As a car owner, you probably know how disappointing it is to have your car severely damaged in an accident or any other kind of disaster such as a flood or storm. It can get particularly frustrating especially when your car insurance company is unable to offer you the compensation you were hoping to get. This is when a car is considered totaled.
While it is well advised to prepare for a financial shock, we are here to give you the good news and tell you that all is not lost. There are ways that you can probably recover some, if not all, of the value of your totaled car.
To guide you through this process, we have prepared a detailed and extensive guide that contains everything you need to know about a totaled car and all the practical options at your disposal to effectively deal with this situation.
What Does “Totaled Car” Mean
If you have had an accident, are unsure if your car is worth saving, and are frantically Googling “when is a car considered totaled”, you are not alone. Most people experience a car accident at least once in their lifetime, which is why you should be well-informed about some basic information regarding accident claims and the general claims process.
After any kind of car crash or accident that results in severe damage to the vehicle, you should immediately contact your auto insurance company to get an estimate of the true value of the damage and set a meeting with them to discuss your options going forward.
If your provider tells you that your car is totaled, it is worth knowing exactly what that means. A totaled car refers to a situation when repair costs are excessively high and exceed the actual cash value of the car. The actual cash value, commonly known as ACV, refers to the difference between the replacement cost and the depreciated value of your car. In case the insurance company calculates that your car’s damage is greater than the ACV, they will deem your car as a total loss, or totaled.
Additionally, another situation where a car is considered totaled is if your provider declares that the car is no longer safe to be driven despite repair work.
What To Do If Your Car Is Totaled
In case the insurance agent determines that the cost of repairing your car greatly exceeds the fair market value of the vehicle, you should look into options for what to do with totaled car parts in order to recover the financial loss.
Steps to take when a car is totaled
If you believe that your car is totaled, it is important to take the following steps as soon as possible:
- File an insurance claim with your provider. However, if you are not responsible for the collision, the at-fault driver’s insurer should be contacted.
- Conduct research to gain insights regarding the fair market value of your car.
- In case you have availed financing to get your car, such as a loan or an auto lease, immediately inform them of the situation.
- Remember to keep making your routine payments to your financier regardless of whether your car is totaled. This will help to avoid your credit score dropping.
Getting rid of your totaled car
If you are searching for how to get rid of a car that is declared a total loss and are thinking of selling your unwanted vehicle before it’s too late in order to avoid fees, fines, and the frustration of keeping a junk car, there are three main avenues that you can explore.
A great way to get rid of a car that doesn’t run is to sell it to an auto salvage yard or a junkyard. Considering that your car is totaled, you expect towing services to pick up your car and receive actual cash upfront for your vehicle.
A second option is to keep the car and remove any valuable and functioning parts from it and sell it for cash. You can easily sell car parts online on places such as eBay, Amazon, Craigslist, and Facebook Marketplace.
When deciding what to do with totaled car parts, you can also consider the option to donate your junk car before you disassemble it. This will save you the headache of having to carry out repairs and enables you to get rid of your unwanted vehicle pretty easily as you don’t really have to search for picky buyers.
How Is My Car’s Value Decided?
Your auto insurance provider is the main player when it comes to deciding the value of your car after it has been totaled. More often than not, people end up being disappointed by the cash payout estimate that they receive from their provider. In this situation, it is possible to challenge or negotiate the claim. However, to be able to do that, you need to be well-versed in how these companies actually go about calculating the value of cars.
How insurance companies determine the value of a totaled car
When an insurance company investigates the answer to when is a car considered totaled, they will arrange to send an insurance adjuster to assess the damage to your car and assign a value to it. Insurance professionals will also enlist the help of a third party to carry out an appraisal of the totaled car. This enables providers to determine the car’s value using a varying methodology or loss formula and allows them to steer clear of any potential bias in their estimation.
Following these assessments, your provider considers both valuations to calculate the ACV and offers an insurance payout equivalent to the market value of the car immediately before it is totaled.
It is possible that you don’t agree with the assessment of the claims adjuster and are dissatisfied with the payout being offered. If this is the case, you can explore the option of hiring an independent private appraiser to value your car. However, keep in mind that in order for this to be valid, your insurer needs to agree to this. In case they do, you can use the valuation from this assessment to potentially challenge the insurance company’s estimated value to demand a higher payout.
It is important to bear in mind that different states have distinct thresholds according to which they declare a car to be totaled. For instance, in South Carolina, a car will be considered totaled when the damage is greater than 75% of the car’s ACV, whereas in Florida, this figure sits a little higher at 80%. For this reason, always carefully read the insurance policy including the fine print.
Overall, it is to your advantage to be aware of these total loss thresholds so that you are in a better position to challenge the insurance quote provided by the claims adjuster in case you feel you are entitled to higher compensation.
Factors to consider when calculating a car’s value
Generally, when calculating the ACV of your car, most insurance professionals take the following factors into account:
- Year, model, and make of the car
- Mileage of the car
- General wear and tear
- Any cosmetic or exterior blemishes such as dents or scratches
- Mechanical issues such as lack of fuel efficiency or engine problems
- History of accidents
Importantly, keep in mind that even if you have purchased a brand new car and totaled it, you should expect a pretty low ACV as cars tend to depreciate from the moment they are used and the entire logic of the ACV is that it factors in this depreciation value of the car. In this situation, you should be prepared to receive a significantly lower amount for your car compared to what you paid for it.
Also, make sure you carefully peruse the insurance terms and types of insurance coverage offered by various providers to choose the best auto insurance coverage.
What Happens If You Keep Your Totaled Car
Generally, when your insurer declares a car totaled, it is given a salvage title. In this case, they will give you a settlement cheque for the car and your provider will proceed with selling the totaled car according to its salvage value.
If you decide to keep the car, however, you should first check state laws regarding keeping totaled cars, and if permissible, proceed with repairing it so that it can be safely driven. You can expect to spend a significant amount of money as the cost of repairs is likely to run pretty high. We recommend hiring a professional and experienced mechanic and negotiating a fair market price for the job. Following repairs, you should carry out two important tasks, namely arranging for inspection and getting insurance.
- Arrange for inspection. After your repair work has been completed, you will need to contact your state’s Department of Motor Vehicle for an inspection. This generally involves official approval of repairs and reclassification of the car from salvage title to rebuilt. This sign-off is integral if you wish to drive your car on the road.
- Get insurance. Similar to buying a new vehicle, your rebuilt car will need to be insured. This may prove to be a bit tricky since on average, the auto insurance industry tends to stay away from insuring a car that has previously been labeled as a salvage vehicle. In this case, you may not be able to obtain collision coverage or comprehensive coverage for your rebuilt car and are likely to only get basic liability auto insurance.
Even if you do repair the car, pass inspection, and are successful in getting insurance, it is important to be aware that the resale value of the car is going to take a hit somewhere between the range of 20% to 40%. This is why you need to be absolutely sure about deciding to keep your totaled car and be willing to take on the risks associated with it in the long run.
The Bottom Line
Having major damage to your car can be a frustrating time and leave you both disappointed and overwhelmed. While this is completely normal and something that many people go through, it is always a good idea to be knowledgeable regarding the optimal way to deal with this unfortunate event.
Having the know-how about when is a car considered totaled and the necessary information that determines the value of your car can be helpful to get a good cash settlement for your totaled car and make the most out of your situation.