accident, you will still owe the remaining payments on the vehicle to the lender. At a time when the majority of motorists finance or lease their vehicles, this is an additional issue to deal with after a serious car accident.

Unfortunately, the fact that the car is a total loss does not remove your legal obligation to continue making monthly payments.

A Pittsburgh Car Accident Attorney at our firm can negotiate with the insurance company on your behalf.

Total loss

An insurance adjuster declares a vehicle a total loss when the cost to it repair is more than the car’s book value or a certain percentage of that value. The latter is generally in the range of 80 percent.

For example, if your car has an estimated book value of $10,000, the adjuster will likely declare it totaled if the repair costs exceed $8,000.

When considering the fair market value, the adjuster looks at the car’s make, model, age, mileage, condition, and any special features. In Pennsylvania, the total loss is based upon the pre-crash fair market value, along with the state sales tax cost for a replacement.

If you disagree with the adjuster’s valuation of the car, you must provide evidence of what it is worth. The fact that you cannot replace the car for its estimated valuation does not come into play.

However, if there are factors the adjuster did not take into consideration, such as brand-new tires, or that it was the top edition of a particular model, that might change the valuation. The same might be true– if you can prove the vehicle was in excellent rather than good condition– just prior to the collision.

If you have sufficient proof that the vehicle is worth more than the value attributed to it by the adjuster, but the insurance company will not agree, you have the alternative of filing a civil lawsuit. The Pennsylvania statute of limitations for filing such a lawsuit is two years.

A car crash resulting in a total loss may also have caused serious personal injuries. If the other driver was at-fault, your attorney might also recommend filing a personal injury lawsuit.

GAP insurance

If you purchased Guaranteed Asset Protection (GAP) insurance when taking out your car loan, it should pay the difference between the value of the vehicle if it is totaled and the amount remaining on your loan. Many auto lenders require such coverage– so check your policy or contact your insurance agent.

The cost of GAP insurance depends on the length of the loan and how much you paid for the car, but it is relatively inexpensive and can make a big difference if you are in an accident. Keep in mind that this coverage will not assist you in funding for another car.

How total loss claims are paid

If the driver owns the car outright, the check for the total loss amount is sent directly to the individual by the insurance company. When there is an outstanding loan on the car, the lender receives the proceeds, and if the amount is less than the loan, the remaining funds are sent to the motorist.

As noted, if the borrower still owes money, repayment is necessary. If you did not purchase GAP insurance, you might try to work out terms with the lender regarding repayment.

Contact us today

If your car was totaled in an accident because of another driver’s negligence, you need an experienced  Pittsburgh Car Accident Attorney at our firm. Use our online contact form or call or text 24/7 to schedule a free consultation.

We will evaluate your claim and advise you on the best way to proceed.