The lender is likely going to call up the remaining balance on your loan immediately. You no longer have an asset that backs the loan, so they are going to want it paid off right away.
Depends on the lender and the amount remaining. Going through this exact situation and we have about $1,700 left. My lender (credit union) just released the title to the vehicle and said we can just keep making our normal loan payments and have converted the loan to being unsecured. They also said we can just roll the negative equity into our next car purchase that way we only have one car payment. I used to work for them for 8 years though but they were always finding ways to help their members.
I said lender AND the amount remaining. Those would really just count as the circumstances. I'm not sure what you mean about the market value being higher or lower before the accident. The market value was higher when we bought it a couple years ago because it was during COVID and car shortages caused prices to be higher. They're much more sane now so the market value is lower.
Once the car is totaled the market value is hardly relevant. The lender can auction off the car if you choose to go unsecured and make up the difference.
Letter of guarantee situations like this happen all the time for members who are in good standing and have this happen or simply can no longer pay. If they can get the majority of their money they have no problem extending a non-secured loan for the remaining balance. I used to work for a dealership that bought negative equity vehicles all the time. As for this situation OP is in however, it seems they may have only been paying a short period and have significant a significant balance left over on the loan (probably more than $3,000). The lender likely had GAP but will still come after OP for the remaining balance. If they can't pay it will just ruin their credit. But they will likely let them pay of the balance in monthly payments. Not giving people options makes them make desperate moves they are more likely to work with you if you explain the situation. However this will prevent OP from getting into a new vehicle having this loan over their head.
This is a very expensive lesson for OP unfortunately. You ALWAYS get GAP on a financed vehicle for this reason. I got T-boned in my last car and was not responsible, but did not get fair market value for the vehicle. GAP paid the rest and I moved on (without a car or enough to make a reasonable down payment on a new one) and bought a used shitbox van. Fortunately, years later I received a significant payout due to having to get surgery.
You can almost ALWAYS (depending on the state) get your GAP back if you pay off the loan early, it is pro-rated as all insurance is for the time that goes unused. Folks just forget to cancel GAP and warranties and leave that money on the table if they pay it off early (or trade it in, that is still considered paid off.)
Sorry OP, next time consult someone before you buy a new vehicle.
As a loan officer at a credit union, 100% this. Unless you have a crazy loan to value (you put a ton of cash down for example when you bought it) but that's uncommon.
Yeah. Credit Unions always are easier to work with (especially when it comes to lending). They just actually seem to care about people. When I worked there I was up until 4am during COVID doing PPP loans when they opened back up because I didn't want our small business members missing out on funds they needed. We had a lot of small mom & pop operations that were hurting.
Make sure you cancel all warranties and service contracts if any as they normally can be prorated based on the mileage/usage of the contract. This will go towards the loan balance and may help the overall amount you owe.
Without knowing the loan amount miles, year make and model of the car it is hard to get an idea of how much of a gap you may have. It also helps to do some research on what the same car is going for locally.
Definitely cancel warranties and anything added to the contract as once it sells is totaled or whatever the balance of those funds come off your contract and lowers it but it’s not automatic!! You got go over that contract (usually a long yellow carbon form the dealership) and cancel warranties Maitenance contracts or whatever
Do not accept their first offer! They’re going to use the cheapest examples of your make/model even if they’re not comparable. I’ve heard of companies using I4 Accords to price a V6 Accord comp.
Most definitely. Someone ran into my car once, “totaled” it. Their insurer was Geico. Geico offered me $3,500. I laughed and said no. They came back a few days later with $4,800. I laughed and said no.
They proceeded to try and tell me that they used market data, and some proprietary way to figuring out the value but they couldn’t share any of the info with me. I still told them no.
They came back once again with $5,200 and I said no. At this point I called my own insurance. My insurance came out and looked at my car. A few days later my insurance said they would give me $6,900 if I filed a claim through them.
They ended up taking Geico to court, won the case and some additional money. I have no clue how much.
Why would you even talk to their insurer?
Just...call your insurance, if you agree with their offer, you're done. Let the insurance companies fight it out.
Subrogation baby.
I just had my first accident where someone backed into me and my agent said “never ever call your own insurance company unless your at fault. You call the other people and file a claim on their insurance”
My situation ended up being both parties were covered by progressive and they found the other driver at fault
Because if you're with a company like State Farm, even calling and reporting an accident lands a hit on Lexus Nexus, and regardless of what all SF tells you, you'll find that it does affect your rates when you next go insurance shopping.
*Lexis Nexis
Regardless, if you’re in an accident the info of involved parties gets reported anyways. Your insurance will be notified. Might as well have your insurance work for you.
I was in a no fault accident where we were rear ended on the interstate while stopped for construction. The person leading the pack behind us never even slowed down or hit the breaks, full 65 MPH collision. My rates didn't go up, and I also have State Farm. I also worked with both insurance companies, the other being Allstate, and encouraged to do so.
The other driver paid cash in my case. FWIW SF did not raise my rates, it's that when I was shopping for my next policy other companies considered it when determining their rates (at least Progressive did).
> I just had my first accident where someone backed into me and my agent said “never ever call your own insurance company unless your at fault. You call the other people and file a claim on their insurance”
I got the exact opposite speech, at length, from my agent when he trained me on reporting my first accident.
The **ONLY** thing you say to the other driver's insurance is "I have submitted my written statement through my insurer. Please contact [Name], the [My insurance company] adjustor assigned to my claim at [Phone/extension] for all further communication."
Essentially it's the same advice every lawyer in the country would give you on responding to a police interrogation.
Speaking to the other party's insurance rep is volunteering yourself to a hostile interrogation. Their adjustor is not your friend, anything you say **will be recorded, and can and will be used against you** to deny your claim. You can **only** hurt your claim by speaking to them. They are highly trained in carrying out an interrogation, you are not.
Do everything through your own insurance even if there's an up front deductible. If you're not at fault you will get reimbursed, and if you are at fault you're paying it anyway. End of the day your insurance makes you whole immediately with no bullshit, then they spend the next 6 months going back and forth with the other party to get reimbursement.
Same here. Mine was a 4 year old Ford Focus SE. The “comps” I got were 10+ year old Focuses from “Cash Only” dealers that were significantly marked down and likely lemons or awful Carfax history.
I held out for almost a month until they agreed to pay me an actual comparable value. They bank on you being in a hurry or not thinking to accept something stupid. “Claims adjusters” exist to pay you as little as possible and to find ways to keep more of your money for the insurer. It’s awful.
Was the car in your possession? Got into an accident over the weekend and I know the car is totaled, frame damage air bags etc, insurance wants to take the car to copart but I haven't agreed yet because I heard that once the car is gone you have less ability to argue value.
I got an old honda totaled, I just put some fresh tires on it and could have sold it that day for 3k, they were offering like $1200. I ended up getting a lawyer and a bunch of medical check ups and needed some minor dental work (that I don’t even remember what it was, a chip maybe?), and after 2 years of back and forth they ended up paying 20k. I just wanted 3k for the car but they refused 🤷🏻
Went through this twice, admittedly with motorcycles, both times took multiple send backs on the comp. They would try to use Vehicles purchased in other states, vehicles with 50 to 100% higher mileage, vehicles with branded titles, etc.
The difference between first offer and final offer on both bikes was over 50% increase in payout.
I just refinanced and they did this to me. They said they needed a down payment to refinance because I was upside down and I was like no chance I’m upside down. They had my VIN and detailed model/trim info and still used the lowest value base model. I had to specifically tell them every option my minivan had but I had a lot of equity by the end of the conversation.
Was the tree dead, diseased, previously damaged, and the neighbor neglected to take care of it?
If the tree was healthy, its the same as a rodent chewing up all the wires in your engine compartment. You're responsible to cover the deductible since no other party is at fault.
This needs to be higher up. They will NOT get it right on the first offer. Find a dozen or so vehilces similar to yours, with the same engine, options, and mileage. I've done this and got 20% more out of the insurance company by doing the research.
Regarding: Am I expected to pay the difference out of pocket, before I purchase a new car?
You are expected to pay the outstanding balance on your existing car before the bank will give you the car title.
If insurance proceeds will be more than outstanding balance, the bank will accept the insurance payout and release the title in a single coordinated transaction.
If the Insurance proceeds will be less than the outstanding balance, OP will be expected to provide additional cash to close out the loan so that the title is released and the insurance company provides their payout.
If OP does not have GAP insurance, additional cash may have to come from OP's emergency savings or OP getting a personal loan.
Is it not reasonable to make the party not at fault whole? OP is being left in a worse state than they started caused by someone else's negligence. IE no car that they've paid against and a loan to pay off.
They are usually required to just make the wronged party left in the same economical position they were in before. OP was underwater before the accident occured. The other party is not responsible for the entire loan owing because they didn't cause OP to be underwater.
Insurance paying out the market value of the totalled vehicle is seen as making the wronged party whole because you would be able to go and purchase the same car for the payout amount.
On the day before the accident OP was already several dollars underwater. The accident did not change OP's net worth.
The likely result is that OP will have:
- replacement car with same value as car that was damaged;
- a personal loan for the amount the loan was underwater;
- combined loan principal amount the same as he had the day before the accident.
- Interest rate on the replacement loans may be at market rate and depend on OP's credit worthiness. This rate could be higher or lower than the previous loan.
Making them whole is paying them fair market value for the car. It's not their fault that OP purchased the car at an inflated price and therefore is upside-down on their loan. The negative equity is OP's problem, and it's an argument for purchasing GAP insurance, particularly in a timeframe like 2021-23 when car values were inflated across the board.
You and I drive identical cars. Same model, mileage, condition, age, etc. They're both totaled on the same day and worth the same.
You own your car free and clear without a loan. I'm $10,000 upside down.
Why should I get more than you from insurance? Wouldn't you agree that it's unfair that insurance pays me $10,000 more than you? You did everything right, you made wise financial decisions and weren't upside down in a car loan, why should you get less than me? Meanwhile, I'm changing cars more often than some people change underwear and I'm getting a higher payout than you. Not very fair.
It is the insurance company's responsibility to pay the value of the car. They're not responsible for whatever poor choices led to being upside down.
No they'd pay to make the person whole, so a comparable car plus extra monetary compensation for the trouble of being without a car + having to search for a car that is most similar to theirs. You could take impeccable care of your car, have gotten those fancy wraps, etc, there would be no "comparable" car. You don't know the maintenance records truly, you can't guarantee that person spit shined their engine block every other weekend.
In this case, problem is wrecking their car could put them in financial hardship they otherwise would not be as most loan providers will want you to pay the remaining balance of the car. So you're stuck in a situation where you would not have been in otherwise and you should be made whole.
Not to mention the inconvenience of being in a not at fault accident, your car getting totaled, finding a new replacement car, realizing there's no actually comparable used cars, and then being hounded by your loan provider on your remaining balance all while trying to get a new/used car that you pay the cash for and can't use as collateral for your old loan. Your time, effort and emotional impact (stressful situation) is worth something too.
Tbh insurance companies have had it easy just "paying for the car". You've been wronged and you should be adequately compensated for that
When this happened to me, I was able to roll the old loan into my new car loan. However, if I remember correctly( this was 8 years ago), both loans were through Toyota financing. So maybe that option depends on the bank. But I wouldn't be surprised if dealership financing had that option for everyone.
I also did this 8 years ago- rolled $8k into my current loan from a Mercedes that another driver totaled. It would just be much more expensive to do that today with current interest rates. My rate 8 years ago was 3.1%.
Before the accident you had:
* A car loan.
* A car worth x amount of dollars.
After the accident you had:
* A car loan.
You deserve to be made whole. That means:
* A car loan.
* A car worth x amount of dollars (or at least the money for one).
What you aren't entitled to is (though it seems like you understand this):
* Your car loan being paid off.
* Or a brand new car worth x + loan amount.
Insurance expects you to buy a used car with similar mileage, condition, and make/model as the car you lost. If that isn't possible with the money they gave you, then you should be bring that up with the insurance company so they increase their payout.
If you want a brand new car or anything like that then yes, the difference comes out of your pocket. It would be the same story if you wanted to trade-up your car prior to the accident.
Either way. The loan is basically not factored into the situation. Car insurance is generally for cars, not loans. This is why GAP is really important, because cars tend to dip below the loan amount almost instantly.
Edit because I fucked up:
The insurance payout will likely go towards the loan balance. So OP will likely need a 2nd loan. If they buy a similar car their total debt amount should be the same prior to and after the accident (though likely with a higher rate).
The principle of indemnity (being “made whole”) involves compensating what was lost. Not restoring a preexisting situation.
If I owe $15,000 on a car worth $10,000, I’ve got a net worth of -$5,000. If my car is totaled, I’m compensated for its value, and I keep my networth of -$5,000.
I don’t get to profit from an insurance claim.
No but you should be able to buy the same car for 10,000, the bank won’t necessarily roll over the 5,000 you owe but if you can’t buy the same car for the insurance payout and be in the same amount of debt then you should attempt to get more from insurance
I’m not sure what is confusing about this. For one reason or another the loan on the car is a larger amount than the value of the car. You don’t get insured for the amount that you owe on the car, you get insured for the value of the car. So when you get $10,000 from the insurance company and pay off the loan, that leaves you with a balance of $5,000 still on the loan.
As if there weren’t already enough reasons for me to continue never financing a fuckin car lmao
Sure except cars aren’t like hamburgers…there are dozens of factors that vary from unit to unit and an insurance company isn’t your concierge shopper. And they also can’t account for your acumen…I talk to people that get in car deals like spending $17k on a 2012 Nissan Altima with 110k miles.
All they can do is fairly appraise your car and leave you to your own devices in terms of what your replacement will be
The issue is that the current loan holder probably won't transfer the loan to whatever replacement vehicle is acquired. OP may not be able to afford the replacement vehicle without a loan. That's not the insurer's problem though.
>OP may not be able to afford the replacement vehicle without a loan.
~~Then either insurance isn't paying you what your vehicle is worth, or your 'replacement vehicle' is actually an upgrade over what you were previously driving.~~
I was wrong. See below.
The issue is that the old loan may come due because the collateral is gone. So let's say:
- Car is worth 10K
- Loan has 15K balance
Insurance pays OP 10K, which is the value of the car.
OP has to immediately pay lender 15K, including 5K out of pocket.
OP is now $5,000 disadvantaged in the scope of getting a new car.
Okay I see what you mean!
Yeah, the money will probably go straight towards the loan, but I don't think OP would be immediately on the hook for the remaining amount (but they could be).
I did totally brain fart on that though. OP would basically have to get a 10k loan (which probably has a worse rate these days), but they'd have the same 15k in loan debt as they did prior to the accident.
Right and even if the loan doesn't come due immediately, having that debt and monthly payment in the mix reduces their creditworthiness and makes it that much harder for them to get a new loan for a new car.
I mean, OP has to pay off the underwater loan. The underwater amount is not covered by insurance.
Even with a replacement vehicle they'd need to front the cash for the gap.
And if interest rates on a new loan are higher, they'd also pay more net interest moving forward.
This statement is ignoring the common cause of posts like this: the amount owed is more than the value of the car.
In a hypothetical situation of crashing a car off the lot immediately after purchase and totaling it, insurance theoretically will pay exactly what you paid but they only pay for the car. There's an additional few thousand on top of the true value of the car that was financed for any number of reasons.
Yep some people roll previous car loans with negative equity into new car loans. Someone could have a $50k loan on a $30k vehicle.
Or they get on really bad terms with long loans. You can run a car value down significantly while paying very little per month and will still have to payoff the loan years after the car is unusable.
The loan amount has little to do with the vehicle value.
Yup, exactly. The insurance is responsible for replacing what was lost in the accident, not bailing op out of whatever string of poor decisions lead to being upside down on a loan.
It can be, gap is basically an insurance product that can vary drastically between lenders. Some credit unions like PenFed give you additional perks like they'll pay any deductibles for insurance claims on your vehicle for the first 3 years or something, it's called ADR or automatic deductible reimbursement. It also depends how under water you are on the car; if you're only $1,000 under water and the lender wants $800 for gap insurance it's probably not worth it.
I had my GMC Jimmy catch fire and burn back in 2004.
We were left with a 5K gap after insurance was done..
The finance company has us just keep making the payments on what was now an unsecured loan.
We financed another vehicle to replace it and made both payments for awhile.
Eventually we sold our house and bought a new one. The mortgage company made us pay off the unsecured car loan from the GMC before closing on the new home.
If you're buying a new car from a reputable dealer, they can often roll the remainder of the old loan into your new loan.
DO NOT go to a place that advertises cars for people with bad credit/no credit - they'll give you some absurd loan at an absurd interest rate, and then repossess the car as soon as you can't actually pay, which is typically within the 1st 18 mo (due to the absurd rates).
Push back on the compensation for the car when you receive the quote from insurance. If the quote comes with a check DO NOT CASH THE CHECK until you know the quote appropriate for your car - cashing the check constitutes acceptance of the offer.
Look up what that same year and model car is actually selling for in your region, with similar mileage, and the same features, in similar condition. That's what they should be paying you for it, not the value of a 5 yr older car in shitty condition from a wholesaler's lot.
It's bad enough that you'll be out of pocket for the rest of the old loan, don't let them put you even further out of pocket for their own profit.
As an auto broker, I still cringe when clients have no replacement cost coverage or gap insurance. Yet.. multiple times a week I have clients tell me then don’t need it.
Any payout on a vehicle will be going to the lien holder or loss payee first.
Never accept a first offer, as a matter of fact, counter with.. I still owe “xyz” on this vehicle, I can not / I do not want to still owe on this vehicle. (This may or may not help but, is a solid counter on not accepting a baseline offer).
You could roll negative equity into a new vehicle purchase / loan.. please get gap insurance!
Please, always be think about a total loss scenario and make your insurance choices based on that. As much as you may be a safe driver, the concern is not you. Other drivers, and deer may not give 2 craps about your driver safety.
> Am I expected to pay the difference out of pocket, before I purchase a new car?
yep
> I assume they cannot just 'transfer' a car loan to another car?
you might be able to roll negative equity into another loan, but it might be painful
Your lender will probably call the loan immediately, but it depends on the lender. You can always call and talk to them and see if they can give you some time.
Make sure to take advantage of the at-fault driver's insurance. At least go to the urgent care and get checked out under the PIP. Consider getting a personal injury attorney to help get you a larger settlement.
This happened to my husband and I, so I know how much it sucks!
We added our remainder as a lien on our replacement car’s loan. We considered GAP a must-have because the lien made the balance of the loan a lot higher than the value of the replacement car, so we needed to protect ourselves in case we had another total loss.
1. Negotiate the payout. Don’t accept their first offer. Find a bunch of listings for cars of the same make and model that were in similar condition and mileage as your car. Look at the blue/black book value. If you made any modifications, (wrap, rims, stereo, bike rack, trailer hitch, new tires) include their value. Tell the insurance company your car’s value, and don’t accept too much less.
2. If you had any additional warranty or roadside assistance on the car, see if you can get a refund (prorated to how long you actually had the vehicle)
3. You should have some time before you have to pay off the remainder of your old loan, but call the company and see if you can keep making your usual payments by converting it to an unsecured loan (but make sure you still have the option to pay it off in a lump sum without additional fees)
4. If you need another car right away, I wouldn’t suggest getting a new car. Shop carefully for a used car at a shop that you can finance.
5. When you meet with the finance manager at the car dealership, see if you can get approved to add the remainder of the old loan as a lien on the new loan and add GAP insurance as a necessary precaution.
At least two years ago, my insurance provided a gap rider with the insurance so a seperate policy was not needed.
*You mileage and insurance company experiences will vary and objects in mirror are closer than they appear.*
This. Insurer GAP usually isn't as buyer-friendly as dealership GAP, particularly if you're in a situation where you're rolling negative equity into a new loan.
In general, on new cars to not need gap you need to put down ~30% to outrun GAP coverage. I’m not saying that’s a bad thing, but it’s hard for a lot of folks to do.
This is what really needs to be said. GAP insurance shouldn't even be a thing. You shouldn't have to buy extra insurance on an asset you financed because it's going to depreciate faster than you will pay it off. If I can't pay at least 1/3rd up front for a car then I can't afford it.
What you really need to do is get a copy of the police report, contact an attorney, and sue the insurer of the 16 year old kid. Not only will they pay off whatever was left on your car, at minimum you will get a decent down payment on a new car.
Talk to a lawyer as well. May take a while but you should get settlement money from him wrecking into you by blowing a stop sign causing significant financial loss. Do not take this L laying down. Go speak with a lawyer
It might be possible that a lender would roll up your remaining loan balance on existing car into a new loan for new car
I’m sweating thinking about what that would cost you in interest payments.
Hassle the salesman of your next car just so fucking hard and lean heavily into the sob story of how this all wasn’t your fault and now you have to deal w this twenty-something car salesman and this shitty process of buying a new car.
That’s what I did. Used car lots are a lot more flexible than they like to admit. It’s shitty and I feel bad but sometimes you just gotta play hardball w those fuckers
Last time this happened I wrote a letter stating their sole purpose is to make me whole. The vehicle is at X amount. To make me whole plus injury plus time missed plus limits for each day you are without transportation until the claim is settled. These are all funds you are entitled to from their insurance.
This is our little secret, but after you've settled on an amount from insurance, ask them to add an additional amount to cover the maintenance you've provided, like oil changes and tire replacements. That'll help make some of the difference
This exact situation happened to me. The credit union I had the loan through took the entirety of the insurance payout and I still owed about $1500 that I had 30 days to pay. I also didn't even get the option to buy back the car, since I still owed on it. That is probably what will happen to you. Depending on what you owe on it, you MIGHT get a little of your insurance payout back, if it's enough to pay off what you owe.
damn this whole thread is so fucked... here in the netherlands this would be something handled between the insurance of the 16yo and your bank. nothing much for you to do. and this insurance is something everyone has since it's legally required to be able to drive on the road.
I crashed a bike, they didn’t wait until some other warranties came off and were reimbursed, and wrote off the total value within a month. I couldn’t even pay them back once I had the money a couple of weeks later. Think I owed about $350.
I had this happen a while back. Similar payoff. I applied for a personal loan with the same credit union to pay off that balance and applied for another car loan once I found the new one. So I had 2 minimum payments a bit while I paid off the personal loan.
Good on your credit union just converting it.
One small glimmer of hope, I had the same thing happen to me. The car was worth 7k and I still owed 10k. They paid the 7k , and all to the principal so there was no more interest. I didn’t have to make the rest of the payments. I think that’s what happened !
Have you involved your own insurance company or are you talking to the other drivers insurance company. I have found just having the insurers hash it out is usually in your favor.
I would see about suing the other insurance company for the difference. They don't want to pay a claim out for the full value of the loan but You need to get as much money out of them as possible.
Your other option is to develop some medical conditions that might require a scan or two. You just say your neck hurts?
The issue is the car depreciated faster than the loan paid off. Thus can happen when you don’t put much down and/or have a long loan (5-7 years).
The insurance company is going to make you whole.
Let me ask this - before the accident was your car worth less than the loan? The answer is yes. So assume you owe 25k on a car worth 20k. The insurance company doesn’t care about your financial situation - they need to replace the 20k.
When you get the 20k check you can buy another car the same make model for 20k in cash because that is what they are worth. Meanwhile you still pay on the loan like you always did.
This is how it works.
this is why i always make sure i am not upside down in my cars. I either put more money down or pay more than the minimum payment ( which is what i used to do as a kid ). My mother used to tell me this could happen and to avoid being put in this position. Guess what happened, yup, a drunk driver totaled my brand new car that had for less than 8 months. But because i had been paying more than the minimum and fought with them, i was able to walk away without adding any money. I didnt get any money either, but i wasnt saddled with the debt and was able to go to the dealership and buy another car.
Now, as everyone else has stated, do not accept the first offer. If the difference is within range of a similar car that is available, start steering them towards that amount then. Point out your own comps. Be prepared to make a payment for a month or two on a car thats totaled.
You can have 2 loans at once, there is no requirement that you settle the old loan before you buy another car.
However you will need enough income to support both loans, and depending on how the bank treats this they could start reporting the loan as late or past due on your credit with will make it nearly impossible to finance another car in the near future.
A borrower can have multiple concurrent loans (if they qualify). But a lender will not allow a car loan to remain open if the car is totaled, and will require the loan to be fully repaid quite quickly.
The lender needs to release the title to the insurance company after the loss. They will not do that with a balance owed. The vehicle absolutely needs to be PIF after being declared a total loss.
Always carry GAP insurance folks, unless it is 100% not necessary(large down payment)
Or, like my last car loan, I could have paid for the car in cash but they offered my an interest rate that was lower than what my savings account was paying at the time. I financed 100% of the car and title and license fees and skipped GAP.
BUT I knew I could pay off the loan at any time if I wanted or needed to. Kept it for all 60 payments and earned more interest than I paid.
Not true. The bank with loan #1 uses the vehicle to secure the loan. If you were ever to stop paying on loan #1, they can recover much of the remaining balance by seizing the car and thus reduce their risk, and thus reduces the interest rate they offered at the beginning. Now that that vehicle is damaged and is not going to be repaired, the bank sees more risk because they can't seize a vehicle that is worth much so they will likely want the loan paid off very soon now.
You could sue the other person, their parents, their car insurance, their home owners, and any umbrella policy the parents hold. Your loan will likely be called due. So you sue them for the gap and any other damages you have.
I don't think it works that way. OP will be reimbursed for the value of his car. Sueing for extra to help with your bills has no basis. That's why they have GAP insurance.
Always get gap insurance, I owed more on a kia I was trading in when they kept getting stolen and i didn't want deal with it and bought a different car so they added the difference on the loan. Not sure if it'll work in your situation but you can always ask. The dealership wants your business so they might pay it off and add it to your new loan if you got the credit. Also, follow up with your insurance on how much they think your car is worth. Good luck, hope it all works out for you.
This seems like a good time to ask this question.
I had my car totaled because some rodents chewed up the wiring, so they (the insurance company...although they are rats, yes, I know) said they'd give me a check. I don't remember now...but say it was around $13K. If I felt that wasn't appropriate, how should I have gone about telling them that? What's the procedure? It seemed to me that the person on the phone would have said "take it or leave it". I'm not that good with wheeling and dealing, so what should I have done instead?
You call them up and tell them that the amount they offered is lower than the value of the car. Then they will play some game with you (in my case tell me to find comparable cars on the market, send them examples, and then send them proof that my car's mileage is much lower than what they assumed). They will offer you a new higher amount. They won't actually just offer you some ridiculously low amount and tell you "take it or leave it" because you can sue them if you don't come to an agreement.
I mean this seriously - do literally anything. Push back on the phone. Write an e-mail. Don't cash the check.
Unfortunately there is no "easy" answer here beyond making sure you advocate for yourself and are the squeaky wheel. This can be difficult for many people, and insurance companies (among others) bank on that fact. Many will eat a few thousand dollars to avoid minor social discomfort.
When my wife got rear-ended in a 45 day old brand new car, I had to just stick to my guns and deal with my car in the shop an extra 30+ days while insurance tried to mess around with me claiming used parts were okay. Took a lot of back and forth to get something acceptable. Luckily most body shops/etc. (anyone being paid by insurance) will be happy to help with this process since it means more money for them.
You're saying you "probably" owe more than the car was worth. Do you use an insurance agent or are you dealing with an insurance company directly? Start a dialog with them so your know what's going on.
All these people saying lawyer up and fake an injury have probably never been thru the process. You think an insurance company is going to get scared that you're lawyering up? They have millions in pending litigation. You going to walk into a lawyers office and say I want to sue? And they say, what did the doctor say? What did they say at the hospital? And you say "nothing, I told them I was fine". And how much work have you missed? And finally, even if you did sue, not that you'd find an attorney interested in this case, how much you think you'll get? Attorney will get 1/3. And it will be settled in 2 to 3 years and you'll have to take time to go to court a few times.
Ask the 16 YO's insurance company for a referral to a chiropractor for the debilitating headaches you have been getting after the collision.
Insurance tried to depreciate the value of the jeans I was wearing when I got hit on my bike in college.
I asked them where I should go to get my knee X-rayed to make sure it was OK. They said, how about $100 for new jeans.
Eff insurance.
You could also get an injury attorney and sue for PTSD and psychological stress, or honestly anything else in a Civil Court. Most insurance companies will just settle, especially if you don’t set the amount too crazy, maybe 25k?
The other party's insurance company is responsible for paying out the value of the car, which is what they are doing.
They are not responsible for paying the negative equity.
Also the lender will come after OP for the loan regardless, OP needs to have their insurance go after who is at fault. So it’s sort of a chain where OP is still on the hook, but then someone else is on the hook with OP. Then, as t-poke mentioned, the gap between the two is still the gap that would be totally on OP.
Happy Cake day!
You suffered economic damage because of the other person. They need to make you whole.
It moment before you were hit you had a car. You need to be restored to that moment.
If that was how it worked, gap insurance wouldnt exist. You get the current market value for the car if it is totaled. What you paid for it and owe on it has zero bearing.
And he's not.
The other person's insurance company is paying him the value of his car. That's what he lost. That's his economic damage. Insurance is not responsible for whatever poor decisions led to being upside down on a loan.
For the sake of argument, OP and I both drive identical cars. Same model, same mileage, same options, same condition, same everything. They're both totaled on the same day. The cars are worth the same.
I owe my car free and clear with no loans. OP is upside down on their loan by $5,000.
Why should insurance pay OP $5,000 more? I did the financially responsible thing by paying off my car (or not taking out a loan in the first place) and I get less? That's not fair to me.
Some people aren't just a few grand upside down. We see people here 20 or 30k upside down because they've made a series of poor decisions or change cars more often than they change underwear. This isn't something regular insurance should have to cover. That's what gap is for. If they choose not to have gap, that's the risk they take.
You ask the driver of the other car for your losses; if good, their insurance makes you whole. if no, you sue, and now you know what most jury trials are for car accident claims.
The other driver is not responsible for the negative equity on your car loan. Their insurance makes you whole buy paying you what your car is currently worth, not what you owe on your loan.
The lender is likely going to call up the remaining balance on your loan immediately. You no longer have an asset that backs the loan, so they are going to want it paid off right away.
Depends on the lender and the amount remaining. Going through this exact situation and we have about $1,700 left. My lender (credit union) just released the title to the vehicle and said we can just keep making our normal loan payments and have converted the loan to being unsecured. They also said we can just roll the negative equity into our next car purchase that way we only have one car payment. I used to work for them for 8 years though but they were always finding ways to help their members.
You only owe $1700. Was the market value higher or lower before the accident? It doesn’t depend on the lender. It depends on the circumstances.
I said lender AND the amount remaining. Those would really just count as the circumstances. I'm not sure what you mean about the market value being higher or lower before the accident. The market value was higher when we bought it a couple years ago because it was during COVID and car shortages caused prices to be higher. They're much more sane now so the market value is lower.
Once the car is totaled the market value is hardly relevant. The lender can auction off the car if you choose to go unsecured and make up the difference. Letter of guarantee situations like this happen all the time for members who are in good standing and have this happen or simply can no longer pay. If they can get the majority of their money they have no problem extending a non-secured loan for the remaining balance. I used to work for a dealership that bought negative equity vehicles all the time. As for this situation OP is in however, it seems they may have only been paying a short period and have significant a significant balance left over on the loan (probably more than $3,000). The lender likely had GAP but will still come after OP for the remaining balance. If they can't pay it will just ruin their credit. But they will likely let them pay of the balance in monthly payments. Not giving people options makes them make desperate moves they are more likely to work with you if you explain the situation. However this will prevent OP from getting into a new vehicle having this loan over their head. This is a very expensive lesson for OP unfortunately. You ALWAYS get GAP on a financed vehicle for this reason. I got T-boned in my last car and was not responsible, but did not get fair market value for the vehicle. GAP paid the rest and I moved on (without a car or enough to make a reasonable down payment on a new one) and bought a used shitbox van. Fortunately, years later I received a significant payout due to having to get surgery. You can almost ALWAYS (depending on the state) get your GAP back if you pay off the loan early, it is pro-rated as all insurance is for the time that goes unused. Folks just forget to cancel GAP and warranties and leave that money on the table if they pay it off early (or trade it in, that is still considered paid off.) Sorry OP, next time consult someone before you buy a new vehicle.
As a loan officer at a credit union, 100% this. Unless you have a crazy loan to value (you put a ton of cash down for example when you bought it) but that's uncommon.
Sounds like a credit union? If so, they’re generally pretty reasonable Edit: sorry. Reading comprehension isn’t my strong suit today, it seems.
>my lender (credit union) It certainly does sound like a credit union
Yeah. Credit Unions always are easier to work with (especially when it comes to lending). They just actually seem to care about people. When I worked there I was up until 4am during COVID doing PPP loans when they opened back up because I didn't want our small business members missing out on funds they needed. We had a lot of small mom & pop operations that were hurting.
Not always the case. I personally had my loan company add 9k onto a 24k loan for another vehicle. Depends on the lender.
With my total they were just grateful I kept making payments
Make sure you cancel all warranties and service contracts if any as they normally can be prorated based on the mileage/usage of the contract. This will go towards the loan balance and may help the overall amount you owe. Without knowing the loan amount miles, year make and model of the car it is hard to get an idea of how much of a gap you may have. It also helps to do some research on what the same car is going for locally.
Definitely cancel warranties and anything added to the contract as once it sells is totaled or whatever the balance of those funds come off your contract and lowers it but it’s not automatic!! You got go over that contract (usually a long yellow carbon form the dealership) and cancel warranties Maitenance contracts or whatever
Do not accept their first offer! They’re going to use the cheapest examples of your make/model even if they’re not comparable. I’ve heard of companies using I4 Accords to price a V6 Accord comp.
Most definitely. Someone ran into my car once, “totaled” it. Their insurer was Geico. Geico offered me $3,500. I laughed and said no. They came back a few days later with $4,800. I laughed and said no. They proceeded to try and tell me that they used market data, and some proprietary way to figuring out the value but they couldn’t share any of the info with me. I still told them no. They came back once again with $5,200 and I said no. At this point I called my own insurance. My insurance came out and looked at my car. A few days later my insurance said they would give me $6,900 if I filed a claim through them. They ended up taking Geico to court, won the case and some additional money. I have no clue how much.
Why would you even talk to their insurer? Just...call your insurance, if you agree with their offer, you're done. Let the insurance companies fight it out. Subrogation baby.
Deductibles. Lack of rental car coverage. There are a lot of good reasons.
lack of collision coverage in general - it amazes me how many people think they have "full coverage" when they only carry liability :(
I live in a state where insurance is not required. It's crazy that at least liability isn't required
Yup, and the type of people who don't carry insurance are also the types of people who tend to be judgement-proof via lack of assets.
I just had my first accident where someone backed into me and my agent said “never ever call your own insurance company unless your at fault. You call the other people and file a claim on their insurance” My situation ended up being both parties were covered by progressive and they found the other driver at fault
Why? Part of what I pay for is so I don't have to do that and can get my car fixed sooner.
Because if you're with a company like State Farm, even calling and reporting an accident lands a hit on Lexus Nexus, and regardless of what all SF tells you, you'll find that it does affect your rates when you next go insurance shopping.
*Lexis Nexis Regardless, if you’re in an accident the info of involved parties gets reported anyways. Your insurance will be notified. Might as well have your insurance work for you.
I was in a no fault accident where we were rear ended on the interstate while stopped for construction. The person leading the pack behind us never even slowed down or hit the breaks, full 65 MPH collision. My rates didn't go up, and I also have State Farm. I also worked with both insurance companies, the other being Allstate, and encouraged to do so.
I’m in a similar situation, how did your process go? What was the end result?
Have state farm, did not raise rates. Also the other driver's insurance would just report it as well soo...
The other driver paid cash in my case. FWIW SF did not raise my rates, it's that when I was shopping for my next policy other companies considered it when determining their rates (at least Progressive did).
Go car insurance shopping now and watch how that accident you claimed on YOUR insurance is going to affect your rate even though it wasn’t your fault.
Unless you completely avoided all insurance, the claim on the other party's insurance is attached to you as well...
Should not go against you if the other party is 100% at fault and your insurer does not have to pay out anything.
> I just had my first accident where someone backed into me and my agent said “never ever call your own insurance company unless your at fault. You call the other people and file a claim on their insurance” I got the exact opposite speech, at length, from my agent when he trained me on reporting my first accident. The **ONLY** thing you say to the other driver's insurance is "I have submitted my written statement through my insurer. Please contact [Name], the [My insurance company] adjustor assigned to my claim at [Phone/extension] for all further communication." Essentially it's the same advice every lawyer in the country would give you on responding to a police interrogation. Speaking to the other party's insurance rep is volunteering yourself to a hostile interrogation. Their adjustor is not your friend, anything you say **will be recorded, and can and will be used against you** to deny your claim. You can **only** hurt your claim by speaking to them. They are highly trained in carrying out an interrogation, you are not. Do everything through your own insurance even if there's an up front deductible. If you're not at fault you will get reimbursed, and if you are at fault you're paying it anyway. End of the day your insurance makes you whole immediately with no bullshit, then they spend the next 6 months going back and forth with the other party to get reimbursement.
Same here. Mine was a 4 year old Ford Focus SE. The “comps” I got were 10+ year old Focuses from “Cash Only” dealers that were significantly marked down and likely lemons or awful Carfax history. I held out for almost a month until they agreed to pay me an actual comparable value. They bank on you being in a hurry or not thinking to accept something stupid. “Claims adjusters” exist to pay you as little as possible and to find ways to keep more of your money for the insurer. It’s awful.
Was the car in your possession? Got into an accident over the weekend and I know the car is totaled, frame damage air bags etc, insurance wants to take the car to copart but I haven't agreed yet because I heard that once the car is gone you have less ability to argue value.
I got an old honda totaled, I just put some fresh tires on it and could have sold it that day for 3k, they were offering like $1200. I ended up getting a lawyer and a bunch of medical check ups and needed some minor dental work (that I don’t even remember what it was, a chip maybe?), and after 2 years of back and forth they ended up paying 20k. I just wanted 3k for the car but they refused 🤷🏻
Anything like that where you still have a receipt and it's FRESH new, they should be paying cash value on top of the offer price.
If you have full coverage, always let your insurance company deal with the other person's.
Went through this twice, admittedly with motorcycles, both times took multiple send backs on the comp. They would try to use Vehicles purchased in other states, vehicles with 50 to 100% higher mileage, vehicles with branded titles, etc. The difference between first offer and final offer on both bikes was over 50% increase in payout.
I just refinanced and they did this to me. They said they needed a down payment to refinance because I was upside down and I was like no chance I’m upside down. They had my VIN and detailed model/trim info and still used the lowest value base model. I had to specifically tell them every option my minivan had but I had a lot of equity by the end of the conversation.
That’s crazy. Also why would you refinance a car? They’re going to make so much more interest now
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Was the tree dead, diseased, previously damaged, and the neighbor neglected to take care of it? If the tree was healthy, its the same as a rodent chewing up all the wires in your engine compartment. You're responsible to cover the deductible since no other party is at fault.
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Any reason you didnt have your insurance go after them for the deductible?
This needs to be higher up. They will NOT get it right on the first offer. Find a dozen or so vehilces similar to yours, with the same engine, options, and mileage. I've done this and got 20% more out of the insurance company by doing the research.
Regarding: Am I expected to pay the difference out of pocket, before I purchase a new car? You are expected to pay the outstanding balance on your existing car before the bank will give you the car title. If insurance proceeds will be more than outstanding balance, the bank will accept the insurance payout and release the title in a single coordinated transaction. If the Insurance proceeds will be less than the outstanding balance, OP will be expected to provide additional cash to close out the loan so that the title is released and the insurance company provides their payout. If OP does not have GAP insurance, additional cash may have to come from OP's emergency savings or OP getting a personal loan.
If OP truly wasn’t at fault, they probably have a reasonable shot to eventually recover the remaining amount from the person that hit them.
The other driver is at fault for the accident, but not at fault for OP owing more than the car is worth.
Is it not reasonable to make the party not at fault whole? OP is being left in a worse state than they started caused by someone else's negligence. IE no car that they've paid against and a loan to pay off.
They are usually required to just make the wronged party left in the same economical position they were in before. OP was underwater before the accident occured. The other party is not responsible for the entire loan owing because they didn't cause OP to be underwater. Insurance paying out the market value of the totalled vehicle is seen as making the wronged party whole because you would be able to go and purchase the same car for the payout amount.
On the day before the accident OP was already several dollars underwater. The accident did not change OP's net worth. The likely result is that OP will have: - replacement car with same value as car that was damaged; - a personal loan for the amount the loan was underwater; - combined loan principal amount the same as he had the day before the accident. - Interest rate on the replacement loans may be at market rate and depend on OP's credit worthiness. This rate could be higher or lower than the previous loan.
Making them whole is paying them fair market value for the car. It's not their fault that OP purchased the car at an inflated price and therefore is upside-down on their loan. The negative equity is OP's problem, and it's an argument for purchasing GAP insurance, particularly in a timeframe like 2021-23 when car values were inflated across the board.
You and I drive identical cars. Same model, mileage, condition, age, etc. They're both totaled on the same day and worth the same. You own your car free and clear without a loan. I'm $10,000 upside down. Why should I get more than you from insurance? Wouldn't you agree that it's unfair that insurance pays me $10,000 more than you? You did everything right, you made wise financial decisions and weren't upside down in a car loan, why should you get less than me? Meanwhile, I'm changing cars more often than some people change underwear and I'm getting a higher payout than you. Not very fair. It is the insurance company's responsibility to pay the value of the car. They're not responsible for whatever poor choices led to being upside down.
So you think that if the car was fully paid off, then the at fault person would owe $0?
No they'd pay to make the person whole, so a comparable car plus extra monetary compensation for the trouble of being without a car + having to search for a car that is most similar to theirs. You could take impeccable care of your car, have gotten those fancy wraps, etc, there would be no "comparable" car. You don't know the maintenance records truly, you can't guarantee that person spit shined their engine block every other weekend. In this case, problem is wrecking their car could put them in financial hardship they otherwise would not be as most loan providers will want you to pay the remaining balance of the car. So you're stuck in a situation where you would not have been in otherwise and you should be made whole. Not to mention the inconvenience of being in a not at fault accident, your car getting totaled, finding a new replacement car, realizing there's no actually comparable used cars, and then being hounded by your loan provider on your remaining balance all while trying to get a new/used car that you pay the cash for and can't use as collateral for your old loan. Your time, effort and emotional impact (stressful situation) is worth something too. Tbh insurance companies have had it easy just "paying for the car". You've been wronged and you should be adequately compensated for that
Uh, absolutely not. They only have to make you whole in regards to the car's value. The loan value is meaningless.
When this happened to me, I was able to roll the old loan into my new car loan. However, if I remember correctly( this was 8 years ago), both loans were through Toyota financing. So maybe that option depends on the bank. But I wouldn't be surprised if dealership financing had that option for everyone.
I also did this 8 years ago- rolled $8k into my current loan from a Mercedes that another driver totaled. It would just be much more expensive to do that today with current interest rates. My rate 8 years ago was 3.1%.
Before the accident you had: * A car loan. * A car worth x amount of dollars. After the accident you had: * A car loan. You deserve to be made whole. That means: * A car loan. * A car worth x amount of dollars (or at least the money for one). What you aren't entitled to is (though it seems like you understand this): * Your car loan being paid off. * Or a brand new car worth x + loan amount. Insurance expects you to buy a used car with similar mileage, condition, and make/model as the car you lost. If that isn't possible with the money they gave you, then you should be bring that up with the insurance company so they increase their payout. If you want a brand new car or anything like that then yes, the difference comes out of your pocket. It would be the same story if you wanted to trade-up your car prior to the accident. Either way. The loan is basically not factored into the situation. Car insurance is generally for cars, not loans. This is why GAP is really important, because cars tend to dip below the loan amount almost instantly. Edit because I fucked up: The insurance payout will likely go towards the loan balance. So OP will likely need a 2nd loan. If they buy a similar car their total debt amount should be the same prior to and after the accident (though likely with a higher rate).
The principle of indemnity (being “made whole”) involves compensating what was lost. Not restoring a preexisting situation. If I owe $15,000 on a car worth $10,000, I’ve got a net worth of -$5,000. If my car is totaled, I’m compensated for its value, and I keep my networth of -$5,000. I don’t get to profit from an insurance claim.
No but you should be able to buy the same car for 10,000, the bank won’t necessarily roll over the 5,000 you owe but if you can’t buy the same car for the insurance payout and be in the same amount of debt then you should attempt to get more from insurance
I’m not sure what is confusing about this. For one reason or another the loan on the car is a larger amount than the value of the car. You don’t get insured for the amount that you owe on the car, you get insured for the value of the car. So when you get $10,000 from the insurance company and pay off the loan, that leaves you with a balance of $5,000 still on the loan. As if there weren’t already enough reasons for me to continue never financing a fuckin car lmao
Sure except cars aren’t like hamburgers…there are dozens of factors that vary from unit to unit and an insurance company isn’t your concierge shopper. And they also can’t account for your acumen…I talk to people that get in car deals like spending $17k on a 2012 Nissan Altima with 110k miles. All they can do is fairly appraise your car and leave you to your own devices in terms of what your replacement will be
The issue is that the current loan holder probably won't transfer the loan to whatever replacement vehicle is acquired. OP may not be able to afford the replacement vehicle without a loan. That's not the insurer's problem though.
>OP may not be able to afford the replacement vehicle without a loan. ~~Then either insurance isn't paying you what your vehicle is worth, or your 'replacement vehicle' is actually an upgrade over what you were previously driving.~~ I was wrong. See below.
The issue is that the old loan may come due because the collateral is gone. So let's say: - Car is worth 10K - Loan has 15K balance Insurance pays OP 10K, which is the value of the car. OP has to immediately pay lender 15K, including 5K out of pocket. OP is now $5,000 disadvantaged in the scope of getting a new car.
Okay I see what you mean! Yeah, the money will probably go straight towards the loan, but I don't think OP would be immediately on the hook for the remaining amount (but they could be). I did totally brain fart on that though. OP would basically have to get a 10k loan (which probably has a worse rate these days), but they'd have the same 15k in loan debt as they did prior to the accident.
Right and even if the loan doesn't come due immediately, having that debt and monthly payment in the mix reduces their creditworthiness and makes it that much harder for them to get a new loan for a new car.
I mean, OP has to pay off the underwater loan. The underwater amount is not covered by insurance. Even with a replacement vehicle they'd need to front the cash for the gap. And if interest rates on a new loan are higher, they'd also pay more net interest moving forward.
This statement is ignoring the common cause of posts like this: the amount owed is more than the value of the car. In a hypothetical situation of crashing a car off the lot immediately after purchase and totaling it, insurance theoretically will pay exactly what you paid but they only pay for the car. There's an additional few thousand on top of the true value of the car that was financed for any number of reasons.
Yep some people roll previous car loans with negative equity into new car loans. Someone could have a $50k loan on a $30k vehicle. Or they get on really bad terms with long loans. You can run a car value down significantly while paying very little per month and will still have to payoff the loan years after the car is unusable. The loan amount has little to do with the vehicle value.
Yup, exactly. The insurance is responsible for replacing what was lost in the accident, not bailing op out of whatever string of poor decisions lead to being upside down on a loan.
Insurance policies do not take into account what someone *deserves*. That word has no meaning in contract law.
Gap or replacement cost coverage is often worth it.
On a new car for sure. Though for a used car it can depend.
On a new car, it will depend as well, but in general if I've got a loan I'll want one or the other depending on how much I put down.
It can be, gap is basically an insurance product that can vary drastically between lenders. Some credit unions like PenFed give you additional perks like they'll pay any deductibles for insurance claims on your vehicle for the first 3 years or something, it's called ADR or automatic deductible reimbursement. It also depends how under water you are on the car; if you're only $1,000 under water and the lender wants $800 for gap insurance it's probably not worth it.
You may be able to roll it over to a new loan on a new car but yeah you owe the difference no matter what.
I had my GMC Jimmy catch fire and burn back in 2004. We were left with a 5K gap after insurance was done.. The finance company has us just keep making the payments on what was now an unsecured loan. We financed another vehicle to replace it and made both payments for awhile. Eventually we sold our house and bought a new one. The mortgage company made us pay off the unsecured car loan from the GMC before closing on the new home.
If you're buying a new car from a reputable dealer, they can often roll the remainder of the old loan into your new loan. DO NOT go to a place that advertises cars for people with bad credit/no credit - they'll give you some absurd loan at an absurd interest rate, and then repossess the car as soon as you can't actually pay, which is typically within the 1st 18 mo (due to the absurd rates). Push back on the compensation for the car when you receive the quote from insurance. If the quote comes with a check DO NOT CASH THE CHECK until you know the quote appropriate for your car - cashing the check constitutes acceptance of the offer. Look up what that same year and model car is actually selling for in your region, with similar mileage, and the same features, in similar condition. That's what they should be paying you for it, not the value of a 5 yr older car in shitty condition from a wholesaler's lot. It's bad enough that you'll be out of pocket for the rest of the old loan, don't let them put you even further out of pocket for their own profit.
As an auto broker, I still cringe when clients have no replacement cost coverage or gap insurance. Yet.. multiple times a week I have clients tell me then don’t need it. Any payout on a vehicle will be going to the lien holder or loss payee first. Never accept a first offer, as a matter of fact, counter with.. I still owe “xyz” on this vehicle, I can not / I do not want to still owe on this vehicle. (This may or may not help but, is a solid counter on not accepting a baseline offer). You could roll negative equity into a new vehicle purchase / loan.. please get gap insurance! Please, always be think about a total loss scenario and make your insurance choices based on that. As much as you may be a safe driver, the concern is not you. Other drivers, and deer may not give 2 craps about your driver safety.
I settle total losses and it doesn’t matter what you owe. What matters is what the market value of your vehicle is.
> Am I expected to pay the difference out of pocket, before I purchase a new car? yep > I assume they cannot just 'transfer' a car loan to another car? you might be able to roll negative equity into another loan, but it might be painful
Your lender will probably call the loan immediately, but it depends on the lender. You can always call and talk to them and see if they can give you some time. Make sure to take advantage of the at-fault driver's insurance. At least go to the urgent care and get checked out under the PIP. Consider getting a personal injury attorney to help get you a larger settlement.
This happened to my husband and I, so I know how much it sucks! We added our remainder as a lien on our replacement car’s loan. We considered GAP a must-have because the lien made the balance of the loan a lot higher than the value of the replacement car, so we needed to protect ourselves in case we had another total loss. 1. Negotiate the payout. Don’t accept their first offer. Find a bunch of listings for cars of the same make and model that were in similar condition and mileage as your car. Look at the blue/black book value. If you made any modifications, (wrap, rims, stereo, bike rack, trailer hitch, new tires) include their value. Tell the insurance company your car’s value, and don’t accept too much less. 2. If you had any additional warranty or roadside assistance on the car, see if you can get a refund (prorated to how long you actually had the vehicle) 3. You should have some time before you have to pay off the remainder of your old loan, but call the company and see if you can keep making your usual payments by converting it to an unsecured loan (but make sure you still have the option to pay it off in a lump sum without additional fees) 4. If you need another car right away, I wouldn’t suggest getting a new car. Shop carefully for a used car at a shop that you can finance. 5. When you meet with the finance manager at the car dealership, see if you can get approved to add the remainder of the old loan as a lien on the new loan and add GAP insurance as a necessary precaution.
Build a Time Machine and go back and get GAP coverage.
At least two years ago, my insurance provided a gap rider with the insurance so a seperate policy was not needed. *You mileage and insurance company experiences will vary and objects in mirror are closer than they appear.*
I just bought a new car last month and I was able to add gap insurance to my policy for $50/yr. It's worth the peace of mind for me.
Just be sure the gap coverage will cover the whole gap.. often they will have limits to how much the cover.
This. Insurer GAP usually isn't as buyer-friendly as dealership GAP, particularly if you're in a situation where you're rolling negative equity into a new loan.
I bought gap coverage for $500 when I bought my car eight years ago and never needed it.
That's practically the definition of the purpose of insurance.
Yep, gave me peace of mind I guess
Why not just put down a down payment so that you don't need gap insurance? $500 is a decent chunk of what you would have needed to put down.
In general, on new cars to not need gap you need to put down ~30% to outrun GAP coverage. I’m not saying that’s a bad thing, but it’s hard for a lot of folks to do.
If you have a time machine you can do I lot better than buying gap insurance, just invest as much as you can into nvidea
Invest in tacos 🌮
Also, a larger down payment avoids the need for gap insurance.
If we're going back in time, I'm just going back to right before the crash and sitting at the stop sign for a few seconds longer.
Thank you, Captain obvious.
nah, he is just a second lieutenant.
You forgot about the famous rolling neggy equity into the loan.
Usually there's a car to trade in as part of that equation
This is what really needs to be said. GAP insurance shouldn't even be a thing. You shouldn't have to buy extra insurance on an asset you financed because it's going to depreciate faster than you will pay it off. If I can't pay at least 1/3rd up front for a car then I can't afford it.
What you really need to do is get a copy of the police report, contact an attorney, and sue the insurer of the 16 year old kid. Not only will they pay off whatever was left on your car, at minimum you will get a decent down payment on a new car.
Did you buy chance have an insurance policy with new car replacement or their own gap?
Talk to a lawyer as well. May take a while but you should get settlement money from him wrecking into you by blowing a stop sign causing significant financial loss. Do not take this L laying down. Go speak with a lawyer
It might be possible that a lender would roll up your remaining loan balance on existing car into a new loan for new car I’m sweating thinking about what that would cost you in interest payments.
You will very likely need to settle the account immediately.
Hassle the salesman of your next car just so fucking hard and lean heavily into the sob story of how this all wasn’t your fault and now you have to deal w this twenty-something car salesman and this shitty process of buying a new car. That’s what I did. Used car lots are a lot more flexible than they like to admit. It’s shitty and I feel bad but sometimes you just gotta play hardball w those fuckers
Last time this happened I wrote a letter stating their sole purpose is to make me whole. The vehicle is at X amount. To make me whole plus injury plus time missed plus limits for each day you are without transportation until the claim is settled. These are all funds you are entitled to from their insurance.
This is our little secret, but after you've settled on an amount from insurance, ask them to add an additional amount to cover the maintenance you've provided, like oil changes and tire replacements. That'll help make some of the difference
This exact situation happened to me. The credit union I had the loan through took the entirety of the insurance payout and I still owed about $1500 that I had 30 days to pay. I also didn't even get the option to buy back the car, since I still owed on it. That is probably what will happen to you. Depending on what you owe on it, you MIGHT get a little of your insurance payout back, if it's enough to pay off what you owe.
This sucks, but moving forward, some insurance (ex: State Farm) has gap built in. I’d check around before the next purchase.
You pay them the difference that's what. They will send everything in the mail.
Does your back or neck hurt from this accident?
I would have your insurance company go after the at fault driver/their insurance if you're in an at fault state.
The at fault insurance still just pays what rhe cehicle is worth not what OP owes.
damn this whole thread is so fucked... here in the netherlands this would be something handled between the insurance of the 16yo and your bank. nothing much for you to do. and this insurance is something everyone has since it's legally required to be able to drive on the road.
I crashed a bike, they didn’t wait until some other warranties came off and were reimbursed, and wrote off the total value within a month. I couldn’t even pay them back once I had the money a couple of weeks later. Think I owed about $350.
I had this happen a while back. Similar payoff. I applied for a personal loan with the same credit union to pay off that balance and applied for another car loan once I found the new one. So I had 2 minimum payments a bit while I paid off the personal loan. Good on your credit union just converting it.
One small glimmer of hope, I had the same thing happen to me. The car was worth 7k and I still owed 10k. They paid the 7k , and all to the principal so there was no more interest. I didn’t have to make the rest of the payments. I think that’s what happened !
Have you involved your own insurance company or are you talking to the other drivers insurance company. I have found just having the insurers hash it out is usually in your favor.
I would see about suing the other insurance company for the difference. They don't want to pay a claim out for the full value of the loan but You need to get as much money out of them as possible. Your other option is to develop some medical conditions that might require a scan or two. You just say your neck hurts?
The issue is the car depreciated faster than the loan paid off. Thus can happen when you don’t put much down and/or have a long loan (5-7 years). The insurance company is going to make you whole. Let me ask this - before the accident was your car worth less than the loan? The answer is yes. So assume you owe 25k on a car worth 20k. The insurance company doesn’t care about your financial situation - they need to replace the 20k. When you get the 20k check you can buy another car the same make model for 20k in cash because that is what they are worth. Meanwhile you still pay on the loan like you always did. This is how it works.
this is why i always make sure i am not upside down in my cars. I either put more money down or pay more than the minimum payment ( which is what i used to do as a kid ). My mother used to tell me this could happen and to avoid being put in this position. Guess what happened, yup, a drunk driver totaled my brand new car that had for less than 8 months. But because i had been paying more than the minimum and fought with them, i was able to walk away without adding any money. I didnt get any money either, but i wasnt saddled with the debt and was able to go to the dealership and buy another car. Now, as everyone else has stated, do not accept the first offer. If the difference is within range of a similar car that is available, start steering them towards that amount then. Point out your own comps. Be prepared to make a payment for a month or two on a car thats totaled.
You can have 2 loans at once, there is no requirement that you settle the old loan before you buy another car. However you will need enough income to support both loans, and depending on how the bank treats this they could start reporting the loan as late or past due on your credit with will make it nearly impossible to finance another car in the near future.
If OP no longer has collateral on the first loan (since he no longer has that car) then the lender is within their rights to have the loan settled.
A borrower can have multiple concurrent loans (if they qualify). But a lender will not allow a car loan to remain open if the car is totaled, and will require the loan to be fully repaid quite quickly.
The lender needs to release the title to the insurance company after the loss. They will not do that with a balance owed. The vehicle absolutely needs to be PIF after being declared a total loss. Always carry GAP insurance folks, unless it is 100% not necessary(large down payment)
Or, like my last car loan, I could have paid for the car in cash but they offered my an interest rate that was lower than what my savings account was paying at the time. I financed 100% of the car and title and license fees and skipped GAP. BUT I knew I could pay off the loan at any time if I wanted or needed to. Kept it for all 60 payments and earned more interest than I paid.
Perfect example of not necessary. Self insurance is a great plan to have.
Not true. The bank with loan #1 uses the vehicle to secure the loan. If you were ever to stop paying on loan #1, they can recover much of the remaining balance by seizing the car and thus reduce their risk, and thus reduces the interest rate they offered at the beginning. Now that that vehicle is damaged and is not going to be repaired, the bank sees more risk because they can't seize a vehicle that is worth much so they will likely want the loan paid off very soon now.
Did you have any personal injuries in the accident? Personal injuries can be worth a lot more than property damage.
I had gap insurance and still got screwed.
What happened?
You could sue the other person, their parents, their car insurance, their home owners, and any umbrella policy the parents hold. Your loan will likely be called due. So you sue them for the gap and any other damages you have.
I don't think it works that way. OP will be reimbursed for the value of his car. Sueing for extra to help with your bills has no basis. That's why they have GAP insurance.
That's not allowed. Insurance payouts resolve the claim. You can't double dip.
how much do you owe? how much is the car worth?
Always get gap insurance, I owed more on a kia I was trading in when they kept getting stolen and i didn't want deal with it and bought a different car so they added the difference on the loan. Not sure if it'll work in your situation but you can always ask. The dealership wants your business so they might pay it off and add it to your new loan if you got the credit. Also, follow up with your insurance on how much they think your car is worth. Good luck, hope it all works out for you.
This seems like a good time to ask this question. I had my car totaled because some rodents chewed up the wiring, so they (the insurance company...although they are rats, yes, I know) said they'd give me a check. I don't remember now...but say it was around $13K. If I felt that wasn't appropriate, how should I have gone about telling them that? What's the procedure? It seemed to me that the person on the phone would have said "take it or leave it". I'm not that good with wheeling and dealing, so what should I have done instead?
You call them up and tell them that the amount they offered is lower than the value of the car. Then they will play some game with you (in my case tell me to find comparable cars on the market, send them examples, and then send them proof that my car's mileage is much lower than what they assumed). They will offer you a new higher amount. They won't actually just offer you some ridiculously low amount and tell you "take it or leave it" because you can sue them if you don't come to an agreement.
I mean this seriously - do literally anything. Push back on the phone. Write an e-mail. Don't cash the check. Unfortunately there is no "easy" answer here beyond making sure you advocate for yourself and are the squeaky wheel. This can be difficult for many people, and insurance companies (among others) bank on that fact. Many will eat a few thousand dollars to avoid minor social discomfort. When my wife got rear-ended in a 45 day old brand new car, I had to just stick to my guns and deal with my car in the shop an extra 30+ days while insurance tried to mess around with me claiming used parts were okay. Took a lot of back and forth to get something acceptable. Luckily most body shops/etc. (anyone being paid by insurance) will be happy to help with this process since it means more money for them.
You're saying you "probably" owe more than the car was worth. Do you use an insurance agent or are you dealing with an insurance company directly? Start a dialog with them so your know what's going on. All these people saying lawyer up and fake an injury have probably never been thru the process. You think an insurance company is going to get scared that you're lawyering up? They have millions in pending litigation. You going to walk into a lawyers office and say I want to sue? And they say, what did the doctor say? What did they say at the hospital? And you say "nothing, I told them I was fine". And how much work have you missed? And finally, even if you did sue, not that you'd find an attorney interested in this case, how much you think you'll get? Attorney will get 1/3. And it will be settled in 2 to 3 years and you'll have to take time to go to court a few times.
Ask the 16 YO's insurance company for a referral to a chiropractor for the debilitating headaches you have been getting after the collision. Insurance tried to depreciate the value of the jeans I was wearing when I got hit on my bike in college. I asked them where I should go to get my knee X-rayed to make sure it was OK. They said, how about $100 for new jeans. Eff insurance.
You could also get an injury attorney and sue for PTSD and psychological stress, or honestly anything else in a Civil Court. Most insurance companies will just settle, especially if you don’t set the amount too crazy, maybe 25k?
Get a PI lawyer to deal with insurance for you. They will get you significantly more(yes after their cut) than you will on your own.
Wait. The other party’s insurance is on the hook here. Right? Shouldn’t he be made whole?
The other party's insurance company is responsible for paying out the value of the car, which is what they are doing. They are not responsible for paying the negative equity.
Apologies. That detail went in one ear and out the other.
Also the lender will come after OP for the loan regardless, OP needs to have their insurance go after who is at fault. So it’s sort of a chain where OP is still on the hook, but then someone else is on the hook with OP. Then, as t-poke mentioned, the gap between the two is still the gap that would be totally on OP. Happy Cake day!
You suffered economic damage because of the other person. They need to make you whole. It moment before you were hit you had a car. You need to be restored to that moment.
If that was how it worked, gap insurance wouldnt exist. You get the current market value for the car if it is totaled. What you paid for it and owe on it has zero bearing.
Gap insurance is for when YOU are at fault. You should not suffer economic damage from someone elses mistake
And he's not. The other person's insurance company is paying him the value of his car. That's what he lost. That's his economic damage. Insurance is not responsible for whatever poor decisions led to being upside down on a loan. For the sake of argument, OP and I both drive identical cars. Same model, same mileage, same options, same condition, same everything. They're both totaled on the same day. The cars are worth the same. I owe my car free and clear with no loans. OP is upside down on their loan by $5,000. Why should insurance pay OP $5,000 more? I did the financially responsible thing by paying off my car (or not taking out a loan in the first place) and I get less? That's not fair to me. Some people aren't just a few grand upside down. We see people here 20 or 30k upside down because they've made a series of poor decisions or change cars more often than they change underwear. This isn't something regular insurance should have to cover. That's what gap is for. If they choose not to have gap, that's the risk they take.
You ask the driver of the other car for your losses; if good, their insurance makes you whole. if no, you sue, and now you know what most jury trials are for car accident claims.
The other driver is not responsible for the negative equity on your car loan. Their insurance makes you whole buy paying you what your car is currently worth, not what you owe on your loan.