Understand Your Options for a Totaled Car

Even if your insurer calls it a total loss, it may still have some value

With more than 10 million car and light truck accidents occurring each year, you may have to deal with one at some point. If the accident is bad enough that your car is totaled, here is what you need to know and do.

Key Takeaways

  • When a vehicle is totaled, it means the insurance company believes it isn't worth repairing. 
  • The insurer may replace your totaled car with an equivalent one or offer you a cash payment equal to your car's value.
  • If you believe the insurer's offer is too low, you can challenge it.
  • If you have a loan on the vehicle, you will still have to repay your lender in full. 

What Is a 'Totaled' Car?

Depending on your state and whether you or another driver were at fault in the accident, the damage to your car may be covered either by your insurance policy or the other driver's. If you file an insurance claim, your insurance company (and possibly the other driver's) will assign a claims adjuster to your case. The adjuster's job is to determine how much their company should pay out on the claim.

The adjuster may conclude that your car is totaled, or a total loss, if it isn't worth repairing or isn't repairable at all. Insurance companies have their own formulas for making that determination. For example, the insurance company may call your vehicle a total loss if the cost of repairing it exceeds 80% of its value. If your car is worth $15,000 at the time an accident occurs, then the 80% cutoff would mean repairs likely wouldn't be authorized if they cost more than $12,000.

Claims against the other driver will fall under their policy's property damage liability coverage. If your policy is the one that will be paying for the damage to your car, either your collision coverage or comprehensive coverage—if you have any—will be involved. Collision coverage is for damage to your car caused by an accident with another vehicle, while comprehensive coverage is for damage caused by something else, such as a fire or fallen tree.

If your car is totaled, here are seven ways you might consider handling it. 

Option 1: Let the Insurance Company Pay You

The easiest way to deal with a totaled car after an accident may be to simply let the insurance company pay you. 

Depending on the insurance laws in your state, this might involve:

  • Replacing your totaled vehicle with a comparable one
  • Offering you a cash payment that's equivalent to your totaled vehicle's actual cash value

Note that if you believe the insurance company's offer is too low, you can challenge it.

If you opt for a cash payment and still owe money on a car loan, the insurance company will generally make the check out to both you and your lender. After your loan has been paid off, any remaining money is yours to keep. However, if the insurance company's payment is less than you owe on the car, you are responsible for paying the difference.

Option 2: Leave the Car As-Is

In some cases, a totaled car may still be drivable. If it is, then you may choose to keep it and continue to use the car as-is. This might be something you'd consider if you don't have collision or comprehensive coverage to pay for repairs. If you decide to keep driving a totaled vehicle, have it checked out by a mechanic first to make sure it's safe to do so.

Option 3: Keep the Car for Parts

Another option if your car insurance won't pay for repairs is to keep the car and use it for spare parts. This might be worth considering if the make and model of your totaled vehicle are similar to those of another car you own. If not, you could sell off spare parts that are still in good working order to other people who own the same type of vehicle. 

Option 4: Sell It to a Junkyard

If you don't want to go through the trouble of selling individual parts from a totaled vehicle, you could sell it to a junkyard or salvage yard instead. Salvage yards can pay you cash for your totaled car, and they may also pay to have it hauled away for you. 

Option 5: Donate the Car

Donating a totaled vehicle to a nonprofit organization is another option. There are a number of charities that accept vehicle donations, including cars that have been totaled, to support their operations. 

An added benefit of donating a totaled vehicle to charity is that you may be able to claim it as a tax deduction. If the nonprofit you donate your vehicle to sells it for less than $500, you can deduct the lesser of $500 or the fair market value of the car on the date that you donated it. If your donated vehicle is sold for more than $500, you can claim the amount for which it was sold.

To support your tax deduction, be sure to get a receipt showing the date of your donation and the name of the nonprofit organization.

Some car dealers will take a totaled vehicle as a trade-in.

Option 6: Trade It In

If you're planning to buy another car, the dealership may allow you to use a totaled vehicle as a trade-in. It's a good idea to get a professional appraisal of the vehicle to make sure a dealer is offering you a fair amount in trade. 

Option 7: Repair It Yourself

A final option for dealing with a totaled car is paying to repair it yourself. You might consider this route if your insurance won't pay for repairs, but you want to keep the car and make it road-ready again. 

When weighing whether to repair a totaled vehicle, consider:

  • Whether the car can actually be fixed and made drivable again
  • How much repairs will cost (be sure to get more than one estimate)
  • What the vehicle would be worth after it's repaired
  • How you'll finance the repairs
  • For how long you think you'll drive the vehicle

Some types of cars will be more expensive to repair than others. For example, parts for an older car may be harder to come by than parts for one you bought a couple of years ago. But it may be worth the added expense if the car has a higher value, or you want to hold on to it for sentimental reasons. 

If you need to take out a loan to pay for repairs, consider what kind of payments you'll be able to afford and how much you'll pay in interest and fees. If you think you may trade in the car two years down the line, but it'll take three years to pay off a loan, for example, it may not be worth it. 

Article Sources
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  2. Nolo. "My Car Was Totaled but I Still Owe Money on It."

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  4. Internal Revenue Service. "A Donor's Guide to Vehicle Donation."